Tax 101: What Is Expiring and When From the Trump Tax Law?

Published: May 22, 2024

There has been so much great information put out about how the Trump tax law overwhelmingly benefits the wealthy and corporations, how much it has cost thus far, how much it would cost to extend in the future, how much it did to explode billionaire wealth, and how little it did to help the average worker or family. It may have even super-charged greedflation as soon as the pandemic provided air cover for businesses to price-gouge.

I did not attempt to duplicate any of that excellent work. Think of this instead as Trump tax cuts 101, an entry point for advocates and staff who want to know more about which parts of the law are expiring at the end of next year.

I did initially plan to include a section on the parts of the Trump law that aren’t expiring but that we should ensure are part of any negotiations next year—like fixing how we tax corporations on their profits at home and abroad—and on the many excellent proposals to raise revenue and make our tax code more fair, including my favorite. But, I ran out of steam. So just keep in the back of your mind that this is an overview of what’s expiring, but this isn’t the whole ball game.

What’s expiring (described in more detail below):

1. Tax rates and income thresholds for ordinary income (e.g. wages, tips, etc)

2. Standard deduction, personal exemptions, itemized deductions

3. Child tax credit (CTC)

4. Alternative minimum tax (AMT) for high-income households

5. Deduction for pass-through business income

6. Estate and gift exclusions for wealthy estates

7. “Opportunity zone” program

What’s in effect now (but would be rolled back under Wyden-Smith):

1. Several corporate tax increases (enacted by the Trump law and currently in effect) would be temporarily rolled back through the end of 2025 (to align with the provisions above) if the Wyden-Smith corporate tax cut/CTC deal is enacted

Background:

On a party-line vote in late 2017, Congressional Republicans passed PL 115-97, better known as the Trump tax law [#1], a sweeping package of tax changes overwhelmingly tilted to benefit the wealthy and corporations.

With a few key exceptions, the majority of the Trump tax cut provisions for corporations were made permanent while the majority of the provisions for individuals are set to expire after December 31, 2025. As a result, without congressional action, the tax code will revert to pre-Trump policies (adjusted for inflation) starting on January 1, 2026 for many of the provisions impacting individuals. 

What happens if Congress takes no action? If all of these temporary provisions were to expire, it’s not entirely clear when the impact of those changes would be felt or by which taxpayers. For example, if all of the Trump income tax rates and thresholds were to expire, the IRS would issue new withholding tables, so Americans subject to withholding on their wages could see a change in their take-home pay right away. [#2] Other changes might not be visible until individuals file their 2026 taxes in early 2027.

• Note #1

  If you’ve heard me talk about the 2017 Trump tax law before, you know I never call it the "Tax Cuts and Jobs Act" or "TCJA." Why? Because that’s not its official title. The only official title for Public Law 115–97 is "An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018."

  The bill’s short title was struck by the parliamentarian during Senate consideration for violating the Byrl rule. TCJA is, thus, one of several nicknames for the law. Should you feel compelled to use a nickname in lieu of its official title, no need to amplify the other side's false messaging.

• Note #2

  Whether everyone will notice the change is another matter. Even households with fairly steady paychecks experience some fluctuation at the first of the year thanks to inflation adjustments, higher insurance premiums, and so on. For millions of wage-earners, the actual tax benefit of the Trump tax cuts was so small—an extra $17 a week for the middle quintile, an extra 19 cents a day for the poorest quintile—that many did not realize they’d gotten a tax cut at all.

  Keep that in mind when you hear statistics like “80% of taxpayers received a tax cut, with an average tax savings of over $2,100.” Included in that 80%—and buried under stats like “average tax savings of $2,100” (with “average” doing a LOT of heavy lifting)—is the fact that many of those “80%” received so little that even conservative groups acknowledge that “just 17% of Americans believe that they received a tax cut under the TCJA.”

