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Countdown to the TCJA Sunset – Key Tax Changes Ahead
Major Tax Changes Are Coming in 2026. Here's How to Prepare While There’s Still Time.
As we move through 2025, one of the most significant tax planning windows in recent history is closing fast. The Tax Cuts and Jobs Act (TCJA), enacted in 2017, is set to expire on December 31, 2025, and with that, many favorable tax provisions for individuals, families, and business owners are on the chopping block.
Unless new legislation is passed to extend or reform the TCJA, the default is a full reversion to the pre-2018 tax code, resulting in higher taxes for most Americans. Here’s what you need to know.
What’s Changing After 2025: Key Expiring Provisions
Here’s a closer look at the tax rules likely to revert—and how they may affect you:
1. Tax Brackets Will Rise
The current marginal tax rates (10%, 12%, 22%, 24%, 32%, 35%, and 37%) are scheduled to increase across the board, with the top bracket returning to 39.6%.
- A single filer earning $75,000 today could owe $2,500–$3,000 more in federal taxes.
- A couple earning $300,000 might pay $8,000–$12,000 more, depending on deductions and filing status.
2. Standard Deduction Will Shrink
In 2025, the standard deduction is $14,600 for singles and $29,200 for married couples filing jointly. In 2026, these are expected to drop back to ~$6,500 and ~$13,000, respectively (adjusted for inflation). Result: More people may end up itemizing deductions – or paying more taxes.
3. Child Tax Credit Will Be Cut
The credit is currently $2,000 per qualifying child. In 2026, it may revert to $1,000, and income phase-outs will begin at lower thresholds. This change could significantly affect families with children under 17.
4. Estate & Gift Tax Exemption Will Be Halved
Currently at $13.61 million per person ($27.22 million for couples), the exemption is expected to fall to about $7 million per person. If your estate is near or above this threshold, you may want to take action now to reduce future estate tax exposure.
5. 20% Pass-Through Business Deduction Ends
Business owners structured as LLCs, S-Corps, sole proprietors, or partnerships currently receive a deduction on up to 20% of qualified business income. This popular provision will sunset, increasing the effective tax rate for many entrepreneurs and professionals, especially those in high-earning service businesses.
6. Return of Miscellaneous Itemized Deductions
Under TCJA, deductions for tax prep fees, investment advisory costs, and unreimbursed employee expenses were suspended. These may return post-2025, potentially allowing more deductions for professionals with significant work-related expenses.
7. $10,000 SALT Deduction Cap May Be Lifted
The current cap on state and local tax (SALT) deductions hits residents in high-tax states the hardest. If it expires, itemizing deductions may become more valuable for those in states like California, New York, or New Jersey.
Smart Planning Moves for 2025
Here’s how to make the most of this planning window before rates rise:
Roth Conversions – With current tax rates still low(er), converting pre-tax IRA dollars to a Roth IRA can lock in a lower tax bill now, to enjoy tax-free withdrawals later. This is especially compelling if you’re in or near retirement.
Estate and Gifting Strategies – Use today’s historically high gift and estate tax exemptions to:
- Fund irrevocable trusts
- Gift appreciating assets to heirs
- Shift growth out of your taxable estate while the exemption is still ~$13.6M per person
Accelerate Income, Delay Deductions – If you expect to be in a higher tax bracket after 2025, it may make sense to:
- Pull forward income into 2025 (bonuses, stock options, business income)
- Defer deductions (charitable gifts, large business expenses) to years with higher rates
Charitable Giving – Two powerful strategies:
- Donor-Advised Funds (DAFs): Front-load donations in 2025 to claim deductions while rates are lower and consolidate giving across future years.
- Qualified Charitable Distributions (QCDs): For those age 70½ or older, make IRA distributions directly to charity (up to $100,000/year) to satisfy RMDs without increasing taxable income.
Business Structure Review – With the 20% Qualified Business Income (QBI) deduction set to expire after 2025, business owners should take a fresh look at how their income is taxed—and whether their current entity type still makes sense.
Key Considerations:
Entity Structure: The benefit of pass-through taxation (S-Corps, LLCs, sole proprietors) may diminish once QBI disappears. For some, switching to a C-Corporation structure—with its flat 21% tax rate—could become more appealing, especially if income is retained in the business rather than distributed.
Compensation Strategy: Owners taking low salaries and high distributions to maximize the QBI deduction may want to rebalance pay structures to align with post-TCJA realities and avoid unnecessary self-employment or payroll taxes.
Example 1:
A solo consultant operating as an S-Corp currently pays herself a $100k salary and takes $150k in distributions to optimize the QBI deduction. With the deduction expiring, she might benefit more from increasing her salary (to maximize Social Security credits and retirement contributions) or consider converting to a C-Corp if profits are being reinvested.
Example 2:
A medical practice structured as a partnership may be hit hard by the loss of the 20% QBI deduction. If profits are high and partners are reinvesting in growth, the firm might analyze whether a professional corporation (PC) or C-Corp setup could yield better after-tax outcomes under future tax rules.
Why Act Now
Once the TCJA expires, many of these tax-saving tools will vanish or lose value. Planning ahead in 2025 could save you thousands—or hundreds of thousands—over time, especially for high earners, small business owners, and those with large estates.
What Should You Do?
These items will be part of our review conversations and we want to proactively explore how the potential tax law changes could impact you. We’re happy to coordinate with your accounting and estate planning professionals to ensure everything stays aligned. If you anticipate any upcoming family or financial changes, sharing them with us in advance will help us provide more personalized guidance.
As part of our planning, we’ll walk through strategies such as:
- Exploring Roth conversion scenarios
- Modeling estate planning options
- Analyzing projected tax brackets for 2026 and beyond
- Optimizing charitable and gifting strategies
Your Team at Wealth Avenue,
P.S. At Wealth Avenue, we are committed to working with individuals and families who are thoughtful about their wealth and seek expert guidance to make informed financial decisions.
If you know someone navigating a financial transition or seeking clarity on how these 2025 updates impact their wealth, we’d greatly appreciate an introduction. Whether it’s a close friend, family member, or colleague, we’re happy to share this resource and have a conversation to see how we can add value. With offices in Virginia, Arizona, and California, and the convenience of virtual meetings, we’re here to help—wherever they are!
To those of you who have introduced us to your family, friends, and colleagues in the last couple of months, thank you. We’re truly honored by your trust and grateful for the confidence you place in us.
One last read below… This month’s extra read from Entrepreneur is for anyone invested in or considering rental real estate. Since we’re on the topicof taxes, it explains how landlords can boost tax savings by understanding the difference between repairs (immediately deductible) and improvements (depreciated over time). By knowing how to classify expenses correctly, you can make smarter decisions, maximize deductions, and improve your long-term return on investment.
Mar. 5, 2025
Dave Spooner
