Why Think About the Sunset of the Tax Cuts and Jobs Act (TCJA)

Effective tax planning means thinking about how tax rates might change.

This year is no exception. In fact, the clock is ticking on provisions of the Tax Cuts and Jobs Act (TCJA), which became law late in 2017. Pieces of this legislation, the largest overhaul of the tax code in decades, are scheduled to sunset in 2025 — just two years from now.

Tax policy is subject to change due to shifting political winds. A policy proposal can spark lengthy debate. The forces of inertia and resistance often prevail. Action often stalls amid partisan gridlock — when the two parties control different branches of government — which tends to be more common than unified, one-party control. The TCJA could expire simply because the parties fail to reach an agreement on how to extend it.

As such, it seems reasonable to at least plan for the possibility that taxes will be higher in the future.

Impact of the expiring TCJA

The TCJA lowered the tax rates for most income levels. With the built-in sunsetting of the TCJA, the lower tax brackets would expire at the end of 2025 and be replaced with the tax brackets that were in place prior to the TCJA.

Here is a comparison of how tax rates would differ upon the expiration of the TCJA.

Married couples filing a joint return:

Married couples filing a joint return:

Single filers:

Single filers