The Tax Cuts and Jobs Act of 2017 was the most significant overhaul of the federal tax code in a generation. But many of its provisions were enacted with a built-in expiration date: December 31, 2025. Unless Congress acts to extend them, taxpayers will face a substantially different tax landscape beginning January 1, 2026. For business owners, executives, and high-net-worth individuals, understanding what changes and planning accordingly is not optional — it is urgent.^[1]

Individual Income Tax Rates

The TCJA reduced individual income tax rates across most brackets. The top rate was lowered from 39.6 percent to 37 percent, and the thresholds for several other brackets were adjusted. If the TCJA expires, the top rate reverts to 39.6 percent, and the other bracket changes also reverse. For a married couple with $1 million in taxable income, the rate increase alone could add approximately $26,000 to their annual federal income tax bill.

Standard Deduction and Personal Exemptions

The TCJA roughly doubled the standard deduction while eliminating the personal exemption. In 2025, the standard deduction for married couples is $30,000. If the TCJA expires, the standard deduction would drop to approximately $16,500 (adjusted for inflation), but the personal exemption — estimated at roughly $5,300 per person — would return. For families with multiple dependents, the return of personal exemptions may partially offset the lower standard deduction, but for many taxpayers, the net effect will be a higher tax bill.

Estate and Gift Tax Exemption

Perhaps the most significant TCJA provision for wealthy families is the doubled estate and gift tax exemption. In 2025, the exemption is $13.99 million per individual ($27.98 million for married couples). After the sunset, it reverts to approximately $7 million per individual. This means that an estate worth $12 million — which is entirely exempt today — would face a federal estate tax of approximately $2 million at the 40 percent rate. The IRS has confirmed in final regulations that gifts made while the higher exemption is in effect will not be clawed back if the exemption later decreases.^[2]

Section 199A: Qualified Business Income Deduction

The Section 199A deduction allows owners of pass-through entities (S corporations, partnerships, and sole proprietorships) to deduct up to 20 percent of their qualified business income. For a business owner with $500,000 in QBI, the deduction saves approximately $37,000 in federal taxes at the 37 percent rate. After the sunset, this deduction disappears entirely. Pass-through business owners will face a significant effective tax increase, and the relative attractiveness of C corporation status may shift as a result.^[3]

State and Local Tax Deduction Cap

The TCJA imposed a $10,000 cap on the deduction for state and local taxes (the SALT cap). If the TCJA expires, the SALT cap would also expire, allowing taxpayers to deduct the full amount of their state income taxes and property taxes. For taxpayers in high-tax states, the return of the full SALT deduction would be a significant benefit. For Mississippi taxpayers, who pay relatively lower state taxes, the impact is less dramatic but still worth monitoring — particularly for business owners with property in multiple states.

Other Expiring Provisions

Several other TCJA provisions are also set to expire, including the increased child tax credit (reverting from $2,000 to $1,000 per child), the elimination of the Pease limitation on itemized deductions (which would return, phasing out deductions for high-income taxpayers), the expanded AMT exemption (which would shrink, subjecting more taxpayers to the alternative minimum tax), the limitation on excess business losses for non-corporate taxpayers under Section 461(l), and the suspension of miscellaneous itemized deductions subject to the two percent floor (which would return, allowing deductions for unreimbursed employee expenses, investment advisory fees, and similar items).^[4]

Planning Strategies for 2025

Given the magnitude of the potential changes, 2025 is a critical year for tax planning. Business owners and high-net-worth individuals should consider several strategies. First, accelerate income into 2025 if possible, to take advantage of the lower rates before a potential increase. Second, maximize the Section 199A deduction by ensuring that pass-through income qualifies and that any applicable limitations (W-2 wages, qualified property) are addressed. Third, use the remaining estate and gift tax exemption by making gifts to irrevocable trusts or other structures before the exemption drops. Fourth, review entity structure to assess whether the relative advantages of S corporation, C corporation, or partnership status will change after the sunset. And fifth, model the tax impact of different scenarios — full sunset, partial extension, and full extension — to develop contingency plans for each outcome.

The political landscape makes the outcome uncertain. There is bipartisan support for extending some provisions (such as the individual rate cuts) but disagreement about others (such as the SALT cap and the estate tax exemption). Business owners should plan for the sunset while monitoring legislative developments, and should be prepared to act quickly if Congress reaches a deal late in the year.