Counting Your Eggs Before They Hatch

Good to Know
The Tax Cuts and Jobs Act (TCJA) of 2017 introduced significant tax reductions for individuals and businesses, with many provisions set to expire at the end of 2025. The likelihood of these provisions expiring depends on legislative actions taken before that deadline. In this article we’ll review:
- The legislative environment,
- Key influences, and
- Potential results.
The Legislative Environment
The Republican majority following the 2024 elections means Republicans have secured the presidency and majorities in both chambers of Congress. This political alignment creates an encouraging environment for extending or making permanent the tax cuts imbedded in the Tax Cuts and Jobs Act (TCJA) of 2017. However, remember the cautious admonition of an unnamed auto sales person that “it’s not a sale until you see the taillights driving down the street.”
Caveats include a narrow House majority and procedural rules.
- Narrow House majority— the razor thin majority in the house means individual members may have greater influence now than back in 2017. As but one example, a coalition of representatives on both sides of the aisle are pressing for an end to the limit on the SALT deduction (State And Local Tax).
- Procedural Considerations — passing tax legislation often involves navigating complex procedures, such as budget reconciliation, which allows for passage with a simple majority but imposes constraints like the Byrd Rule in the Senate. This rule prevents bills passed via reconciliation from increasing the federal deficit beyond a 10-year window, which originally led to the TCJA's individual tax cuts being temporary.
Key Influence and Mitigating Factor
- Fiscal Impact Influence — extending all expiring TCJA provisions could technically add $trillions to the federal deficit over a decade, assuming no increase to federal tax revenue. On its surface, this potential cost could influence legislative decisions, especially amid concerns about the national debt and economic stability.
- Mitigating Factor — be careful before ignoring the Trump Factor. For example, the President-Elect has indicated an increase in tariffs is on the table to balance the scales of international trade fairness. Additional tariffs alone could go far to reduce deficits and relieve, or — with other revenue moves and DOGE— even mitigate the fiscal impact.
Potential Outcomes
The author has misplaced his crystal ball but we can expect the result to land on one of the following:
- Full Extension — Congress extends all expiring provisions, maintaining the current tax landscape,
- Selective Extension —Alternatively, Congress might choose to extend certain provisions, such as those benefiting middle- and lower-income households, or
- Expiration — If legislative consensus isn't reached, the expiring provisions will sunset as scheduled, leading to higher tax rates and reduced deductions for many taxpayers starting in 2026.
Conclusion and Next Steps
The pro-tax cut extension forces in Congress, increasingly and refreshing not limited to just one side of the aisle, increase the likelihood of extending some, most, or all TCJA provisions. Factors like the legislative environment, key influences, and potential results mean the ultimate result is far from certain.
As a next step, taxpayers should remain in close contact with their Financial Advisor to provide guidance to maximize new opportunities or minimize lost opportunities as 2025 unfolds.
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The material contained in this article is to raise awareness—it is informational, general in nature and does not constitute financial advice. It should not be relied upon or used without consulting a credentialed financial professional to consider your specific circumstances. This communication was published on the date specified and may not include any future changes in the topics, laws, rules or regulations covered.