The Core of the Tax Code Will Change, but We Don’t Know How

Navigating the byzantine U.S. tax rules and completing your return may be enough of a headache.

But you can count on fresh tax stress coming from Washington not far down the road.

On Dec. 31, 2025, critical parts of the 2017 federal tax law are scheduled to expire. After that sunset, they would revert to what they would have been if that sweeping tax legislation, passed in the first year of the Trump administration, had never taken effect.

Core features of the tax code will be up for grabs: what tax rate you have to pay, how big the standard deduction will be, how business income will be treated, what the exemption limits will be on big-ticket items like an inheritance or a gift, and the federal deduction you can take for state and local taxes.

Sound confusing? Well, consider this.

If Congress does nothing, the tax code in 2026 will suddenly shift to what it would have been if the law had never changed, effectively generating trillions of dollars in extra liabilities for taxpayers and an equal amount of revenue for the federal government. As if that weren’t complicated enough, the tax code before the 2017 law included provisions for future inflation adjustments — and there has been a lot of inflation over the last few years. These adjustments need to be applied if the law sunsets, as scheduled, making the actual numbers for important things like federal tax brackets difficult to estimate.

Just keeping the current tax code intact might seem to be a better alternative. But that isn’t likely because it would be staggeringly expensive.

The Congressional Budget Office has “estimated that extensions of all provisions that are scheduled to either expire or become less generous would cost $3.5 trillion” by 2033. A handy analysis by the Congressional Research Service breaks down the major components, piece by piece.