Additionally, while most of the Trump tax cuts were deficit-financed, the law included a handful of revenue raisers affecting corporations and individuals designed to make the other tax cuts appear less expensive. Some of those revenue raisers (like the change to R&E expensing at stake in the Wyden-Smith CTC deal) only came into effect in the last few years; others (like the SALT cap) have been in effect since 2018 but are set to expire at the end of 2025.

And finally, there are a handful of other big 2025 expirations not part of the Trump tax law (and not covered in this memo) that will be part of the larger fiscal fight and could impact the political dynamics around extension. Two big ones come to mind: 

1. The current Biden-McCarthy debt limit deal expires on January 1, 2025. By employing “extraordinary measures” (that become a little less extra-ordinary every year), Treasury can likely delay default until the spring. But drawn out negotiations over the debt limit that linger through mid-2025 could derail movement on taxes, increasing the risk that Congress will simply pass a short-term extension of the entire Trump law, including the tax cuts for the ultra-wealthy. [#3]

2. The Biden-era expansion of the ACA’s financial assistance for individuals buying health insurance in the private market is set to expire at the same time as the Trump law. 

• Note #3

  In my personal view, extending the cuts for everyone is a worse outcome than letting the law expire for everyone and it’s the outcome we should be fighting hardest against. Returning to the Obama-era tax code would not be a catastrophe, given how little most regular families actually received and how damaging the ITIN requirements are for immigrant families cut out of the law’s benefits. Extending the tax cuts for the wealthy, however, would do real harm to wealth inequality, racial equity, and the health of our democracy—not to mention the national debt. In 2012, Democratic messaging that Republicans were holding the middle class tax hostage to help the wealthy was hugely successful because it resonated with what the public already believes about the two parties.

One note: the Trump tax law was yuge, and I’m discovering new details every day (like this one), so this memo hits the toplines only, and the reader should assume there are many, many, many smaller pieces not covered.

What’s Scheduled to Expire:

1) Changes to how we tax ordinary income

Ordinary income is the income that the public is most familiar with: salary, wages, tips, interest, etc. (Exceptions to ordinary income include certain dividends and long-term capital gains, which are taxed at lower rates.) 

At the federal level, we tax ordinary income using seven marginal income tax brackets. A more detailed refresher on how marginal income tax brackets work can be found here, but two key points to keep in mind: 

i) You’re not taxed on your gross (total) income, but rather on your taxable income, which is your gross income minus deductions and exemptions; your salary might be $80K but your taxable income might only be $60K, and it’s your taxable income which determines your brackets

ii) Just because you max out in the 22% bracket, for example, doesn’t mean you pay 22% on your entire taxable income; instead, everyone pays 10% on their first $10 grand (roughly speaking), 12% on their next $40 grand, and so on. (See visual here.)

1A) Lower income tax rates for most brackets 

Of the seven marginal income tax brackets for ordinary income that existed pre-Trump, the Trump tax law lowered the rates for five of them and kept the rates the same for the other two. The top marginal rate was cut from 39.6% to 37%. 

By itself, this provision is a fairly straightforward tax cut for almost everyone. But here’s where it gets tricky…

1B) Income thresholds that help the very, very wealthiest

The Trump law lowered the income thresholds for the middle brackets, pushing some upper middle class tax filers into a higher bracket than they were in previously—a slight tax increase for those filers (not counting other provisions, like tax credits, that may have lowered their ultimate tax liability). 

For example, an unmarried individual with $500K in taxable income in 2025 will top out at the 35% rate under the Trump rules, but if the pre-Trump rules return in 2026, that same taxfiler would only top out at the 33% bracket (owing about $1000 less in taxes if the Trump rules expire).

At the same time, the Trump law increased the income threshold dividing the penultimate (35%) bracket and the top bracket (37%), sheltering more income from the very wealthiest households in the lower (35% rate) bracket—a straightforward tax cut, but only for those with the highest incomes.

Starting on January 1, 2026, tax rates and income thresholds will revert back to the pre-Trump tax code. adjusted for inflation. 

