These parts of Trump's tax cut law expire in 2026

The 2017 Tax Cuts and Jobs Act (TCJA) made huge permanent cuts to corporate and business taxes while making temporary cuts to individual taxes to limit the bill’s expansionary effects on the deficit, which stands now at more than $36 trillion.

Now, with Republicans set to control both chambers of Congress and the White House, the party is poised to deliver the TCJA’s second act, locking in or extending what they couldn’t set in stone in 2017 due to the Senate’s budget reconciliation rules.

As former Speaker Paul Ryan (R-Wis.) noted last year, Republicans “made temporary [what] we thought we could get extended [and] we made permanent what we thought might not get extended that we wanted to stay permanent.”

Here’s a look at the big-ticket items from the more than two dozen tax laws that are expiring at the end of next year.

Individual tax rates are set to tick up

Several marginal income tax rates are set to increase in 2026 in what would be the most noticeable single aspect of the TCJA expirations.

Going up the income scale, people making between $11,000 and $45,000 per year will see their rates increase from 12 percent to 15 percent.

From there, people making up to $95,000 will have an increase from 22 percent to 25 percent; people making up to $182,000 will have an increase from 24 percent to 28 percent; people making up to $231,000 will get an increase from 32 percent to 33 percent; and people making more than $580,000 will get a bump from 37 percent to 39.6 percent.

The vast majority of Americans fall into the three lowest tax brackets or an even lower one of 0 percent, according to a 2015 analysis by the Tax Foundation, which looked at pre-TCJA tax rates.

These cuts added $1.2 trillion to the deficit through 2027, according to an estimate by the Joint Committee on Taxation (JCT) made at the time of enactment. If extended through 2034, they would add another $2.2 trillion, according to the Congressional Budget Office (CBO).

State and local tax deduction cap would go away

One of the most controversial provisions in the TCJA was the cap on state and local tax deductions, known as SALT, which incensed Republican members of Congress from several Democratic states. With the thin Republican majority in the House, the SALT Caucus has more power to get the cap raised or canceled, and Trump said on the campaign trail that he’s willing to make some changes to it.

“I’ve been very clear — I won’t support a tax bill that does not lift the cap on SALT,” Rep. Mike Lawler (R-N.Y.), a member of the SALT Caucus, told The Hill at the end of November. “Fifty percent of households used to itemize their deductions, and it came down to about 19 percent of the district now itemize their deductions because of the cap.”

“If no tax bill passes, the cap on SALT completely expires. So it certainly behooves those who are opposed to SALT to negotiate in good faith,” he said.

Without an extension of the $10,000 SALT cap, which would be welcomed by Democrats and blue-state Republicans alike, taxpayers would be allowed to deduct all eligible state and local income, revenue from sales, property taxes, and foreign income taxes.

Eliminating the SALT cap starting in 2025, would cost an additional $1.2 trillion, according to a February brief from Penn Wharton.

The standard deduction would decrease and personal exemptions would come back

The standard deduction will decrease starting in 2026 if current tax law stands after 2025.

After the TCJA was enacted, the standard deduction caps were doubled to $12,000 for single filers, $18,000 for heads of household, and $24,000 for married people filing together. Updating for inflation, these amounts are now $14,600, $21,900, and $29,200, respectively.

Those deductions at 2018 levels will drop to $6,500 for single filers, $9,550 for heads of household, and $13,000 for joint married filers, though those numbers will be adjusted up somewhat for inflation.

The TCJA’s increase in the standard deduction added about $700 billion to the deficit, according to the JCT at enactment, and will add about $1.3 trillion to the deficit if extended.

The TCJA doubled the standard deduction by doing away with personal exemptions, which took the form of itemized expensing.

Personal exemptions will go back to their pre-TCJA levels and then be marked up for inflation, if the law is permitted to expire. In 2018, the personal exemption amount would have been $4,150. If extended through 2034, the loss of personal exemptions would shrink the deficit by $1.7 trillion, per the CBO.

The child tax credit goes down

Without an update to the tax law, the maximum child tax credit (CTC) will shrink from $2,000 per child to $1000, and the additional credit will drop from $1,400 to $1,000.

The income threshold for taking people off the credit will drop from $400,000 for married filers to $110,000.

The CTC was further expanded in the American Rescue Plan following the pandemic from $2,000 per child to $3,600 per child, taking a huge bite out of child poverty across the U.S.

“[Census] results showed a remarkable decline in child poverty, to 5.2 percent, largely driven by the expansion of the Child Tax Credit put in place under the American Rescue Plan (ARP),” researchers at Columbia University wrote in 2022.

Republicans could further increase the credit, though they voted against doing that in the Senate as part of a larger tax package over the summer. If extended at current levels, the CTC would add $735 billion to the deficit.

Inheritance taxes go up and the 199A pass-through deduction goes away

The TCJA increased the estate and gift tax exclusions from $5 million to $10 million. Without an extension, that exclusion, adjusted for inflation, will drop from about $13.6 million to $6.8 million.

The law’s pass-through business deduction, which is similarly prized by wealthier taxpayers, created a 20 percent discount for this type of income, which is set to expire at the end of next year.

On the administrative level, pass-through businesses have drawn the attention of the IRS in recent years as entities enabling tax avoidance. The agency recently established a special department within its large business and international division specifically to go after taxes unpaid by large partnerships, which can have complex and nested structures.

Business tax breaks that have already expired

Some tax breaks in the TCJA have already expired and have been the focus of recent intermediate tax legislation, though it failed to make it through Congress in August. 

These breaks include full deductibility of research and experimentation expenses in the year they were incurred, as well as modified accounting standards for the deduction of business interest, which is valued by the private equity industry, among others in the financial sector.

Immediate capitalization of property costs will also expire and be replaced by annual depreciation and amortization deductions.

There are also changes built into the international territorial tax regime that was set up by the TCJA to deter companies from moving their headquarters overseas.