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Preparing for the Tax Cuts and Jobs Act Sunset at the End of 2025

Preparing for the Tax Cuts and Jobs Act Sunset at the End of 2025

November 28, 2023

We strive to be proactive and keep individuals up to date regarding potential changes that could impact their tax situation.

You may be familiar with the Tax Cuts and Jobs Act of 2017 (TCJA), which lowered marginal tax rates and the cost of capital.

Although some provisions are permanent, most individual tax changes are not. Unless Congress acts, many of the changes implemented as part of the TCJA will “sunset” on December 31, 2025. At that time, rates may revert to pre-2017 levels.

Overview of the Tax Cuts and Jobs Act in 20171

When passed in 2017, the TCJA lowered most individual income tax rates, including the top marginal rate, from 39.6 percent to 37 percent. The law maintained the seven-bracket rate structure, but the income thresholds were updated. TCJA increased the standard deduction to $12,400 for single filers and $24,800 for married filers, compared with $6,500 (single) and $9,550 (married) under the prior code.

What May Change1

Below, we have summarized the most notable tax changes set for December 31, 2025.

Tax Rates

The reduction in tax rates for individuals and married couples in 2017 may increase back to where they were in 2016. That means that after December 31, 2025:

  • The 37% rate is scheduled to revert to 39.6%
  • The 24% rate is scheduled to revert to 28%
  • The 22% rate is scheduled to revert to 25%
  • The 12% rate is scheduled to revert to 15%


Tax Brackets

The tax brackets you fall into based on income may also return to the broader ranges that were in effect before TCJA. Below is a visual of how much they changed in 2018 for Married Filing Jointly filers and the estimates of their reversion in 2026.

In Conclusion

Preparing your taxes can be complex, and accidental errors can be easy to make. By being diligent, carefully strategizing, and keeping up with new rules, you can improve your ability to manage your taxes and keep pace with whatever comes down from Washington. Remember, even if you’re working with a tax professional, you are responsible for correctly filing your financial details.

Keep in mind that this article is for informational purposes only and is not a replacement for real-life advice, so make sure to consult your tax, legal, or accounting professional before modifying your strategy in anticipation of the TCJA adjustments. Remember, tax laws are constantly changing, and there is no guarantee that all the provisions of the TCJA will expire.

Best,

1. TaxFoundation.org, August 30, 2023

This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm.