Many tax provisions enacted under the Tax Cuts and Jobs Act (the “TCJA”) will automatically expire on December 31, 2025, and others will expire by December 31, 2028.  As previously discussed here, the pressing need to address these expiring tax provisions has elevated tax to an important issue in this election cycle, as the incoming President will need to engage in detailed tax reform proposals during her or his first year in office.  If these tax provisions expire, businesses and individuals will be subject to various tax implications, as summarized below.  Unless otherwise indicated, the tax changes summarized below will each be effective as of December 31, 2025.

Business and Corporate Tax Provisions

• The base erosion and anti-abuse tax (“BEAT”) would increase from 10% to 12.5%.
• A U.S. corporation’s effective tax rate on global intangible low-taxed income (“GILTI”) would increase from 10.5% rate to 13.125%.
• A U.S. corporation’s effective tax rate on foreign-derived intangible income (“FDII”) would increase from 13.125% rate to 16.4%.
• The 20% deduction applicable to qualified business income earned by certain pass-through entities would disappear.
• Businesses would no longer be able to claim bonus depreciation on qualified property and would be required to capitalize and recover the cost of the property through annual depreciation or amortization deductions (currently being phased out with no bonus depreciation available after December 31, 2027).
• Loss limitations preventing non-corporate taxpayers from claiming excess business losses under Section 461(l) would be eliminated after December 31, 2028.
  
  

Individual Taxpayer Provisions

• Individual income tax rates would increase, with top marginal rates increasing from 37% to 39.6%.
• The $10,000 cap on state and local tax deductions would be eliminated.
• Taxpayers could again claim miscellaneous itemized deductions, such as investment and advisory fees, to the extent that the expenses exceed 2% of the taxpayer’s adjusted gross income.
• Both the total amount of income exempted from the individual Alternative Minimum Tax and the income threshold for phasing out the exemption would be reduced.
• Mortgage interest could be deducted on the first $1,000,000 of mortgage debt, up from $750,000.
• Certain high-earning taxpayers would again be subject to an overall limitation on their itemized deductions, with up to 80% of their itemized deductions reduced.
• The estate tax exemption, as adjusted for inflation, would be halved.
• Individuals could again deduct personal casualty and theft losses not otherwise compensated by insurance.
• The Child Tax Credit would be reduced from $2000 to $1000 per qualifying child.
• The standard deduction would be nearly halved.
• Taxpayers could again claim personal exemptions for themselves and dependents.