Financial Impacts if Trump Extends the Tax Cuts and Jobs Act

On the campaign trail, Trump signaled that he’d favor making these provisions permanent. Because Republicans control both houses of Congress, it's probable that he will succeed in making good on that promise. Here's a look at the elements of the TCJA that are set to expire and how extending them could continue to benefit consumers’ wallets. 

Simplified Returns 

The TCJA increased the standard deduction and removed personal tax exemptions, which made tax returns easier for many individuals. If extended, the standard deduction for a married couple in 2026 would be roughly $30,725, and the personal exemption would be zero. If this element of the TCJA expires, the standard deduction would fall to $16,525 and the personal exemption would rise to $5,275, according to Brookings Institution calculations. 

Lower Tax Rates 

The TCJA lowered individual income tax rates and if it’s not extended those rates will increase again. Brookings estimates that if the TCJA ends, the top marginal tax rate will go back to 39.6% (where it was in 2017), increasing from the previous rate of 37%. In addition to promising to extend the TCJA, President Trump ran on the idea that tipped wages, overtime and Social Security payments should no longer be taxed. We’ll be watching to see if he continues to push for those changes. 

Real Estate Deduction 

Under the TCJA, homeowners are only allowed to use $10,000 of their state and local taxes (SALT) as a deduction. On the campaign trail, candidate Trump said he would let the SALT limitation expire. Before the TCJA, there wasn't a cap on the SALT deduction. This was advantageous for homeowners with large houses or those residing in high-tax states. 

Under the TCJA, homeowners can deduct mortgage interest on homes worth $750,000 or more. If the law expires, homeowners will be able to deduct mortgage interest on properties worth up to $1 million.  

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Child Tax Credit 

The tax credit for each child under 17 years of age was increased under the TCJA to $2,000 up from $1,000 and then adjusted for inflation subsequently. If allowed to expire, the child tax credit will revert to $1,000, which on an inflation adjusted basis is about 25% lower than it was in 2017. 

Alternative Minimum Tax 

The TCJA reduced the number of people who were on the hook for the alternative minimum tax by increasing the AMT exemption amounts and raising the income levels at which the exemptions phase out. If this expires, couples filing jointly could see the AMT exemption fall to about $110,075, down from $140,300 if the provision is extended. 

Estate Taxes 

TCJA doubled the estate tax exemption and for married couples it’s roughly $28 million. If this aspect of the TCJA isn’t extended, the exemption will fall to about $14 million. 

Business Taxes 

Sole proprietors, partnerships and S-corporations could lose the TCJA's 20% deduction for qualified pass-through income if that portion of the Act is allowed to expire. The bonus depreciation provision, which allows companies to deduct certain capital investments, will be phased out by 2027. 

What does not expire is the reduction of the corporate tax rate to 21% down from 35%. During the campaign, President Trump promised to lower the tax rate even further to 15% for companies manufacturing their products in the United States. It remains to be seen whether that actually happens. 

 Partner with a Financial Advisor for Tax Planning 

It’s always important to stay on top of changes to the tax code, but it will be especially important this year. This is where working with a proactive accountant and financial planner can be invaluable. At WHZ we will be keeping up with any and all changes made to the tax code on behalf of our clients. If you have any questions about how tax changes might impact your portfolio, we're here to help. We offer personalized tax planning as part of an overall strategic financial plan designed to reduce your taxes while increasing your wealth. Contact us for a consultation on our website at whzwealth.com, or give us a call at (860) 928-2341.  

Authored by Principal/Managing Partner Laurence Hale AAMS, CRPS®. Securities and advisory services offered through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. These materials are general in nature and do not address your specific situation. For your specific investment needs, please discuss your individual circumstances with your representative. WHZ Strategic Wealth Advisors does not provide tax or legal advice, and nothing in the accompanying pages should be construed as specific tax or legal advice. 697 Pomfret Street, Pomfret Center, CT 06259 and 392-A Merrow Road, Tolland, CT 06084. 860-928-2341. www.whzwealth.com.