With the recent election behind us, we’re taking a fresh look at what could be on the horizon for taxes. Some major tax provisions are set to expire in 2025, and with new ideas on the table, we might see changes that impact everything from individual tax rates to business deductions.
Here’s a breakdown of what’s expiring, what’s proposed, and how these changes might impact you. 📅👇
1. Individual Tax Rates and Brackets: What’s Expiring and Why It Matters 🧾
What’s Expiring by 2025: The 2017 TCJA lowered tax rates for most people and adjusted the tax brackets, meaning many of us saw smaller tax bills. If these changes expire, tax rates will go back up to pre-2017 levels, which could lead to higher tax bills for most.
Current vs. Previous Rates for a Quick Comparison:
10% Rate: Stays the same.
12% Rate: Replaces the previous 15% rate.
22% Rate: Replaces the previous 25% rate.
24% Rate: Replaces the previous 28% rate.
32% Rate: Replaces the previous 33% rate.
35% Rate: Stays the same.
37% Rate: Replaces the previous 39.6% rate.
So, if you’re earning between $40,000 and $400,000, these changes have likely saved you money each year!
Proposed Plan: The idea is to keep these lower rates and brackets for the long term, so taxpayers don’t see their rates jump back up in 2026.
What It Could Mean for You: If these lower rates stay, you’ll likely continue to keep more of your paycheck, especially if you’re in those key brackets (like 12%, 22%, and 24%) that cover most middle-class incomes. If they don’t, you’ll see your rate go up in 2026, and your tax bill could grow by thousands of dollars. 📉
2. Standard Deduction and the Loss of Personal Exemptions: What’s Expiring and What Could Change 💸
What’s Expiring by 2025: The TCJA nearly doubled the standard deduction—currently $14,600 for singles and $29,200 for married couples filing jointly. However, it also eliminated personal exemptions, which used to allow around $4,050 per person to be deducted from income. This was a big help for families, especially larger ones.
Proposed Plan: The proposal is to keep the higher standard deduction level in place permanently, but personal exemptions aren’t coming back.
What It Could Mean for You: If the higher standard deduction stays, it’ll be easier for most people to file taxes and enjoy a sizable tax break. But keep in mind, without the personal exemptions, larger families don’t get quite as much benefit as they did before. Without action, the deduction will shrink after 2025, and taxpayers could see their taxable income increase—especially impactful for middle-income households. 👍
3. Child Tax Credit: What’s Expiring and What’s Proposed 👶💵
What’s Expiring by 2025: The TCJA raised the Child Tax Credit from $1,000 per child to $2,000 per child, with up to $1,400 of that amount refundable, meaning it’s paid even if you don’t owe taxes.
Proposed Plan: There’s a proposal to keep the expanded Child Tax Credit in place for families.
What It Could Mean for You: This credit has been a big help for families, giving extra money to cover costs for raising children. If this provision stays, families will continue to see a lower tax bill or larger refund. But if it expires, families may lose a good chunk of tax savings at a time when costs are going up in other areas too. 👨👩👧👦
4. Estate Tax Exemption: What’s Expiring and How It Affects
Inheritances 🏡
What’s Expiring by 2025: The TCJA raised the estate tax exemption significantly, so individuals can currently transfer up to $12.92 million tax-free. Without action, this exemption drops back to around $5 million in 2026.
Proposed Plan: The idea is to keep this higher exemption level in place.
What It Could Mean for You: For most, this won’t make a big difference, but for families with more assets or small businesses, a lower exemption would mean more estate tax. Keeping it higher lets more wealth pass down to the next generation tax-free. 💰
5. Business Tax Breaks: What’s Expiring and What’s Proposed 🏢💼
Several tax breaks for businesses are also set to expire by 2025, which were designed to help small and growing companies.
100% Bonus Depreciation: Businesses can write off the entire cost of big purchases, like equipment, right away.
R&D Expensing: Companies can currently deduct their research and development costs right away.
20% Deduction for Small Businesses (QBI): Small businesses and self-employed people can deduct 20% of their income, reducing the tax they owe.
Proposed Plan: The idea is to keep these deductions in place, supporting businesses of all sizes.
What It Could Mean for You: If you own a business, these deductions mean lower costs, more cash flow, and potentially more growth. If they expire, business owners may face higher costs, impacting their ability to expand and hire. 🔧
6. State and Local Tax Deduction Cap (SALT) 🌆
Current Law: The TCJA placed a $10,000 cap on the SALT deduction, limiting how much you can deduct for state and local taxes. This mainly affects people in high-tax states.
Proposed Plan: There’s a plan to remove this cap, so taxpayers in high-tax areas can deduct more.
What It Could Mean for You: If you live in a high-tax state and pay more than $10,000 in state and local taxes, removing the cap could significantly reduce your federal tax bill. If the cap stays, those in high-tax states will continue to feel the pinch. ⚖️
7. Making Social Security Benefits and Overtime Pay Tax-Free 🧓⏱️
New Proposal: A new proposal would make Social Security income and overtime pay tax-free. This isn’t part of the 2025 expirations and doesn’t have a set timeline.
What It Could Mean for You: If you’re retired, making Social Security tax-free would mean you keep more of your benefits. For those working overtime, this could also mean a bigger paycheck. 🤑
8. Auto Loan Interest Deduction 🚗💰
New Proposal: Another new idea would allow people to deduct interest paid on car loans, similar to mortgage interest deductions.
What It Could Mean for You: If you’re financing a car, this could help reduce your taxable income and make a vehicle purchase more affordable. Without this change, auto loan interest will remain non-deductible. 🤔
9. Lower Corporate Tax Rate for U.S. Manufacturing 🏭🇺🇸
New Proposal: There’s a proposal to reduce the corporate tax rate to 15% for U.S.-based manufacturers, aimed at boosting domestic production.
What It Could Mean for You: If passed, this change could help create jobs in the U.S., keeping manufacturing and production local. However, it’s not tied to the 2025 expiration. 👷
10. Green Energy Tax Credits 🌱❌
Current Law: Tax credits currently exist for green energy, like solar panels, wind turbines, and energy-efficient home improvements.
Proposed Plan: The proposal would remove these credits, making it more expensive to invest in green energy.
What It Could Mean for You: If you’re considering green upgrades for your home, you might want to take advantage of these credits while they’re available, as they make eco-friendly options more affordable. 🌞
Summary: What This Means for You and What’s Likely to Come First 📅
With the 2025 deadline approaching, the first priority will be to address the expiring provisions like the current individual tax rates, the standard deduction, and the Child Tax Credit. If nothing changes, these benefits will disappear, and many taxpayers could see their taxes rise in 2026.
The new proposals—like removing the SALT cap, making Social Security tax-free, or adding a deduction for auto loan interest—don’t have set timelines and could take longer to come into play. These ideas may be reviewed over the next few years, but they’re not as urgent as addressing the 2025 expirations.
What can you do now? If you’re a taxpayer, especially in the middle class, it’s a good idea to keep an eye on these potential changes. If passed, these proposals could help keep more of your income, provide better deductions for families, or offer extra benefits if you own a business. But with Congress still needing to decide, the best approach is to stay informed and ready for any updates.
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