These are the income cut-off levels for single filers. The distribution for married-filing-jointly filers is much less wacky, but similar in its treatment of the 33-35% brackets. Data via CBO

This is the same data as the chart above (rounded to the nearest $10K for simplicity) to show how the Trump tax law changed income thresholds for the upper middle brackets to pay for a larger cut for the very wealthiest incomes. You can see how people who would have maxed out in the 33% bracket under Obama now find themselves maxing out in the 35% bracket under Trump. Side bar: see that tiny little $2K slice for the 35% bracket that’s set to return in 2026? Weird, right?That was necessitated by the last Democratic president’s pledge to not raise taxes on those over $400K.

This is worth taking a moment to marvel at, if only because it’s a remarkably straightforward example of how taxpayers lower down the food chain—in this case, the merely wealthy—ended up picking up the tab so the insanely wealthy could get even more. We don’t have to cry too many tears for the people making $500,000 a year to still marvel at how brazenly the law dings them to help the tycoon class.

It’s also a cautionary tale against focusing too much on “the 1%” when the big winners are much higher up the food chain. Conservative groups like the Tax Foundation and the National Taxpayers Union love, and I mean L-O-V-E to talk about the share of (federal income only) taxes paid by the 1%, because that hides how much the people at the tippy top are not paying.

And finally, one big change that is not expiring: the Trump tax law permanently changed how inflation is calculated when updating income thresholds each year, switching to a less-generous measure known as Chained-CPI. 

Taken in isolation, this provision is a tax increase for everyone, but when considered in connection with the rest of the tax law, most taxfilers still get some kind of cut (even if it’s pennies relative to what the big guys get). But that’s not true for the poorest 20%. In 2023, ITEP found that even extending all of the expiring Trump tax cuts still yields a $110 tax increase on the poorest group when this permanent change is taken into account. (Figure 5)

Once you start looking at the details, the Trump law is just chock full of examples of the little guys taking a hit to benefit the big guys, and not in a tax-cuts-always-help-the-rich generic kind of way, but in a cynical, methodical, and very Trumpian kind of way.

2) Changes to deductions & personal exemptions

As I noted above, taxpayers calculate their taxable income by starting with their total (gross) income and subtracting deductions and exemptions.

So-called “above-the-line” deductions are available to everyone who qualifies (e.g. the student loan interest deduction). The “line” in question separates your “gross income” from your “adjusted gross income” (AGI). 

Below the line, taxfilers can choose whether to take the standard deduction (a fixed amount set in law, indexed to inflation) or the sum of their itemized deductions (e.g. charitable deduction, mortgage interest deduction). 

Exemptions and deductions provide more tax savings to higher-income taxfilers than to lower-income ones (for reasons I explain here—with visuals!) while tax credits can be structured to provide the same benefit regardless of income. 

2A) Repeal of personal exemptions 

Before the Trump tax law, each taxpayer was also able to reduce their gross income by a personal exemption (fixed amount, indexed to inflation) for each person in their household (the taxfiler, spouse, and all qualified dependents) in addition to whatever deductions they took.

The Tax Policy Center has a nice example here:

[P]ersonal exemptions link tax liability to household size. For instance, in 2017 when the personal exemption amount was $4,050 and the standard deduction for a married couple was $12,700, a married couple with three children and income of $92,950 (before subtracting five personal exemptions and the standard deduction) and a married couple without dependents and income of $80,800 (before subtracting two personal exemptions and the standard deduction) had the same taxable income—in this case, $60,000.

In 2017, the personal exemption for each person on a household’s tax return was $4,050. The Trump tax law eliminated personal exemptions from 2018 through 2025. Personal exemptions (adjusted for inflation) are set to return in 2026.

As TPC notes, “By replacing personal exemptions for dependents with expanded child tax credits, TCJA moved toward equalizing the tax benefit for children and other dependents across households with different incomes.”

But, like all things connected to the Trump tax law, this change was a mixed bag. Previously, anyone with an individual taxpayer identification number (ITIN) qualified for a personal exemption and any child with an ITIN qualified for the child tax credit. The Trump law limited eligibility for the child tax credit to children with Social Security numbers, so certain families lost both their personal exemptions and their child tax credits. [#4]

• Note #4

  There are likely other differences between which dependents qualified for personal exemptions and which qualify for family-related tax credits that also determined whether this was a net-positive or net-negative for impacted households.

