The Tax Cuts and Jobs Act (TCJA) was signed into law on December 22, 2017. At the time, it was the biggest tax reform effort in more than 30 years, pitched as a way to spur economic growth by cutting taxes across the board. It was also supposed to be temporary, as most of its individual provisions were set to expire at the end of 2025.
However, in July 2025, Congress passed the One Big Beautiful Bill Act (OBBBA), which made most of the TCJA's tax cuts permanent (and added some new ones on top). Today, the TCJA affects every type of business and individual across the economic spectrum. It’s also commonly referred to as the GOP Tax Plan or Republican Tax Plan.
What changes are in the Tax Cuts and Jobs Act?
It's easiest to split the changes into two groups: businesses and individuals.
For businesses, the TCJA:
Cuts the top corporate tax rate from 35% to 21%, permanently from day one.
Gives pass-through businesses a 20% deduction on qualified business income. OBBBA made this permanent and widened the phase-in range to $75,000 (single filers) and $175,000 (joint filers).
Eliminates the corporate alternative minimum tax (AMT).
Restores 100% bonus depreciation, permanently, for qualifying property acquired on or after January 20, 2025. (This had been scheduled to phase down to zero by 2027—OBBBA locked it back in.)
Expands the Section 179 deduction. For 2026, you can deduct up to $2,560,000 of qualifying equipment, software, and other property, with the deduction starting to phase out once purchases exceed $4,090,000.
Limits how much interest expense some businesses can deduct.
Limits net operating loss (NOL) carryforwards to 80% of taxable income in any future year and eliminates most NOL carrybacks (with narrow exceptions for farming and insurance)—a rule TCJA made permanent from the start and left unchanged by OBBBA.
Restores immediate expensing for domestic research and development costs, reversing the 2022–2024 rule that forced businesses to amortize R&D costs over several years.
Expands cash-method accounting to more corporations that meet certain size requirements.
For individuals, the TCJA:
Keeps the top individual tax rate at 37% (down from 39.6% pre-2018) and the seven tax brackets.
Set the 2026 standard deduction at $16,100 for single filers, $24,150 for head of household, and $32,200 for those married filing jointly—up from 2018's $12,000/$18,000/$24,000.
Limits itemized deductions in several ways: mortgage interest is capped at $750,000 of acquisition debt (permanent under OBBBA), and the SALT (state and local tax) deduction cap is temporarily raised from $10,000 to $40,000 for 2025–2029—phasing back down for filers with income over $500,000—before reverting to $10,000 in 2030.
Eliminates the personal exemption, permanently.
Increases the Child Tax Credit to $2,200 per child (up from $2,000) and makes it permanent, with up to $1,700 refundable. The phase-out still starts at $200,000 (single) and $400,000 (joint).
Raises the estate tax exemption and gift tax exemption to $15 million for individuals and $30 million for married couples—permanent, and now indexed for inflation going forward.
Leaves long-term capital gains tax rates untouched at 0%, 15%, and 20% (those brackets were never scheduled to sunset), though the income thresholds separating them rise with inflation each year—for 2026, single filers pay 0% up to $49,450 of taxable income, 15% up to $545,500, and 20% above that.
Keeps the Affordable Care Act (ACA) individual mandate penalty at zero—it was repealed starting in 2019 and stays that way.
Reshapes a few other itemized deductions:
The charitable contribution limit for cash gifts is now permanently 60% of adjusted gross income (up from 50% pre-TCJA), though a new 0.5% AGI floor kicks in starting in 2026.
Miscellaneous itemized deductions (like unreimbursed employee expenses) are permanently eliminated.
A new limitation replaces the old "Pease" rule, reducing the value of itemized deductions for taxpayers in the 37% tax bracket.
The real effect on your effective tax rate depends heavily on your income, filing status, and whether you itemize.
How does the Tax Cuts and Jobs Act affect small businesses?
A few changes affect small business owners:
The 20% pass-through deduction. This benefits many business owners, but the rules are complicated. Get a tax professional to check whether your business qualifies. OBBBA made this deduction permanent, so it's no longer a use-it-before-it-expires situation.
The Section 179 deduction. This lets small businesses fully deduct the cost of qualifying property, like machines, furniture, computers, and software, in the year they put it to use. For 2026, that cap is $2,560,000, and it phases out once you've placed more than $4,090,000 of property in service that year. Unlike the original TCJA version, this deduction is no longer scheduled to shrink over time.
Bonus depreciation. Before the TCJA, this wasn't available every year and usually only covered part of new property's cost. TCJA took it to 100%, and it was on track to phase out by 2027—but OBBBA restored the 100% rate permanently for property acquired on or after January 20, 2025. It still covers used property and certain real estate improvements. OBBBA also added a new 100% depreciation deduction for "qualified production property" (think manufacturing facilities) built between 2025 and 2033.
FAQs
When did the TCJA go into effect?
The TCJA took effect January 1, 2018, and mostly applied to 2018 tax returns and beyond—2017 returns were largely unaffected. Then, with most of its provisions set to expire December 31, 2025, Congress passed OBBBA on July 4, 2025, making the bulk of those changes permanent starting with the 2026 tax year, instead of letting them lapse.
What can I do now that the TCJA is here?
There's a lot to wade through, so talk to your CPA or payroll provider about how these changes affect your business specifically.
What does the Congressional Budget Office (CBO) have to do with the Tax Cuts and Jobs Act?
The Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT) score tax bills for their deficit impact—JCT estimates the revenue effects, which CBO builds into its overall cost estimate—and that's why the TCJA's provisions were set to expire in 2025 under the Byrd Rule's 10-year reconciliation limit.
Is the Tax Cuts and Jobs Act still in effect in 2026?
Yes, and most of it is now permanent. The TCJA's individual tax provisions were originally set to expire after 2025, but the One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, made the bulk of them permanent starting with the 2026 tax year, including the lower tax brackets, the larger standard deduction, and the 20% pass-through deduction.
What's the difference between the Tax Cuts and Jobs Act and the One Big Beautiful Bill Act?
The Tax Cuts and Jobs Act (TCJA) is the 2017 law that created the current tax brackets, standard deduction, and pass-through deduction—but wrote them to expire after 2025. The One Big Beautiful Bill Act (OBBBA) is the 2025 law that extended most of those TCJA provisions permanently and added new, temporary deductions for tips, overtime pay, and seniors.
