The Tax Cuts and Jobs Act (TCJA) was a major overhaul of the U.S. tax code signed into law on December 22, 2017. The legislation made significant changes to both individual and business taxes, with the goals of reducing taxes, simplifying tax filing, and encouraging economic growth.
Many of the law's individual tax provisions were originally scheduled to expire after 2025. However, subsequent legislation extended or made permanent several key provisions, meaning many of the TCJA's most significant changes continue to affect taxpayers filing their 2026 tax returns in 2027.
Higher Standard Deductions
One of the most noticeable changes under the TCJA was a substantial increase in the standard deduction. As a result, many taxpayers no longer benefit from itemizing deductions.
Before the TCJA, the standard deduction was:
- $6,500 for Single filers (2017)
- $13,000 for Married Filing Jointly filers (2017)
After the TCJA took effect for 2018, the standard deduction nearly doubled:
- $12,000 for Single filers
- $24,000 for Married Filing Jointly filers
Subsequent legislation further increased these amounts and made the higher standard deduction framework permanent. Higher standard deductions have simplified filing for many taxpayers and reduced the need to track itemized expenses throughout the year.
Changes to the Child Tax Credit
The TCJA expanded the Child Tax Credit to provide larger tax benefits for eligible families.
Before the TCJA:
- Credit of up to $1,000 per qualifying child
After the TCJA:
- Credit increased to $2,000 per qualifying child
- A larger refundable portion became available for qualifying taxpayers
Later legislation increased the maximum credit and refundable amount while preserving the expanded eligibility rules created by the TCJA.
For many families, the enhanced Child Tax Credit remains one of the most valuable tax benefits available.
Lower Individual Income Tax Rates
The TCJA reduced tax rates across most federal income tax brackets.
Among the most significant changes:
- The top individual tax rate was reduced from 39.6% to 37%
- Several other tax brackets received rate reductions
- Income thresholds for many brackets were adjusted
These lower tax rates reduced federal income tax liability for many individuals and families and were later extended through additional legislation.
Elimination of Personal Exemptions
Before the TCJA, taxpayers could generally claim personal exemptions for themselves, spouses, and dependents.
The TCJA eliminated personal exemptions entirely.
To offset the loss of these exemptions, the law increased:
- Standard deductions
- Child Tax Credit benefits
- Certain dependent-related tax benefits
As a result, many taxpayers continued to see overall tax savings despite the elimination of personal exemptions.
State and Local Tax (SALT) Deduction Limit
The TCJA introduced a cap on the deduction for state and local taxes.
Before the TCJA:
- No overall federal limit applied to most state and local tax deductions
Under the TCJA:
- Deduction capped at $10,000
- Married Filing Separately taxpayers generally limited to $5,000
Subsequent legislation temporarily increased the deduction limit for certain years before later reductions are scheduled to take effect. These limitations continue to be especially important for taxpayers living in high-tax states.
Mortgage Interest Deduction Changes
The TCJA reduced the amount of mortgage debt eligible for the mortgage interest deduction on newly acquired homes.
Before the TCJA:
- Interest generally deductible on up to $1 million of mortgage debt
After the TCJA:
- Limit reduced to $750,000 for qualifying new mortgages
Existing mortgages that qualified under previous rules generally retained their prior treatment. The lower mortgage debt limit continues to apply to many newer home loans.
Estate and Gift Tax Exemption
The TCJA significantly increased the federal estate and gift tax exemption.
The exemption roughly doubled from pre-TCJA levels, allowing individuals and families to transfer substantially larger amounts of wealth before federal estate taxes apply.
Because estate tax rules are subject to ongoing legislative changes, taxpayers with significant estates should review the current exemption limits when engaging in estate planning.
Roth IRA Recharacterization Rules
Before the TCJA, taxpayers who converted Traditional IRA funds to a Roth IRA could later reverse, or recharacterize, the conversion in certain situations.
The TCJA eliminated the ability to undo a Roth conversion.
As a result, taxpayers should carefully evaluate the tax consequences of a Roth conversion before completing one, since the conversion is generally permanent once processed.
Qualified Business Income (QBI) Deduction
One of the TCJA's most significant business-related provisions was the creation of the Qualified Business Income (QBI) deduction.
The deduction allows eligible owners of pass-through businesses to deduct up to 20% of qualified business income.
Businesses that may qualify include:
- Sole proprietorships
- Partnerships
- S corporations
- Certain trusts and estates
The QBI deduction can provide substantial tax savings for eligible business owners and self-employed individuals.
Corporate Tax Changes
The TCJA made major changes to corporate taxation.
The most significant was a reduction in the federal corporate income tax rate:
- Previous corporate tax rate: 35%
- Current corporate tax rate: 21%
This reduction permanently lowered federal corporate taxes and remains one of the most impactful business provisions of the law.
The TCJA also repealed the corporate Alternative Minimum Tax (AMT), simplifying tax compliance for many corporations.
Bonus Depreciation and Business Investment Incentives
The TCJA expanded bonus depreciation rules, allowing businesses to deduct a large portion of qualifying asset purchases more quickly.
These provisions encouraged businesses to invest in:
- Equipment
- Machinery
- Technology
- Other qualifying business property
Accelerated depreciation can improve cash flow by allowing businesses to recover costs sooner through tax deductions.
Limits on Certain Business Deductions
While the law created many tax benefits, it also imposed new limitations on some business deductions.
Examples include:
- Interest expense limitations for certain businesses
- Restrictions on net operating loss (NOL) usage
- Elimination of deductions for many entertainment expenses
- Changes to employee fringe benefit deductions
These rules vary depending on the size and type of business involved.
How the TCJA Affected Individual Taxpayers
For many individuals, the TCJA resulted in:
- Lower tax rates
- Higher standard deductions
- Increased Child Tax Credits
- Simplified tax filing
- Reduced need to itemize deductions
However, taxpayers in high-tax states or those who previously benefited from certain deductions may have experienced different results due to deduction limitations and the elimination of personal exemptions.
How the TCJA Affected Business Owners
Business owners benefited from several major provisions, including:
- The Qualified Business Income (QBI) deduction for pass-through entities
- Lower corporate tax rates
- Expanded depreciation opportunities
- Increased incentives for capital investment
At the same time, business owners must navigate various limitation rules related to interest expense, losses, and certain business deductions.
Why the TCJA Still Matters
Even though the TCJA was enacted in 2017, many of its provisions continue to shape how taxpayers prepare their returns today. Standard deductions, tax brackets, business deductions, and numerous other tax rules still reflect changes introduced by the law.
Understanding these provisions can help taxpayers make informed decisions about deductions, credits, retirement contributions, business planning, and overall tax strategy when filing their federal income tax returns.