In 2017, the Tax Cuts and Jobs Act (TCJA) rewrote many provisions in the U.S. tax code for individuals and businesses. Unless Congress acts to extend or make these cuts permanent, at the end of 2025, most of those changed provisions will sunset, reverting to their pre-2017 standing.
A Bloomberg Tax survey reveals that 81% of tax professionals are concerned about the TCJA sunset, with many struggling to model its impact. If these changes occur, 40% expect to increase tax consulting budgets by at least $100,000. This heightened pressure increases the risk of errors or omissions, key triggers for professional liability claims.
In light of this uncertainty, CPAs must reassess tax strategies, communicate proactively about potential tax increases or lost deductions, and update financial models/projections. Failure to do so risks client dissatisfaction, legal action, and professional liability claims.
This post highlights the potential changes and the proposed legislation that would extend TCJA tax cuts.
Which provisions are expiring?
Here are the key tax provisions set to change at the end of 2025 due to the TCJA sunset:
Individuals and Families
Individual Tax Rates: The individual income tax rates currently range from 10% to 37%. If the TCJA sunsets, then these rates will revert to what they were before 2017. For example, the highest tax rate would increase to 39.6%.
Standard Deduction: The standard deduction, which was significantly increased by the TCJA, will revert to roughly half its current amount after adjusting for inflation.
Itemized Deductions:
- SALT Cap: The $10,000 cap on state and local tax (SALT) deductions will expire.
- Mortgage Interest Deduction: This deduction will revert to pre-TCJA limits ($1 million in mortgage debt, $100,000 in home equity loan interest).
- Miscellaneous Itemized Deductions: These deductions (e.g., investment fees, unreimbursed employee expenses) will be reinstated, subject to a 2% AGI floor.
- Child Tax Credit: The credit will decrease from $2,000 to $1,000 per qualifying child.
- Personal Exemptions: Suspended personal exemptions will return, currently projected at $2,000 per taxpayer and dependent, subject to inflation and phase-outs.
- Alternative Minimum Tax (AMT): Exemption amounts and phase-out thresholds will revert to pre-TCJA levels, potentially increasing AMT burden.
Businesses
Qualified Business Income (QBI) Deduction (Sec. 199A): The 20% deduction for passthrough business income will no longer be available.
Bonus Depreciation: The allowable bonus depreciation percentage for qualified property will decrease to 0% for property placed in service after December 31, 2026.
Estate and Gift Tax Exclusions: The basic exclusion amount, currently $12.92 million per person, will be roughly halved.
What are the exemptions to the TCJA sunset?
One crucial exception to the TCJA sunset is the corporate tax rate. The TCJA permanently restructured the corporate tax rate from a top rate of 35% to a flat 21%. This change is one of the few provisions that will not expire at the end of 2025, providing stability for businesses amidst the uncertainty of the broader tax landscape.
Also read: Understanding the Corporate Transparency Act and Its Impact on Accounting Firms
Implications of the “Big Beautiful Bill”
The House of Representatives passed the “One Big Beautiful Bill” Act (OBBA) on May 22, 2025, and, as of writing, is currently being debated in the Senate. If passed, OBBA would permanently extend the higher standard deduction and lower individual income tax rates. The SALT deduction cap would also be raised to $40,000 for taxpayers with incomes under $500,000, with a phase-out for higher earners.
Additionally, the bill would modify and permanently establish the international tax provisions of the Global Intangible Low-Taxed Income (GILTI) framework and the Foreign-Derived Intangible Income (FDII) regime. It also proposes increasing the Base Erosion and Anti-Abuse Tax (BEAT) rate, aiming to strengthen the U.S. tax system's ability to address tax avoidance by multinational corporations. These changes are designed to enhance tax fairness and encourage domestic investment.
OBBA's new tax provisions include eliminating taxes on tips. The bill also proposes an additional $4,000 deduction for many older taxpayers and a deduction for auto loans on U.S.-made cars. The "Big Beautiful Bill" would also modify some green energy tax credits established under the Inflation Reduction Act (IRA). A notable new provision is the creation of tax-exempt "MAGA" (Money Account for Growth Advancement) accounts for individuals under 18, which would come with a one-time federal credit for eligible children born between 2025 and 2028.
Helping you navigate the uncertainties of the changing tax code
The upcoming shifts in tax legislation, particularly the sunsetting provisions of the TCJA and the potential passage of OBBA, could introduce a complex landscape of new liabilities for CPA firms. These changes are not merely administrative; they carry significant financial and reputational risks. Firms could face increased scrutiny over past advice, potential penalties for misinterpretations of new rules, or even lawsuits from clients who believe they were inadequately prepared for the changes.
Proactive and robust protection for your CPA firm is not just advisable, but essential. Protexure offers a comprehensive suite of professional liability products to address these evolving challenges. Our offerings go beyond standard coverage, providing tailored solutions that account for the unique complexities of tax advisory services and the specific risks associated with legislative changes. This ensures your firm is not just covered but truly safeguarded against the unforeseen, allowing you to focus on confidently providing expert guidance to your clients.
Contact us today to learn more.
