Tax Cuts and Jobs Act (TCJA)

The Tax Cuts and Jobs Act (TCJA) is a major overhaul of the U.S. tax code, signed into law on December 22, 2017. Its primary goals were to reduce taxes, simplify tax filing, and stimulate economic growth for individuals and businesses.

🧩 Key Individual Tax Provisions Under TCJA

🟢 Standard Deduction

Increased significantly, reducing the need to itemize for many taxpayers.

• Before TCJA (2017):
  • $6,500 — Single
  • $13,000 — Married Filing Jointly (MFJ)
• After TCJA (2018):
  • $12,000 — Single
  • $24,000 — MFJ
• Update Under OBBBA (2025):
  • $15,750 — Single
  • $31,500 — MFJ
    ✅ These increases were made permanent

🟢 Child Tax Credit (CTC)

Expanded to provide larger benefits to families.

• Before TCJA: $1,000 per qualifying child
• After TCJA: $2,000 per child (up to $1,400 refundable)
• Update Under OBBBA:
  • $2,200 per child
  • Up to $1,700 refundable

🟢 Marginal Tax Rates

Lowered across most income brackets.

• Top rate: Reduced from 39.6% → 37%
• Other brackets lowered by approximately 1–4%

✅ OBBBA made these lower rates permanent, preventing a 2026 reversion

🟢 Personal Exemptions

• Eliminated under TCJA
• OBBBA permanently repealed personal exemptions

📌 Higher standard deductions were intended to offset this elimination.

🟢 SALT Deduction Cap

Limits deductions for state and local taxes.

• Before TCJA: No cap
• After TCJA:
  • $10,000 cap ($5,000 if MFS)
• Update Under OBBBA:
  • $40,000 cap for tax years 2025–2029
  • Reverts to $10,000 starting in 2030

🟢 Mortgage Interest Deduction

• Before TCJA:
  • Interest deductible on mortgages up to $1 million
• After TCJA:
  • Limit reduced to $750,000 for new loans
• OBBBA Update:
  • $750,000 limit made permanent
  • Mortgage insurance premiums included

🟢 Estate and Gift Tax Exemption

• Before TCJA: ~$5.49 million
• After TCJA: ~$11.18 million (indexed for inflation)

⚠️ Scheduled to revert in 2026 unless further extended

🟢 Roth IRA Recharacterization

• Eliminated under TCJA
• Roth conversions can no longer be undone

🟢 Qualified Business Income (QBI) Deduction

• Introduced a 20% deduction for qualified pass‑through business income

✅ OBBBA made the QBI deduction permanent
✅ Expanded phase‑in thresholds for more taxpayers

🏢 Business Tax Provisions Under TCJA

🟢 Corporate Tax Rate

• Reduced from 35% → 21%
• ✅ Permanent reduction

🟢 Corporate AMT

• Repealed under TCJA

🟢 Bonus Depreciation

• Allowed full expensing of certain qualified capital investments

🟢 Limits on Business Deductions

• 💼 Interest expense capped at 30% of adjusted taxable income
• 📉 Net operating losses (NOLs) limited to 80% of taxable income
• 🎟️ Entertainment expenses and certain employee benefits no longer deductible

⏳ Expiration and Legislative Extensions

• Many individual provisions under TCJA were scheduled to expire after 2025
• The One Big Beautiful Bill Act (OBBBA), signed in July 2025, made several TCJA provisions permanent, including:
  • ✅ Standard deduction increases
  • ✅ Lower marginal tax rates
  • ✅ Child tax credit enhancements
  • ✅ Adjusted SALT deduction caps
  • ✅ Qualified Business Income (QBI) deduction

📊 Impact on Taxpayers

👤 Individuals

• ✅ Simplified filing due to higher standard deduction
• ✅ Lower tax liability across most income brackets
• ✅ Fewer taxpayers need to itemize

🧑‍💼 Business Owners

• ✅ Significant benefits from QBI deduction
• ✅ Lower corporate tax rate
• ✅ Expanded capital investment incentives