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A First Look at What Could Happen with the Tax Cut and Jobs Act Extension in 2025

A First Look at What Could Happen with the Tax Cut and Jobs Act Extension in 2025 | Frazier & Deeter

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With Republicans now controlling the House, Senate and Presidency, we find ourselves in a situation reminiscent of 2017, when the Tax Cuts and Jobs Act (TCJA) was passed on December 22 along party lines. Many provisions of the TCJA are set to expire after 2025, requiring renewal to prevent a reversion to pre-2017 tax laws. However, the 21% corporate tax rate, a permanent change, will remain intact.

Key provisions at risk include individual tax cuts, the 20% QBI passthrough deduction and bonus depreciation—all of which will expire at the end of 2025 without Congressional action. With just a year to act, let’s take an early look at what might happen.

President Trump’s Wish List

Besides renewing individual and business tax cuts in the TCJA, President-elect Trump has indicated other changes he would like to see, including:

  • Lower the corporate tax rate to 15% for domestic activities
  • Permanent 100% bonus depreciation
  • No tax on tips, overtime pay and Social Security payments
  • Allow an interest deduction for auto loans
  • Keep and expand the child tax credit
  • Eliminate or increase the cap on SALT deductions
  • Repeal clean energy tax credits enacted by Biden’s 2022 Inflation Reduction Act
  • Eliminate the corporate alternative minimum tax
  • Eliminate the excise tax on stock buybacks

Provisions with Bipartisan Support

Provisions with bipartisan support, previously stalled due to the election year, include eliminating or delaying the requirement to amortize research and experimental expenses. Additionally, a bipartisan bill that nearly passed in 2024 proposed expanding the R&D tax credit by raising the refundability cap and extending benefits for start-ups. These measures are likely to appear in some form in the TCJA extension act.

Possible Revenue Raisers

This time around, the legislators have a “math problem” as many commentators have noted. Extending all of the TCJA tax cuts could cost close to $5 trillion. Trump has proposed further costly tax cuts, like reducing the corporate tax rate and eliminating tax on tips and overtime pay. The Republicans could have problems with deficit hawks within their own party if Congress does not find some way to offset this figure either with revenue raisers or deep spending cuts. The spending cuts are coming, but the new Department of Government Efficiency (DOGE) is likely to take a while to get underway. This raises the question: where could the revenue come from?

Several provisions are vulnerable to revenue raising efforts, including the carried interest tax break, any relief on the SALT deduction limitation, clean energy credits and incentives and certainly other tax provisions enacted under President Biden in the Infrastructure Act and the Inflation Reduction Act.

Outlook

This equation of preserving tax cuts, reducing the cost and attacking the deficit is a complex one. For this reason, Washington insiders believe the TCJA expiration legislation could take all year rather than be completed within the first 100 days as the House Speaker has suggested. However, Congress has a track record of last-minute action, making a December 2025 extension just before the TCJA expires a likely scenario. Still, the timeline could accelerate, with more clarity expected after Inauguration Day.

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