21 Jan 2025

New Year, New Challenges: TCJA Renewal and Tax Policy Shifts in 2025

As we enter 2025, the renewal of the Tax Cuts and Jobs Act of 2017 (TCJA) is front and center for Republicans, who hold majorities in both chambers of Congress. Despite internal divisions and procedural hurdles, Senate Majority Leader John Thune aims to use budget reconciliation to expand tax relief, while House Ways and Means Committee Chair Jason Smith advocates for a single reconciliation measure. Key provisions set to expire include the higher standard deduction and child tax credit. The debate over the $10,000 SALT deduction cap is crucial, with potential revenue offsets from repealing SALT, mortgage interest deductions, and clean energy tax incentives. The Congressional Budget Office projects that extending the TCJA could increase the federal debt by $3.7 trillion by 2034. Understanding the original TCJA is crucial, as it lays the foundation for the current legislative efforts and highlights the significant changes and impacts that are now under review for renewal.

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2017 Tax Cuts and Jobs Act: Preparing for Reversion to Prior LawConsider the implications of a new administration and the TCJA. With a fairly cohesive Republican Congress, legislation is likely to expand corporate income tax cuts enacted by the TCJA, not result in their expiration. When enacted in 2017, the TCJA introduced the most sweeping changes to the Internal Revenue Code since the Tax Reform Act of 1986. Many of the changes made by the TCJA were only temporary and many are set to expire at the end of 2025, unless Congress takes action to extend them. For example, the TCJA lowered individual tax rates to 10%, 12%, 22%, 24%, 32%, 35%, and 37% (the top rate decreasing from 39.6%). These tax rates are set to sunset December 31, 2025. Beginning January 1, 2026, the top tax rate reverts to 39.6% without other action.

Federal Tax Policy to Watch in 2025See how, as Republicans have just a 53-47 majority in the Senate and a five-seat margin in the House of Representatives, Republican lawmakers likely will have to rely on the budget reconciliation process to bypass Senate Democratic filibusters, as Democratic support for renewing and expanding the TCJA appears unlikely.

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- Business Entities. IRS and Treasury Department issue final regulations concerning the program to allocate clean electricity low-income communities bonus credit amounts established pursuant to the Inflation Reduction Act of 2022 for calendar years 2025 and succeeding years. D. 10025, 90 Fed. Reg. 2842 (Jan. 13, 2025).
- Business Entities. IRS provides transitional relief from penalties for certain brokers who fail to report sales of digital assets, as defined in Reg. §1.6045-1(a)(19), other than digital assets not required to be reported as digital assets pursuant toTreas. Reg. §1.6045-1(c)(8)(ii), (iii), or (iv), on information returns (Form 1099-DA, Digital Asset Proceeds From Broker Transactions), or fail to furnish payee statements under I.R.C. Section 6045. I.R.S. Notice 2025-3. See Information Reporting by Non-custodial Brokers of Digital Asset Transactions.
- Business Entities. IRS provides the optional 2025 standard mileage rates for taxpayers to use in computing the deductible costs of operating an automobile for business, charitable, medical, or moving expense purposes. The standard mileage rate for business-use transportation or travel expenses for 2025 is 70 cents per mile. I.R.S. Notice 2025-05.
- Employment Treasury Department and IRS proposed regulations addressing several SECURE 2.0 Act provisions relating to catch-up contributions, as generally allowed for employees in a qualified cash or deferred arrangement (like a 401(k) plan) who are age 50 or older. 90 Fed. Reg. 2645 (Jan. 13, 2025).
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