Rational Reaction: Tax Law Expiration and the “One Big, Beautiful Bill”
As 2025 unfolds, tax policy is once again at the center of American economic debate. The Tax Cuts and Jobs Act (TCJA) of 2017—one of the most significant overhauls of the U.S. tax code in decades—is set to expire at the end of this year. That means key provisions affecting individuals, families, and businesses may either sunset, be extended, or face sweeping reforms.
Here’s a detailed breakdown of what’s at stake, what lawmakers are proposing, and how it could affect you.
⏳ The Countdown to 2026: What’s Expiring?
Unless Congress acts, many of the TCJA’s provisions will revert to their pre-2018 status starting January 1, 2026. These include:
Higher Tax Rates: Marginal income tax rates would return to a top rate of 39.6%, up from the current 37% (Forbes).
Shrinking Standard Deduction: The nearly doubled standard deduction will be cut in half, potentially forcing more people to itemize their taxes (Forbes).
Return of Personal Exemptions: Currently suspended, personal exemptions will make a comeback, albeit with different thresholds (The Tax Adviser).
Reduced Child Tax Credit: The credit is expected to fall from $2,000 to $1,000 per child, and the income phase-out thresholds will also lower (The Tax Adviser).
Estate Tax Exemption Cuts: The federal estate and gift tax exemption could drop from over $13 million to around $6 million per person (ACO CPA).
AMT Returns: More individuals may be subject to the Alternative Minimum Tax due to lower exemption levels (Wikipedia).
🧾 The “One Big, Beautiful Bill”
In response, House Republicans have unveiled an ambitious tax package dubbed the “One Big, Beautiful Bill.” Its aim? To lock in many of the TCJA's most popular features while introducing new tax benefits.
Key Proposals:
Permanent TCJA Extensions: This includes the existing tax brackets, the higher standard deduction, and the expanded child tax credit (Journal of Accountancy).
New Deductions:
Tip income and overtime pay would be tax-exempt through 2028.
Seniors (65+) could claim a new deduction of up to $4,000.
Up to $10,000 in interest on car loans could be deductible (Journal of Accountancy).
Expanded Business Tax Breaks: The Qualified Business Income (QBI) deduction could rise from 20% to 23%.
Estate Tax Changes: A permanent increase in the estate tax exemption to $15 million per individual has been proposed (MarketWatch).
SALT Deduction Reform: The cap on state and local tax (SALT) deductions would rise to $30,000, though it would phase out for high earners (Journal of Accountancy).
Rollbacks on Green Incentives: The bill also proposes phasing out clean energy tax credits, including those for EVs and energy-efficient home improvements.
⚖️ What’s Next?
The bill has passed the House Ways and Means Committee and may face a floor vote before the July 4 recess. However, it’s unclear how the Senate will respond. With a divided Congress and budget reconciliation constraints, any final outcome will likely require significant compromise, with lawmakers on both sides of the aisle concerned about the fiscal impact (Kiplinger).
🧠 Final Thoughts
As the expiration of the TCJA provisions looms, the U.S. tax landscape is at a pivotal crossroads. Whether you're a family trying to plan your 2026 budget or a business navigating upcoming compliance, staying informed and prepared is critical. We plan to keep you in the loop.
For further details, explore the full legislation analysis and updates: