TCJA Sunset: What Expires and When

The Tax Cuts and Jobs Act of 2017 (P.L. 115-97) was the most significant overhaul of the Internal Revenue Code in three decades. But most of its individual provisions were written with a built-in expiration date: December 31, 2025. As we prepare returns for the 2026 tax year, practitioners face a landscape that has shifted dramatically. Provisions that clients have relied on for eight years are gone, reverting to pre-TCJA rules unless Congress acts.

This section covers the major sunsets and their practical implications for your clients.

Individual Rate Brackets Revert

The TCJA reduced individual income tax rates across nearly every bracket. Effective January 1, 2026, those rates revert to their pre-TCJA levels, adjusted for inflation.

2025 TCJA Rates (Single Filer)

2026 Reverted Rates (Single Filer, Projected)

Note the re-introduction of the 15%, 25%, 28%, and 33% brackets that the TCJA had consolidated. The top rate returns to 39.6%, up from 37%. For a single filer with $200,000 in taxable income, the rate increase from 32% to 33% on a portion of that income, combined with the shift from 24% to 28% in the middle brackets, produces a meaningful tax increase.

Practitioner Action Item: Run 2025-vs-2026 projections for every client earning above $100,000. The bracket changes hit hardest in the $100,000--$400,000 range, where the shift from 24% to 28% (and 32% to 33%) creates the largest percentage increase in tax liability.

Standard Deduction Reduction

The TCJA nearly doubled the standard deduction, moving it from $6,350 (single) and $12,700 (MFJ) in 2017 to inflation-adjusted levels that reached $15,000 (single) and $30,000 (MFJ) by 2025.

In 2026, the standard deduction reverts to approximately:

• Single: $8,300 (projected, inflation-adjusted from pre-TCJA baseline)
• Married Filing Jointly: $16,600
• Head of Household: $12,200

This is a reduction of roughly $6,700 for single filers and $13,400 for married couples. On its own, this change increases taxable income substantially. For a married couple in the 25% bracket, the reduced standard deduction alone produces approximately $3,350 in additional federal tax.

The Return of Personal Exemptions

The TCJA eliminated personal exemptions (previously $4,050 per person in 2017). In 2026, personal exemptions return, projected at approximately $5,300 per person.

For a married couple filing jointly with two children, the math works like this:

Families with children may actually see a net benefit from the sunset, because the combined return of personal exemptions plus the (reduced) standard deduction exceeds the TCJA's inflated standard deduction alone. A family of four gains approximately $7,800 in additional deductions compared to 2025.

However, high-income families will see personal exemptions phased out under the returning Pease limitation, which reduces itemized deductions and personal exemptions for AGI above certain thresholds. The phase-out threshold was approximately $261,500 (single) and $313,800 (MFJ) before TCJA, and will return at inflation-adjusted levels.

Practitioner Action Item: Model the net effect for each client. Single filers and couples without dependents generally lose from the sunset. Families with multiple dependents may break even or come out ahead, depending on income level and whether Pease applies.

SALT Deduction Cap Removal

Section 164(b)(6), which limited the state and local tax (SALT) deduction to $10,000, expires. In 2026, taxpayers who itemize can once again deduct the full amount of state income taxes (or sales taxes) and property taxes.

For clients in high-tax states -- California, New York, New Jersey, Connecticut, Illinois -- this is significant. A couple paying $18,000 in state income tax and $14,000 in property taxes can deduct the full $32,000, rather than the $10,000 cap.

Combined with the lower standard deduction, many more taxpayers will benefit from itemizing in 2026 than did in 2025. The percentage of taxpayers who itemize is projected to roughly triple, from about 10% back toward 30%.

Practitioner Action Item: Re-evaluate the standard-vs-itemize decision for every client. Clients who have been on autopilot with the standard deduction for eight years may now benefit from itemizing, particularly homeowners in high-tax states.

Child Tax Credit Reduction

The TCJA doubled the child tax credit from $1,000 to $2,000 per qualifying child under 17, with a refundable portion (additional child tax credit) of up to $1,700. In 2026, the credit reverts to $1,000 per qualifying child, with a refundable portion of approximately $1,000 (inflation-adjusted).

The income phase-out thresholds also revert. Under TCJA, the credit began phasing out at $200,000 (single) and $400,000 (MFJ). Pre-TCJA thresholds were $75,000 (single) and $110,000 (MFJ). The return to lower phase-out thresholds means many middle-income families will lose some or all of the credit.

Consider a married couple with two children and AGI of $150,000. In 2025, they claim $4,000 in child tax credits with no phase-out. In 2026, they claim $2,000, potentially reduced further by the phase-out starting at $110,000.

QBI Deduction Expiration

Section 199A, the qualified business income (QBI) deduction, allowed eligible taxpayers to deduct up to 20% of qualified business income from pass-through entities (sole proprietorships, partnerships, S corporations). This deduction expires entirely after December 31, 2025.

For a sole proprietor with $200,000 of QBI, the loss of the 199A deduction means $40,000 of income that was previously deduction-eligible is now fully taxable. At a 28% marginal rate, that is $11,200 in additional tax.

The expiration hits:

• Sole proprietors and single-member LLCs: Full impact on Schedule C income
• S corporation shareholders: Impact on distributive share (not reasonable compensation)
• Partners: Impact on ordinary income allocations
• Specified service trades or businesses (SSTBs): These already faced phase-outs above $191,950 (single) under TCJA; the entire deduction is now gone regardless of income

Practitioner Action Item: This is the single largest tax increase for many small business clients. Discuss entity structure changes (C corporation election, for example) well before year-end. A C corporation pays a flat 21% rate -- the corporate rate was not part of the TCJA sunset -- and may now be advantageous for retained earnings.

Estate and Gift Tax Exemption Reduction

The TCJA doubled the estate and gift tax exemption from approximately $5.49 million to $11.58 million (2020), with inflation adjustments reaching approximately $13.99 million per person by 2025. In 2026, the exemption reverts to approximately $7.0 million per person (inflation-adjusted from the pre-TCJA $5 million baseline).

For married couples using portability, the combined exemption drops from approximately $27.98 million to approximately $14.0 million. Estates between $14 million and $28 million that would have passed free of estate tax under TCJA are now potentially taxable at 40%.

Practitioner Action Item: For clients with estates exceeding $14 million (married) or $7 million (single), accelerated gifting in early 2026 may still use the higher exemption amount if Congress provides a transition window. Monitor legislative developments closely. For clients who already made large gifts under the higher exemption, the IRS has confirmed (in final regulations under section 2010) an anti-clawback rule: gifts made while the higher exemption was in effect will not be recaptured.