2B) Increased standard deduction

The Trump tax law nearly doubled the standard deduction from 2018 through 2025: 

• for individual filers the standard deduction increased from $6,500 in 2017 to $12,000 in 2018

• for married-filing-jointly filers, it increased from $13,000 to $24,000

The pre-Trump standard deduction is set to return in 2026 (increased for inflation).

For people already taking the standard deduction, the increased standard deduction paired with the elimination of personal exemptions may not have had a big impact. But as tax expert Bob Lord and others have noted, this did potentially have a big impact on middle class filers who had previously itemized. Under the pre-Trump code, they received both personal exemptions and their itemized deductions. Under the Trump law, however, their relatively small itemized deductions were matched by the larger standard deduction, but they lost their personal exemptions. Middle class homeowners and small-dollar charitable givers were likely among those most affected.

One tax expert who’s crunched the numbers warned me that it may be impossible to comply with Biden’s pledge to prevent tax increases on those making under $400K without retaining the Trump law’s policy choices on deductions and exemptions. (After all, some current taxpayers would get a cut, others an increase by letting the pre-Trump code come back into effect; Biden’s do-no-harm pledge only promises to ensure that those who currently benefit won’t end up worse off.) But, we shouldn’t take it as a given that this set of policy choices was necessarily the right set. 

 2C) Changes to itemized deductions

The Trump law temporarily restricted or eliminated certain itemized deductions while expanding others, through the end of 2025. 

For example, the Trump law temporarily: 

1. capped the state and local tax (SALT) deduction for individuals [#5]

2. capped the amount of qualified business losses that pass-through filers could deduct [#6]

3. eliminated the deduction for moving expenses

4. capped the mortgage interest deduction

On the other end of the spectrum, while small-dollar charitable givers were dinged by the Trump law—for the reasons noted above—the big guys were able to deduct even more of their charitable giving. The charitable deduction for cash donations was raised from 50% of AGI in any given year to 60% of AGI, which Rice University wants you to know "is particularly helpful for donors making a large, legacy-shaping gift." LOL

And while the law reduced the value of any given deduction by lowering tax rates (remember, the higher the rate, the bigger the deduction), it allowed the wealthy to take more advantage of their deductions by eliminating a critical cap on how much they could take (aka “the Pease limitation,” named for its congressional sponsor). 

I don’t know what The Balance website is, but this is a surprisingly good description of how the Pease limitation on deductions for the wealthy worked. In 2014, the conservative Tax Foundation called Pease a secret “surtax” on the wealthy, which is reason enough to let it come back on schedule in 2026.

• Note #5

  Republicans were explicit in 2017 that they included the SALT cap not only as a revenue-raiser, but as a way to coerce blue states into cutting their progressive state taxes or risk the flight of their wealthiest taxpayers to red states.

  I have two EXTREMELY CONTROVERSIAL opinions on tax policy and this is one of them: while the notion of millionaires fleeing blue states to avoid taxes is largely a myth, to the extent that it happens on the margins, particularly among retirees no longer tethered to daily business operations, the SALT cap probably plays a role. After all, that’s what it was designed to do. And that’s why anti-tax groups like ALEC are pushing to keep it. I’m all for soaking the rich, but not in a way that rewards red states for having incredibly regressive state tax regimes.

• Note #6

  Due to the Inflation Reduction Act, this now expires in 2029.

3) Expanded child tax credit (CTC)

Unlike deductions and exemptions which lower a taxpayer’s taxable income and therefore give a bigger benefit to those with higher incomes (see visual here), tax credits provide a dollar-for-dollar reduction of an individual’s final tax liability. 

