TCJA Extension: Permanent Provisions, SALT Cap, and Trump Accounts

The Tax Cuts and Jobs Act did not expire at the end of 2025. On July 4, 2025, President Trump signed the One Big Beautiful Bill Act (Public Law 119-21), which made most of the TCJA’s individual and business tax provisions permanent, raised the state and local tax deduction cap temporarily, and added a handful of new deductions running through 2028. For most taxpayers, the practical result is that 2026 rates, brackets, and deductions look like a slightly enhanced version of the 2025 rules rather than a reversion to the pre-2018 code.

What Would Have Happened Without the Extension

Nearly all of the TCJA’s individual income and estate tax changes were scheduled to sunset on December 31, 2025. Had that happened, the tax code would have reverted to pre-2018 rules in 2026. The top individual rate would have jumped from 37% back to 39.6%. The standard deduction for single filers would have fallen from roughly $15,450 to about $8,350. The child tax credit would have been cut in half to $1,000. Personal exemptions would have returned.¹ The corporate rate cut from 35% to 21% was never at risk; it was made permanent in the original 2017 law.²

Individual Provisions Now Permanent

Income Tax Rates and Brackets

The seven TCJA rates — 10%, 12%, 22%, 24%, 32%, 35%, and 37% — are now permanent. The new law also added inflation adjustments for 2026: 4% for the bottom two brackets and 2.3% for the higher ones. For 2026, the 37% rate begins at $640,601 for single filers and $768,701 for married couples filing jointly.³

Standard Deduction

The higher standard deduction is permanent, with a modest bump built into the new law. For 2026, it is $16,100 for single filers, $32,200 for married couples filing jointly, and $24,150 for heads of household.⁴ The personal exemption stays at zero, also made permanent.³

Child Tax Credit

The child tax credit is permanently set at $2,200 per qualifying child under 17, up from the TCJA’s $2,000, effective starting in 2025 and indexed for inflation.⁵ The refundable Additional Child Tax Credit is $1,700 per child for 2025, indexed for inflation, and limited to 15% of earnings above $2,500.⁶ The phase-out thresholds remain at $200,000 for single filers and $400,000 for joint filers.

Estate and Gift Tax Exemption

The doubled estate and gift tax exemption is permanent with no sunset. For 2026, the basic exclusion amount is $15 million per individual, up from $13.99 million in 2025, and will keep being indexed for inflation.⁷ A married couple can shield $30 million from federal estate and gift tax.⁸

Alternative Minimum Tax

The more generous AMT exemption amounts under the TCJA are permanent, with modifications and continued inflation indexing.⁹

The SALT Cap Just Got Bigger, But Only for a While

The state and local tax deduction cap rose from $10,000 to $40,000 ($20,000 for married filing separately) beginning in 2025. This piece is temporary.¹⁰

If your modified adjusted gross income is above $500,000 ($250,000 for married filing separately), the $40,000 cap phases down at 30 cents per dollar over the threshold, bottoming out at the original $10,000. Both the $40,000 cap and the $500,000 income threshold rise 1% annually through 2029.¹¹ In 2030, the deduction reverts to a $10,000 cap with no income-based phase-down.¹⁰

Business Provisions

The Section 199A pass-through deduction is permanent and increased from 20% to 23%. To claim the full deduction, a pass-through business must show that 75% of gross receipts come from a qualified trade or business. The existing limitations on specified service trades or businesses continue in modified form, with higher phase-in thresholds.¹²

Bonus depreciation, which had been phasing down 20 points per year since 2023, is restored to 100% and made permanent for qualifying property acquired after January 19, 2025.¹³ The Section 179 expensing limit was permanently doubled to $2,500,000, with the phase-out threshold raised to $4,000,000.¹⁴

Domestic research and experimental expenditures are again fully deductible in the year incurred, on a permanent basis for tax years beginning after December 31, 2024. The five-year amortization rule the TCJA had imposed starting in 2022 is gone for domestic R&D; the 15-year amortization for foreign R&D stays.¹⁵ Businesses that capitalized domestic R&D between 2022 and 2024 may elect to deduct remaining unamortized costs immediately in 2025 or spread them over 2025 and 2026.¹⁴

The business interest deduction limitation is also loosened. The 30%-of-income cap now uses the more favorable EBITDA-based calculation permanently, reversing the tighter EBIT standard that took effect in 2022. This applies to tax years beginning after December 31, 2024.¹³

New Deductions Available 2025 Through 2028

Four new deductions were created by the law. All are available to itemizers and non-itemizers alike, and all expire after the 2028 tax year.

