Planning Ahead: expiration of TCJA in 2026

As we approach the end of 2025, one major tax development is looming: the possible expiration of the Tax Cuts and Jobs Act (TCJA). Originally enacted in 2018, the TCJA brought sweeping changes to the tax code—including reduced income tax rates, increased standard deductions, and major adjustments to deductions, credits, and estate tax thresholds.

Unless Congress acts to extend these provisions, many of them will automatically sunset on December 31, 2025, reverting federal tax law to pre-2018 rules. That could result in higher tax rates, narrower tax brackets, and the loss of certain deductions and credits.

And while no one can predict whether Congress will renew the TCJA or let it expire, this uncertainty makes 2024 and 2025 ideal years for tax planning opportunities.

One Smart Strategy: Consider Roth Conversions While Rates Are Lower

One compelling move to evaluate before any potential tax hikes? Roth conversions—or, for some, simply choosing Roth contributions instead of pre-tax.

Pre-Tax vs. Roth: What’s the Difference?

Pre-tax savings (e.g., traditional IRAs or 401(k)s):
– You deduct the contribution today, reducing your taxable income.
– The money grows tax-deferred.
– When you withdraw the funds in retirement, they are taxed as ordinary income.
– After age 73, you’re required to start taking Required Minimum Distributions (RMDs).

Roth savings (e.g., Roth IRAs or Roth 401(k)s):
– You pay taxes up front—no deduction today.
– The money grows tax-free.
– Qualified withdrawals are completely tax-free.
– Roth IRAs are not subject to RMDs during your lifetime.

Why Timing Matters: Tax Rates May Rise After 2025

Here’s the core idea:
– If your tax rate today is lower than it will be in retirement, Roth contributions or Roth conversions make more sense.
– If your tax rate today is higher than in retirement, pre-tax contributions help you now and might reduce your lifetime tax burden.

But with TCJA provisions potentially ending, your tax rate may increase in 2026—even if your income stays the same. That’s because not only could marginal rates rise, but the brackets themselves would narrow, causing more income to be taxed at higher levels.

2025 Tax Brackets vs. Pre/Post-TCJA (2017 & 2026) Brackets *Inflation Adjusted

Below are side-by-side comparisons of the current (2025) tax brackets and those projected to return after the TCJA expires:

Pre/Post-TCJA (2017 and 2026) Brackets

2025 Tax Brackets

Final Thought: Tax Policy Is Uncertain—Planning Is Not

We can’t know for sure what Congress will do. But we do know what the current law says: the TCJA provisions will expire at the end of 2025 unless extended. That alone is reason enough to consider proactive strategies now—before potential rate hikes kick in.

Whether it’s a Roth conversion, a contribution change, or broader financial planning, now is the time to act.