Your Taxes Could Rise and Get More Complicated If Lawmakers Don’t Act

Lawmakers have a little under a year and a half to rewrite the U.S. tax code—or else it will rewrite itself, with far-reaching consequences for your tax returns and the economy.

That’s because when 2025 ends, a multitude of tax cuts and changes signed by former president Donald Trump, and a major one by President Joe Joe Biden, will expire. That includes major income tax provisions of the Tax Cuts and Jobs Act of 2017, as well as a major increase to healthcare subsidies in the Inflation Reduction Act of 2022.

When that date arrives, things will go back to how they were before those laws were passed, unless Congress either extends or modifies the provisions in question. Either way, people’s household finances, and the broader economy, could be in for a big shakeup, with much of the outcome depending on how each party does in the upcoming election in November.

“You need to pay attention to some of this stuff going on, even if you haven’t before, because these are both big changes and they are fixed changes,” Mark Steber, chief tax information officer at accounting firm Jackson-Hewitt, told Investopedia in an interview. “If they do nothing, they go away and you pay more. If they change something … it’s going to impact you, good or bad, and you can’t hide from it.”

As the nonpartisan Tax Foundation put it in a recent report, “the vast majority of Americans will see higher, more complicated taxes” if lawmakers do not act.

Here are some of the specific things that will go away if they aren’t renewed: 

Income Taxes Would be Higher 

The TCJA lowered marginal tax rates for most income levels. Here is how they would change if the TCJA expired, for a single taxpayer:

Standard Deduction Would Be Reduced

One of the biggest changes the TCJA made was expanding the standard deduction. For a single filer, for example, the deduction was nearly doubled to $12,000 from $6,500, and to $24,000 from $13,000 for married couples filing jointly. It also eliminated personal exemptions, which reduced your tax bill for each person in your household. 

At the same time, the law reduced the value of some specific itemized deductions, both of which pushed more people to use the simpler standard deduction rather than hunting for specific tax breaks.

In 2021, only 9.8% of filers claimed any itemized deductions, down from 30.6% in 2017.

If the TCJA expired, the standard deduction would be reduced to the old level and then adjusted for inflation, and personal exemptions would return, meaning more people would benefit by itemizing, increasing the complexity of calculating taxes.

Healthcare Would Get Costlier 

In addition to the Trump tax cuts, a major Biden policy change is set to run out at the end of 2025: a change to the Affordable Care Act that significantly cut the premiums for insurance plans purchased on state-run marketplaces.

Biden’s changes allowed people making more than 400% of poverty-level income to claim tax credits offsetting the cost of health insurance plans purchased on ACA marketplaces. The overall effect was to reduce premiums by about $700 a year in 2024 for the average person enrolled in an ACA plan, the Department of Health and Human Services estimated. Families saved $2,400 a year on average, according to a White House estimate. 

About 3.8 million fewer people would have insurance coverage by 2034 if the law is allowed to expire, the Congressional Budget Office projected.

The Child Tax Credit Would Be Smaller

The TCJA doubled the maximum value of the child tax credit to $2,000 per child and made it available to households higher up the income ladder. If the TCJA expires, it will go back to $1,000, and the value of the credit would be reduced for married couples making $110,000 or more, down from $400,000 under current law.

Vice president Kamala Harris, the presumptive Democratic nominee, has outlined a plan to take it further, matching the temporary 2021 child tax credit expansion passed in the American Rescue Plan pandemic relief bill. That year, the credit was worth $3,000 per child, or $3,600 for kids under 6, and was delivered in monthly checks. She also proposed adding a provision for parents of newborns, boosting the amount of the tax credit to $6,000 for the first year of a child’s life.

For the Republican’s part, vice presidential nominee JD Vance said the Trump campaign would boost the child tax credit to $5,000 per child.

Millionaire Heirs Would Pay More On Inheritances

The TCJA doubled the amount of money people could receive from inheritances without paying the 40% estate tax to $10 million from $5 million. The current inflation-adjusted amount, $13 million, would revert to the old $5 million level and then be adjusted for inflation. 

Residents of High-Tax States Would Get A Tax Cut

A few provisions of the TCJA actually raised taxes instead of cutting them. One of those was a cap on State and Local Tax (SALT), mostly affecting higher income earners in states with high income and property taxes. 

The TCJA put a $10,000 cap on how much state and local taxes can be deducted from federal taxes, for taxpayers who itemize their deductions. The cap would go away if the TCJA expires.

The Wealthy Stand to be Most Affected

The wealthiest taxpayers have the most to lose if the tax cuts expire. According to an analysis by William Gale, a senior fellow at the Urban-Brookings Institute Tax Policy Center, a nonpartisan think tank, the bottom one-fifth of income earners got a tax cut of $60 a year from the TCJA. The middle one-fifth got a $930 benefit while those in the top 20% got $7,640 and the top 1% got $51,000. 

“These tax cuts were quite tilted toward high-income households,” Gale said. 

Because of this, the TCJA tax cuts likely only gave a modest boost to the economy and consumer spending, since wealthier households tend to spend less of their income than lower-income ones, according to an analysis by Gale.

Democrats seek to roll back the TCJA’s benefits to the wealthy while maintaining the provisions that helped lower income earners. In a recent interview with Politico, Harris said she would not raise taxes on anyone earning less than $400,000 a year, carrying forward a Biden pledge. 

Extending Everything Would Be Costly

Should Congress simply extend the laws and keep things the way they are, that would have consequences too, piling on to the $34 trillion national debt. Making the Trump tax cuts permanent by itself would cost $3.8 trillion over the next decade according to an analysis by Gale—adding more strain on a federal budget that’s already on track to put more toward interest payments than it spends on the military, according to the Congressional Budget Office.

“The big policy challenge and related political challenge is the sheer cost of all this,” Garrett Watson, senior policy analyst at the Tax Foundation told Investopedia. “Even just for extending the tax cuts for the non-rich, you’re looking at a $2-$2.5 trillion cost over 10 years.”

In years past, Republicans and Democrats have often compromised on spending with the Democrats giving Republicans the tax cuts for businesses and the wealthy that they want, and Republicans giving Democrats the spending on social programs that they want, resulting in ever-greater deficits. 

As higher interest rates make that debt more costly, more experts are warning that larger spending deficits could pose a risk to the economy, and politicians are taking notice. 

“The option to just skip through the political and policy trade-offs and just to a deficit-financed tax cut is going to be much harder to do this time, if it’s possible at all,” Watson said.