No tax on tips. Workers in tipped occupations may deduct up to $25,000 in qualified tip income per year. The deduction phases out above $150,000 in MAGI ($300,000 for joint filers).¹⁶
No tax on overtime. Employees may deduct the premium portion of overtime pay (the “half” in time-and-a-half), up to $12,500 per year, or $25,000 for joint filers, with the same income phase-outs.¹⁶
Auto loan interest. Up to $10,000 per year in interest on loans for new, American-assembled personal vehicles under 14,000 pounds gross weight. The loan must have originated after December 31, 2024. Phase-out begins at $100,000 MAGI ($200,000 joint).¹⁶
Senior bonus deduction. Individuals 65 or older get an extra $6,000 deduction, or $12,000 for qualifying couples, on top of the existing senior standard deduction. Phase-out begins at $75,000 MAGI ($150,000 joint).¹⁶

Trump Accounts

The law creates tax-advantaged savings accounts for children, branded “Trump Accounts.” Children born between January 1, 2025, and December 31, 2028, qualify for a one-time $1,000 government contribution invested in an index fund, claimed through the family’s tax return.¹⁷ Any American under 18 may hold an account. Starting July 4, 2026, parents may contribute up to $5,000 per year, and employers may add up to $2,500 per year on a tax-excluded basis.¹⁸

Funds are locked until the beneficiary turns 18. After that, they may be used for education, a home purchase, or retirement. Early withdrawals before 59½ face a 10% penalty, with exceptions for education, home buying, adoption, and disaster relief. Contributions are taxed as ordinary income and investment earnings are taxable, which analysts have noted makes the accounts less favorable than 529 plans for college costs.¹⁸

Cost and Who Benefits

The Congressional Budget Office scored the enacted law as adding $3.4 trillion to the unified budget deficit over the 2025–2034 period, reflecting $4.5 trillion in decreased revenues offset by $1.1 trillion in spending cuts.¹⁹ The spending cuts came mostly from Medicaid (about $884 billion over ten years), student loan programs ($387 billion), and SNAP ($156 billion), according to the Penn Wharton Budget Model.²⁰

Every income group receives a tax cut from the extension, but the benefits are larger at the top. A Tax Policy Center analysis estimated that extending the TCJA provisions would boost after-tax income by 0.5% for the lowest-income quintile, 1.2% for middle-income households, and 2.5% for the top 1%.²¹ Penn Wharton found that in 2026, a middle-quintile household would see an average income increase of about $1,115, while a household in the 95th to 99th percentile would gain roughly $19,210.²²

Low-income households benefit primarily from the larger standard deduction and the enhanced child tax credit, with those gains partially offset by the continued elimination of personal exemptions. Higher-income taxpayers benefit disproportionately from the lower top rates, the pass-through deduction, the AMT changes, and the higher estate tax exemption.²¹

1
Tax Foundation. 2026 Tax Brackets if Tax Cuts and Jobs Act Expires
2
Bipartisan Policy Center. The 2025 Tax Debate: The Corporate Tax Rate and Pass-Through Deduction
3
Tax Foundation. 2026 Tax Brackets
4
Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
5
Tax Policy Center. What Is the Child Tax Credit
6
Center for Agricultural Law and Taxation, Iowa State University. One Big Beautiful Bill Act Implements Significant Tax Package
7
Internal Revenue Service. What’s New – Estate and Gift Tax
8
Morgan Lewis. IRS Announces Increased Gift and Estate Tax Exemption Amounts for 2026
9
PwC. United States – Individual – Significant Developments
10
Bipartisan Policy Center. SALT Deduction Changes in the One Big Beautiful Bill Act
11
TurboTax. Unlocking the New SALT Cap
12
Tax Foundation. 199A Deduction in the Big Beautiful Bill
13
Tax Foundation. One Big Beautiful Bill Act Tax Changes
14
Plante Moran. The One Big Beautiful Bill: Insights for Manufacturers
15
Internal Revenue Service. One Big Beautiful Bill Provisions
16
Internal Revenue Service. Tax Deductions for Working Americans and Seniors
17
U.S. Department of the Treasury. Trump Accounts Press Release
18
Brookings Institution. How Children Are Treated in the One Big Beautiful Bill Act
19
Congressional Budget Office. Cost Estimate for Public Law 119-21
20
Penn Wharton Budget Model. Senate Reconciliation Bill: Budget, Economic, and Distributional Effects
21
Tax Policy Center. Unpacking the TCJA: Who Benefits and Who Loses from Extending Major Provisions
22
Penn Wharton Budget Model. TCJA Extenders