Refundable credits help those low-income taxpayers who end up with no tax liability get money back, even after their taxes owed falls to zero. This can partly offset the federal payroll taxes that working people pay even if they earn too little to owe any federal income tax. It can also partly offset the many regressive state and local taxes that Americans pay, especially sales taxes that affect even the poorest households, and property taxes, which are passed down to low-income tenants as higher rents.

As an example, a household with $6,000 in fully refundable tax credits and a final tax liability of $4,000 would end up getting that $4,000 wiped clean and a check for $2,000.

The CTC is structured as a partially refundable credit, with income limitations on who can claim it, earnings requirements affecting how much one receives, and a cap on the refundable portion of the credit below the full credit amount. (The refundable portion is sometimes called the “additional child tax credit,” ACTC.) 

The Trump law made a number of changes to the CTC through the end of 2025. Some were positive, such as doubling the maximum credit to $2,000 per child, raising the eligible age from 16 to 17, phasing in the ACTC earlier, lifting the income threshold for which the CTC phases out, and indexing the refundable portion to inflation.

Other changes were harmful, such as capping the refundable portion and requiring children to have Social Security numbers instead of ITINs.

See CRS report for more details.

4) Expanded carve-outs from the alternative minimum tax (AMT) for high-income households

The AMT was designed to capture high-income taxfilers who would otherwise manage to avoid paying income taxes through the regular tax system because they could cobble together enough deductions, exemptions, and so on. 

Taxfilers subject to the AMT first calculate their tax liability through the regular system, then they add back in certain deductions and exemptions (so-called AMT “preference items”), then they subtract the AMT exemption amount, then they recalculate their taxes under the AMT rules (which have a different rate structure than the regular income tax system). Clear as mud? Their tax liability is the higher of the two calculations, regular or AMT. (This NerdWallet overview is honestly the best one I’ve read.)

The Trump law temporarily increased both the amount of money exempted from the AMT calculation and, even more significantly, the income threshold at which the exemption phases out. Basically, under the Trump law, even wealthier people could take advantage of bigger carve-outs. The AMT is set to revert to pre-Trump policy in 2026. [#7]

• Note #7

  Capping the SALT deduction and eliminating personal exemptions significantly reduced the number of people who had to pay the AMT. Previously some number of filers would benefit from a deduction like SALT under the regular system only to get snagged by the AMT. Given how costly lifting the SALT deduction is, I’m assuming it doesn’t all come out in the wash, however, or else there wouldn’t be political pressure to lift the cap or budgetary pressure to keep it. But that’s beyond the scope of this memo.

5) Pass-through deduction (aka Section 199A)

The Trump tax law is often described as being heavily tilted toward “the wealthy and big corporations,” which makes sense because we tax business income through either the individual income tax code or the corporate income tax code.

But it might be better described as heavily tilted toward “the wealthy and the big businesses they own, no matter how those businesses are structured.” That’s because major corporations weren’t the only billion-dollar firms to get a big business tax cut under the 2017 law. The Trump tax cuts slashed taxes on business profits for both C corporations and for pass-through businesses such as sole proprietorships, partnerships, and S corporations.

Pass-through businesses are called that because the owners report the business’s income on their individual tax returns, instead of filing separate returns for the business itself. The business income passes through to the owner. Many small businesses are structured as pass-throughs but that doesn’t mean that “pass-through” and “small business” are synonymous. I own a pass-through firm and so does Donald Trump. In fact, the pass-through category includes a number of billion-dollar firms with massive market share like Uline, the shipping products behemoth; Bloomberg, the financial data and media giant; and, of course, the Trump Organization.

Big businesses structured as pass-throughs already got plenty of preferential tax treatment under pre-Trump tax law but they received a massive new tax cut from the Trump law in the form of Section 199A, the 20% pass-through deduction on “qualified business income.” 

And while 199A was sold as a “small business tax cut,” the benefit has flowed overwhelmingly to the wealthiest. As Equitable Growth notes: “This tax cut was one of the most regressive provisions in the Trump tax bill since it targets benefits at already-wealthy business owners, who are disproportionately old, White, and male.” ProPublica’s investigative reporting into the open corruption behind Section 199A found it gave “just 82 ultra-wealthy households more than $1 billion in total savings” in the first year alone.

