As Donald Trump prepares for his return to the White House, American taxpayers are watching anxiously to see what will happen to the trillions of dollars in tax breaks scheduled to expire at the end of 2025. The expiration isn't a surprise: It was written into Trump's signature tax legislation from his first term, the Tax Cuts and Jobs Act (TCJA), signed into law in 2017. The TCJA's provisions included a permanent lower corporate tax rate, as well as temporary lower income tax rates that came with a sunset date of Dec. 31, 2025.
Those income tax cuts resulted in a 1% to 4% reduction in all but the lowest of the seven tax brackets imposed under the current IRS regime. If Congress does not pass a law to extend the reduction, the higher rates will snap back into place, as will older provisions that set the bar lower for estate taxes. The nonpartisan Tax Foundation estimates 62% of filers will pay more if this occurs.
Now Republicans have an opportunity to extend the cuts, a road made easier since Democrats—who had opposed the TCJA in 2017 on grounds it unduly favored the wealthy—do not control the House, Senate, or presidency next year. Many financial advisors and other experts expect Republicans to at least extend some of the most popular provisions, like the lower federal rates and higher standard deduction.
"There is a general expectation that Congress will cherry-pick preferred provisions rather than make a blanket extension," says Carolyn Yun, a client advisor at Hollow Brook Wealth Management.
One provision that might not get extended: the $10,000 cap on state and local property tax deductions, known as SALT. Because any change to the SALT cap benefits only taxpayers who itemize their deductions and pay more than $10,000 in state and local income or sales and property taxes, letting the cap expire would be a boon to households earning between $200,000 and $500,000, according to right-leaning think tank the Tax Foundation. But Trump has voiced his support for eliminating the cap.
"For clients who delay paying local or property taxes until Jan. 1 of the following year, it may make sense to delay those payments if the SALT limitation becomes higher in 2025," says Yun.
Outside of the TCJA, another tax break potentially on the chopping block is the $7,500 electric-vehicle credit. Though EV king Elon Musk is heavily involved in the Trump administration, the tax credit "has not been a favorite of Republicans," says Yun. Those interested in purchasing an EV may want to make a move soon.
"We encourage them to make the purchase before the end of the year," she says. "This tax credit and other clean energy credits may not be available much longer."
Estate tax uncertainty
One big change that wealth planners, in particular, are paying attention to is what will happen with the estate tax exemption, or how much someone can transfer to another person without paying any federal estate tax, which can reach 40%. The lifetime exemption was essentially doubled under the TCJA, and in 2024 is $13.61 million for individuals and $27.22 million for couples (in 2025, it will be $13.99 million and $27.98 million, respectively).
If this provision is not extended, the exemption will essentially be cut in half after 2025. As such, financial planners have been working with clients on how best to prepare.
"This is the number one issue that’s looming large in people’s minds," Nita Vyas, trust counsel and managing director at Fiduciary Trust International, previously told Fortune. "For our high-net-worth clients, it takes some thought to implement whatever it is you’re going to do."
