Preparing For The Sunset Of The Tax Cuts And Jobs Act

The Hancock Group |

by Gerald R Rose, ChFC®, Account Executive, The Hancock Group, Inc.

Most of you reading this article have finished filing your tax returns for 2023 and are likely planning summer vacations. Few will think much about tax issues until later this year or early next year. However, we should all be aware that at the end of 2025, a “sunset” awaits us, and it is not after a sunny, relaxing day at the beach or by the lake.

The Tax Cuts and Jobs Act of 2017 (TCJA) made many changes to the US Tax Law. However, many of the changes included sunset provisions that will cause them to expire at midnight on January 1, 2026 (Happy New Year), unless Congress acts to extend them.

According to the Internal Revenue Code (IRC), “sunset” is an expiration date for a tax provision set by law when enacted or amended.

There will be numerous changes to tax provisions once the Tax Cuts and Jobs Act of 2017 (TCJA) has sunset. One change will be the marginal tax rates (IRC 1) under the (TCJA). Currently, the rates are as follows: 10%, 12%, 22%, 24%, 32%, 35%, and 37%.

On January 1, 2026, the marginal tax rates will return to the 2017 tax rates as follows: 10%, 15%, 25%, 28%, 33%, 35%, and 39.6%.

The income brackets to which those rates apply will also be different and adjusted for inflation. The bottom line is that the marginal tax rates will increase unless Congress acts.

Another provision of the TCJA of 2017 was a substantial increase in the standard deduction. Taxpayers may deduct the standard deduction or elect to itemize deductions from their Adjusted Gross Income when arriving at a taxable income.

Following are highlights of changes, Revenue Procedure 2023-34, from the Internal Revenue Service dated November 9, 2023. The standard deduction for 2024:

The standard deduction for married couples filing jointly for tax year 2024 rises to $29,200, an increase of $1,500 from tax year 2023. For single taxpayers and married individuals filing separately, the standard deduction rises to $14,600 for tax year 2024, an increase of $750 from 2023. For anyone filing as head of household, the standard deduction will be $21,900 for tax year 2024, an increase of $1,100 from 2023.

The generous standard deduction will “sunset” on January 1, 2026, and revert to the 2017 standard deduction adjusted for inflation unless Congress acts.

Good or bad, the expiration of the Tax Cuts and Jobs Act 2017 (TCJA) provisions will allow policymakers to rethink tax policy. 

Contact The Hancock Group, Inc. today at (814) 944-8849 to discuss any changes the expiring tax law could bring to your financial plan. As always, consult your tax advisor for specific tax advice.