The Trump-era TCJA tax cuts are set to expire after 2025. Here’s what you need to know

“The biggest tax cut expiring is lower rates and wider brackets,” said Erica York, senior economist and research director at the Tax Foundation’s Center for Federal Tax Policy.

The TCJA reduced federal income tax rates across the board, with the top rate dropping from 39.6% to 37%.

Without updates from Congress, individual rates will return to pre-TCJA levels after 2025. This would reduce federal income tax rates to 10%, 15%, 25%, 28%, 33%, 35% and 39.6%.

When filing your taxes, you claim the standard deduction or itemized deductions, whichever is greater. Both options reduce your taxable income.

Some itemized deductions include charitable donations, a certain percentage of medical expenses, and state and local taxes, or SALT, a tax break that TCJA has capped at $10,000.

The TCJA nearly doubled the standard deduction, making it less likely that filers would itemize tax breaks. That could change after 2025 if the standard deduction returns to 2017 levels, experts say.

Before 2018, about 70% of taxpayers claimed the standard deduction, compared to 90% in the 2020 tax year, according to the Tax Policy Center.

The $10,000 limit on the SALT deduction was passed to help pay for the TCJA changes — and it’s been a key issue for some lawmakers in high-tax states like California, New Jersey and New York.

The SALT cap is set to expire in 2025. But “there are problems with the policy of the cap” because a higher limit primarily benefits higher earners, Gleckman said.

The TCJA increased the child tax credit by doubling the maximum tax break to $2,000, increasing the refundable portion to $1,400, and expanding eligibility. This will return to 2017 levels with no change from Congress.

House lawmakers passed a bipartisan tax package in January, including improvements to the child tax credit. While the bill is stalled in the Senate, the debate could influence negotiations as the 2025 deadline approaches.

There are also higher federal gift and estate tax exemptions through 2025, which allow the wealthiest Americans to transfer tax-free assets to the next generation.

In 2024, the tax-free limits on life or death gifts increased to $13.61 million per person or $27.22 million for spouses. But those limits will drop by about half in 2026 without new laws from Congress.

“(It’s) the biggest issue we’re discussing with our clients right now,” Robert Dietz, national director of tax research at Bernstein Private Wealth Management in Minneapolis, previously said in an interview with CNBC.

The looming change to a higher exemption has prompted some ultra-wealthy Americans to make lifetime gifts to remove assets from their estates, experts say.

However, smaller federal gift and estate tax exemptions would not impact most tax filers. Fewer than 0.2% of people who die in 2023 are expected to have a taxable estate, according to estimates from the Tax Policy Center.