Learn about some of the TCJA provisions that are set to expire at the end of 2025—and what that might mean for you.
As the largest tax overhaul in several decades, the TCJA brought about sweeping changes to the U.S. tax landscape. At the end of 2025, however, some of the benefits and limitations implemented by the TCJA are set to expire. Here we outline a few notable provisions that are scheduled to be affected by the sunset.
Morgan Stanley and its affiliates do not provide tax advice. You should always contact your tax advisor for information specific to your situation.
One of the most significant changes of the anticipated sunset of the TCJA is the reduction in federal estate, gift and generation-skipping transfer (GST) tax exemptions. The TCJA doubled these for tax years 2018 through 2025, to the currently effective amounts of $13.61 million per individual for 2024.
On January 1, 2026, however, these exemptions will be reduced to:
These changes may require some taxpayers to rethink their estate planning strategies. For those with substantial estates, the approaching sunset of these exemptions may also present a time-sensitive opportunity to take advantage of the current limits before they decrease. This may include setting up trusts for your chosen beneficiaries and transferring assets, such as equity awards, to such trusts and using all or a portion of your remaining federal estate, gift and GST tax exemptions.
Another pending shift relates to the alternative minimum tax (AMT)(opens in a new tab). The AMT operates as a separate, parallel tax system, reducing some of the tax benefits that higher income families may use to lower their tax liabilities.
With the implementation of the TCJA, AMT exemptions and phaseout limits increased. In 2024, for instance, the AMT exemption amount is $85,700 for single filers and $133,300 for married couples filing jointly. The phaseout—which is the income threshold at which the AMT exemption gradually starts to decrease—begins at $609,350 for single filers and $1,218,700 for married couples filing jointly.
On January 1, 2026, the AMT exemption and phaseout thresholds will return to pre-TCJA levels. This will drop AMT exemptions to $54,300 for single filers and $84,500 for married couples filing jointly, with phaseout limits of $120,700 for single filers and $160,900 for married couples filing jointly (each indexed for inflation).
For those who are philanthropically inclined, the TCJA brought more generous deduction limits for cash contributions to charitable organizations. Currently, taxpayers who itemize their deductions may deduct cash contributions made to public charities, up to 60% of their adjusted gross income (AGI).
On January 1, 2026, the limit for deducting cash gifts to public charities reverts to 50% of AGI. This may prompt some donors to shift their giving strategies to maximize currently available tax benefits.
The TCJA brought about notable changes for business owners as well, particularly for owners of pass-through entities—including sole proprietorships, partnerships and limited liability companies. Typically, owners of these entities include the income from the entities on their personal income tax returns. Under the TCJA, however, eligible business owners may claim a deduction of up to 20% of qualified business income. This effectively allows them to exclude up to 20% of their qualified business income from federal income tax. On January 1, 2026, deductions under Section 199A for qualified business income will no longer be allowed.
Beyond specific deductions and exemptions, the TCJA’s sunset will see an increase in federal marginal income tax rates as well, with tax rates for the highest earning individuals rising to 39.6%.
SINGLE
TAXABLE INCOME | 2024 MARGINAL TAX RATE | 2026 MARGINAL TAX RATE* |
$0 to $11,600 | 10.0% | 10.0% |
$11,601 to $47,150 | 12.0% | 15.0% |
$47,151 to $100,525 | 22.0% | 25.0% |
$100,526 to $191,950 | 24.0% | 28.0% |
$191,951 to $243,725 | 32.0% | 33.0% |
$243,726 to $609,350 | 35.0% | 35.0% |
$609,351 and above | 37.0% | 39.6% |
*Note: the income brackets reflected are for tax year 2024 but may be different in 2026 due to adjustments for inflation.
MARRIED FILING JOINTLY
TAXABLE INCOME | 2024 MARGINAL TAX RATE | 2026 MARGINAL TAX RATE* |
$0 to $23,200 | 10.0% | 10.0% |
$23,201 to $94,300 | 12.0% | 15.0% |
$94,301 to $201,050 | 22.0% | 25.0% |
$201,051 to $383,900 | 24.0% | 28.0% |
$383,901 to $487,450 | 32.0% | 33.0% |
$487,451 to $731,200 | 35.0% | 35.0% |
$731,201 and above | 37.0% | 39.6% |
*Note: the income brackets reflected are for tax year 2024 but may be different in 2026 due to adjustments for inflation.
Alongside changes to federal marginal income tax rates, the standard deduction will also be affected by the sunset. The standard deduction is a flat amount that taxpayers can deduct from their adjusted gross income when filing their federal income tax return. Taxpayers may either apply the standard deduction or itemize their deductions.
The TCJA increased the standard deduction to $12,000 for single filers and $24,000 for married couples filing jointly, indexed for inflation. The 2024 inflation-adjusted figures are $14,600 for single filers and $29,200 for married couples filing jointly.
On January 1, 2026, the standard deduction will revert to the 2017 amounts of $6,350 for single filers and $12,700 for married couples filing jointly, indexed for inflation. For some taxpayers, this may make it more beneficial to itemize deductions for the 2026 tax year.
For taxpayers who itemize their deductions, the TCJA introduced a $10,000 limit to the allowable deduction for payments made for state and local taxes (SALT), such as property taxes. On January 1, 2026, that deduction cap will expire, positioning taxpayers in high-tax states to potentially benefit.
Finally, the TCJA’s sunset may bring about potential advantages for homeowners. Under the TCJA, the deduction for interest paid on mortgage debt is limited. As a result, taxpayers who itemize their deductions are currently allowed to deduct interest paid on the first $750,000 of mortgage debt incurred on or after December 16, 2017.
On January 1, 2026, the $750,000 limit will increase to $1,000,000. Additionally, interest paid on the first $100,000 of home equity debt will be allowed as a deduction. This may provide financial relief to homeowners with larger mortgages or those considering purchasing a new home.
As the TCJA sunset approaches, it’s important for taxpayers to prepare in advance. By consulting with your tax advisor and reviewing your financial strategies with your Relationship Manager, you can position yourself to make more informed decisions.
Tax laws are complex and subject to change. This information is based on current federal tax laws in effect at the time this was written. Morgan Stanley Smith Barney LLC, its affiliates, and Financial Advisors do not provide tax or legal advice. Clients should consult their tax advisor for matters involving taxation and tax planning and their attorney for matters involving trust and estate planning and other legal matters.
Morgan Stanley Smith Barney LLC does not accept appointments, nor will it act as a trustee, but it will provide access to trust services through an appropriate third- party corporate trustee.
The term “Family Office Resources” is being used as a term of art and not to imply that Morgan Stanley and/or its employees are acting as a family office pursuant to Investment Advisers Act of 1940.
© 2025 Morgan Stanley Smith Barney LLC. Member SIPC.
CRC#3969827 (11/2024)
