The 2024 POTUS Election Won't Impact Your Taxes Much, but the Expiring Tax Cuts and Jobs Act Will
As the 2024 presidential election ramps up, it’s natural to wonder what changes a new administration could bring to our tax system. While elections can certainly influence future tax policies, it's important to understand that the next administration—regardless of who wins—won't immediately or directly impact your taxes. On the other hand, the looming expiration of the Tax Cuts and Jobs Act (TCJA) at the end of 2025 has significant and direct implications for personal taxes. And especially in the State of Tennessee where your vote is more or less irrelevant (for now, anyway, due to the electoral system) voters should be more focused on the Congress of 2025 instead of the President from 2025-2029.
The 2024 Presidential Election and Personal Taxes
Elections always bring up discussions about tax policy, and both major parties may have ideas on how to modify the tax code. However, these are often proposals or goals that take time to implement or simply do not happen at all. After all, any substantial changes in the tax code would require approval from Congress, making immediate shifts in individual taxes unlikely simply because of a change in administration.
So, while campaign promises may signal certain tax priorities, the most pressing tax changes will happen regardless of who is in office unless Congress takes action to extend or amend existing laws. Here’s where the Tax Cuts and Jobs Act (TCJA) comes in.
The Impact of the TCJA Expiration in 2025
The TCJA was passed in December 2017, implementing broad changes that affected individual taxpayers. However, many of these changes were temporary, designed to last until December 31, 2025. Without an extension, these provisions will expire, significantly altering individual tax obligations. Here’s a breakdown of key changes that are set to revert after 2025:
1. Individual Income Tax Rates
The TCJA introduced lower income tax rates across seven brackets, ranging from 10% to 37%. These reduced rates will end in 2025, with the highest rate increasing from 37% back to 39.6%.
2. Standard Deduction
One of the most notable changes in the TCJA was nearly doubling the standard deduction. This larger deduction amount will expire after 2025, reverting to lower, pre-2018 levels, which will increase taxable income for many taxpayers.
3. Personal Exemptions
The TCJA eliminated personal exemptions (a tax deduction available for each taxpayer and dependent). These will return in 2026, but this doesn’t necessarily lower taxes, as exemptions are generally lower than the increased standard deduction amount we’re used to.
4. Child Tax Credit
Under the TCJA, the Child Tax Credit increased from $1,000 to $2,000 per qualifying child, with up to $1,400 refundable. Without an extension, the credit will revert to $1,000, making it less beneficial to families.
The TCJA also introduced a $500 nonrefundable credit for other dependents, like elderly parents. This credit will disappear if the TCJA expires.
5. Other Tax Credits and Deductions
Earned Income Tax Credit (EITC): Although the TCJA didn’t change the EITC directly, other changes such as lowered credits and deductions will indirectly affect many families and taxpayers with children.
State and Local Tax (SALT) Deduction: The TCJA capped the deduction for state and local taxes at $10,000, which impacted taxpayers in high-tax states. If this provision expires, the cap will be lifted, potentially benefiting some taxpayers.
Medical Expense Deduction Threshold: The medical expense deduction threshold, currently at 7.5% of adjusted gross income (AGI), will revert to 10% after 2025.
6. Qualified Business Income (QBI) Deduction for Pass-Through Entities
The TCJA created a 20% deduction for qualified business income from pass-through entities like sole proprietorships and partnerships. This deduction is a significant tax benefit for small business owners and will disappear after 2025 if not extended.
7. Estate and Gift Tax Exemption
The TCJA doubled the exemption amount for estate and gift taxes. Without an extension, the current exemption of $12.92 million (2023) will revert to around $5 million, which may affect estate planning for wealthy taxpayers.
8. Mortgage Interest Deduction
The mortgage interest deduction was limited to interest on up to $750,000 of mortgage debt. Without an extension, this limit will increase back to $1 million in 2026, impacting homeowners.
9. Alternative Minimum Tax (AMT) Exemptions
The TCJA significantly raised AMT exemptions, reducing the number of taxpayers subject to it. These exemptions will revert to lower levels, potentially impacting more taxpayers after 2025.
Why the TCJA’s Expiration Will Matter More Than Election Outcomes
The expiration of the TCJA’s individual tax provisions will have an immediate impact on taxpayers' financial situations beginning in 2026. While new administrations can influence future tax policy, any proposed tax changes would take time to enact, even if they align with campaign promises.
For taxpayers, this means the most pressing factor to watch for isn’t necessarily the election outcome, but rather whether Congress takes action on the TCJA. If Congress doesn’t extend these provisions, millions of taxpayers will face higher tax bills, fewer deductions, and reduced credits.
Planning Ahead for 2026
Understanding the TCJA’s potential expiration can help individuals and families better prepare for future tax impacts. Working with a tax advisor or planning strategies like maximizing deductions, considering estate plans, or making qualified business income adjustments could soften the blow if these provisions expire.
The 2024 presidential election is undeniably important, but when it comes to your taxes, the TCJA’s expiration is set to have a direct, lasting impact on what you pay starting in 2026. It’s wise to stay informed on both potential extensions and alternative planning strategies that could help minimize your tax obligations in the future. Contact one of our specialists today to find out how the new tax laws will impact you.