In recent weeks, details have started to emerge related to tax legislation that could impact almost every taxpayer next year. The Joint Committee on Taxation has issued a “Description of the Budget Reconciliation Legislative Recommendations Related to Tax,” and the House Ways & Means Committee had a markup meeting on May 13 and voted to proceed with the general proposal to extend and expand tax cut provisions of 2017’s Tax Cuts and Jobs Act (TCJA).

TCJA, which, at the time, was hailed as the largest tax cut bill in several generations, took effect in 2018.  The provisions of TCJA impacted individuals differently, but most paid less overall federal income taxes as a result. Those who normally itemized deductions benefited from a dramatic increase in the standard deduction, resulting in most taxpayers no longer itemizing. Other provisions included a reduction in income tax rates and other measures like AMT relief, expanded childcare credits, etc.

Fast forward to today: The current law includes a sunset provision for parts of the legislation to expire at the end of 2025. If no action is taken, most taxpayers will see a significant increase in their tax liability beginning next year.

Here are some of the proposed changes:

• Extend the TCJA income tax rates, which will be indexed for inflation.
• Extend the current, higher standard deduction amounts and include a temporary enhancement.
• Extend the increased childcare tax credit and include a temporary enhancement.
• The current estate and gift tax credit amounts would be made permanent.
• The current AMT relief would be made permanent.
• Limitations on home mortgage interest deductions, casualty losses and miscellaneous deductions would be made permanent.
• Permanently repeal the Pease limitation on itemized deductions.

A number of other extensions and modifications were also included (see the full report released on May 9, 2025).

Latest update: On May 22, the House passed a revised version of the original bill by a slim margin that included a limited nonitemizer charitable deduction and other changes. It has been sent to the Senate, where members are expected to make additional changes that will need to be reconciled into final form prior to being voted on.

As there will no doubt be several stages to refine the framework of the new tax law, stay tuned to the Sharpe Group blog for additional updates!