Nobody’s talking about the provisions that don’t sunset 

There have been no shortage of articles discussing the anticipated sunset of the 2017 Tax Cuts and Jobs Act (TCJA). Practitioners have repeatedly warned their clients that numerous TCJA provisions are set to expire at the end of 2025. Without Congressional action, individual taxpayers face the prospect of an increase in marginal tax rates, a halving of the estate and gift tax exemption and the expiration of the qualified business income deduction. However, the TCJA also introduced several permanent changes to the individual tax rules that remain in effect regardless of what happens this year in Washington.

So, what are a few TCJA tax items relevant to individuals that don’t sunset at the end of 2025? 

1.    Inflation adjustments: TCJA permanently changed how various income thresholds are adjusted for inflation. Following the enactment of TCJA, inflation adjustments are based on changes in the chained Consumer Price Index for All Urban Consumers, which accounts for the ability of consumers to substitute between goods. In theory, this should result in smaller inflation adjustments to tax brackets and other phaseout limitations. Over time, this could result in tax bracket creep for many individual taxpayers if their income grows faster than the rate of inflation applied to tax brackets and phaseouts. This makes bracket management increasingly important for taxpayers regardless of what happens with TCJA.

2.    Alimony: TCJA also permanently repealed various tax rules related to divorce. For divorces executed on or in some cases modified after Dec. 31, 2018, alimony payments are no longer deductible nor are alimony payments received includible in income. Clients undergoing a divorce should be aware that the TCJA alimony changes do not sunset, and they should work with their attorneys to plan accordingly.

3.    Medical expenses: The deduction for medical expenses used to be limited to only those expenses exceeding 10% of a taxpayer’s Adjusted Gross Income (AGI). TCJA temporarily lowered the floor to 7.5% of AGI, and Congress later made that change permanent. Taxpayers with significant medical expenses should be aware that this provision does not sunset at the end of 2025. They should consider ways to maximize this deduction by timing expenses to the extent possible, and for married couples, they should consider whether filing separately may yield a greater tax benefit.