What happens if the TCJA expires without extension?

Individual tax rates increase to the pre-2018 levels with a top rate of 39.6%, the Section 199A deduction for pass-through businesses disappears, the estate and gift tax exemption drops from approximately $13.99 million to roughly $7 million per person, and the standard deduction is reduced while personal exemptions return.

Should I wait for legislative clarity before making tax planning decisions?

Some decisions cannot wait. Estate tax gifting using the enhanced exemption must be completed before any sunset takes effect. Income timing and Roth conversion decisions should be made based on the best available information, with contingency plans for different outcomes.

Legislative Update: TCJA Extension Bill Signed or Still Pending? | Lynch Law

Legislative Update: TCJA Extension Bill Signed or Still Pending?

Lynch Law, PLLC

As 2025 draws toward its close, the question that has dominated tax planning discussions all year finally approaches resolution: will the Tax Cuts and Jobs Act provisions be extended, modified, or allowed to expire? The answer—whatever it turns out to be—will define the tax landscape for years to come and will require immediate action by business owners, estate planners, and their advisors.

The Current Legislative Posture

The reconciliation process has been the vehicle for TCJA extension legislation throughout 2025. The House passed its version of the bill, and the Senate has been conducting its own negotiations with modifications. Whether the final bill has been signed into law, is still in conference committee, or has stalled depends on factors that cannot be predicted at the time of this writing—but business owners should be prepared for any outcome.^[1]

If legislation has been enacted, the key questions for business owners are which provisions were extended and for how long (permanent vs. temporary), what modifications were made to the House-passed provisions, what revenue offsets were included, and whether any new provisions were added. If legislation has not been enacted, the default is the sunset of all temporary TCJA provisions on December 31, 2025.

Key Provisions at Stake

The individual income tax rate cuts (top rate of 37% vs. 39.6%), the nearly doubled standard deduction (with elimination of personal exemptions), the Section 199A qualified business income deduction (20% deduction for pass-through businesses), the doubled estate and gift tax exemption ($13.99M vs. approximately $7M), the $10,000 SALT deduction cap, the enhanced child tax credit, and various other TCJA provisions all hang in the balance. Each of these provisions affects business owners and high-net-worth individuals in different ways, and the planning response depends on which provisions survived and in what form.^[2]

Planning for Extension

If the TCJA provisions have been extended—whether permanently or for an additional period—business owners can proceed with relative confidence that the current planning strategies remain viable. S corporation and pass-through entity planning continues to benefit from Section 199A. Estate planning using the enhanced exemption remains available. Income tax planning under the lower rate structure continues. However, if the extension is temporary, the same planning uncertainty will resurface at the next sunset date.^[3]

Planning for Sunset

If the TCJA provisions have expired, the planning landscape changes dramatically. Income tax rates increase, requiring recalibration of estimated tax payments and withholding. The Section 199A deduction disappears, increasing the effective rate on pass-through business income. The estate tax exemption drops by approximately half, exposing more estates to the federal estate tax. Personal exemptions return but the standard deduction is reduced. Business owners who anticipated the sunset and took action during 2025—accelerating income, executing Roth conversions, completing estate tax gifts—will be well positioned.^[4]

Regardless of the outcome, business owners should schedule a meeting with their tax advisors as soon as the legislative picture becomes clear to implement any necessary changes to their tax and estate planning strategies.^[5]

References

^[1] Tax Cuts and Jobs Act, Pub. L. No. 115-97 (2017); individual provisions generally scheduled to sunset after December 31, 2025.
^[2] TCJA §§ 11001 (rate cuts), 11011 (§ 199A), 11061 (estate tax exemption), 11042 (SALT cap), 11022 (child tax credit).
^[3] Extension of TCJA provisions preserves existing planning strategies but temporary extensions create recurring uncertainty at each new sunset date.
^[4] Sunset of TCJA provisions triggers higher rates, loss of § 199A, reduced estate exemption, and return of personal exemptions with lower standard deduction.
^[5] See Tax Controversy & IRS Defense (discussing legislative response planning and tax strategy updates).

This article is for informational purposes only and does not constitute legal advice. The facts of every situation are different, and you should consult with a qualified attorney before taking action based on the information in this article.