The deduction is structured to allow married couples with taxable income of less than $383,900 and singles with taxable income of less than $191,950 to claim the credit with few if any restrictions. [#8] Above those thresholds, one tax expert told me, there’s a “complicated list of restrictions understood by no one other than tax lawyers (who argue about their meaning among themselves).” These amorphous restrictions are fully phased in only for married couples with taxable income greater than $483,900 for married couples and $241,950 for singles—with lots of exemptions based on industry and other factors. 

In theory, this should limit the ability of billionaires to benefit from the deduction. But because there are so many loopholes and carveouts, and because the deduction is so complicated that true small businesses often miss out on claiming it, it’s most accurately described as one more of the Trump law’s tax cuts for big business.

• Note #8

  “Taxable income” is doing some heavy lifting here. Remember that under the Trump law, you can significantly reduce your AGI with a limitless amount of deductions to get the lowest possible taxable income. Income thresholds are more often pegged to AGI to prevent those kinds of shenanigans.

6) Expanded estate and gift tax exemptions

The Trump law doubled the amount of wealth that rich households can shield from the estate and gift tax, from $11 million per couple in 2017 to roughly $22 million in 2018, and indexed those levels to inflation. The pre-Trump exemptions—adjusted for inflation—are set to return in 2026. 

Like the pass-through deduction above, these nominal threshold amounts hide just how much money the ultra-wealthy can shelter. In theory, a billionaire shouldn’t get much benefit—relative to his vast fortune, anyway—from even a $22 million exemption. But in practice, the estate tax has been so riddled with loopholes that a billionaire can game the system to fall below them. (This video from 2014 remains one of my favorite plain-English explanations of four of these billionaire loopholes.)

7) “Opportunity Zone” program

The stated goal of the Trump law-created the “Opportunity Zone” program is to encourage investment in low-income communities by rewarding investors with deferred, reduced, and sometimes eliminated capital gains taxes.

The reality, however, is best captured by this 2021 New York Times column: “A capital-gains tax break sold as a way to induce the wealthy to invest in poor neighborhoods, opportunity zones appear to be providing more opportunity for the wealthy to cut their tax bills than to the people who live in designated zones. … 84 percent of the zones got no opportunity zone money at all. Half the money went to the best-off 1 percent of zones.”

There is little-to-no oversight over the OZ program, but House Republicans have nonetheless proposed extending and expanding it, including specifically to rural areas, and there is some bipartisan support for extending it.

What’s In Effect Now But Would Be Changed Under Wyden-Smith:

The Trump tax law included two new revenue raisers impacting corporations (changes to when companies deduct their R&E costs and changes to how companies calculate their net interest deduction) and phased out a third corporate tax cut created by the law (100% bonus depreciation) in order to offset the cost of making the corporate rate cuts permanent. 

Even as they were writing the Trump law in 2017, Republicans never really intended all of these tax increases to take effect. Rather, their goal was to make the bill’s overall score lower—particularly beyond the ten-year budget window—and then come back in a few years to undo them. That hasn’t worked out exactly as they planned [#9], but the three corporate pieces are included in the Wyden-Smith corporate tax cut/CTC deal passed by the House and awaiting action in the Senate. 

• Note #9

  Admire, for a moment, the audacity of the law’s architects now claiming that the corporate tax cuts they forced through caused revenue to increase. Corporate tax revenue fell sharply following enactment of the Trump tax law, and only began to approach pre-2018 levels of projected revenue after these corporate tax increases started taking effect in 2022—increases that Republicans have been actively working to repeal!

If Wyden-Smith becomes law as it’s currently drafted, these two corporate tax increases and one corporate tax cut phase-out will be rolled back to 2022 and 2023 (respectively) as though they never took effect at all, through the end of 2025. Then they’ll get folded into the larger Trump tax law fight.

Along with my former colleagues, I’ve written about these provisions extensively for Americans for Tax Fairness here.