| Signed | December 22, 2017, by President Donald Trump |
| Public law | 115-97, usually called TCJA; most provisions took effect for 2018 |
| Votes | House 224–201; Senate 51–48, with no votes from the minority party |
| In one sentence | The largest rewrite since 1986: a permanent 21% corporate rate, and for individuals lower rates, a bigger standard deduction and fewer deductions — nearly all of it set to expire after 2025. |
| What happened in 2025 | The One Big Beautiful Bill Act made the expiring individual provisions permanent, with changes. See the 2025 page. |
Why it happened
The United States had the highest statutory corporate rate in the developed world, 35%, and a tax system that taxed the worldwide income of American companies, which kept trillions of dollars of foreign earnings parked offshore. Cutting the corporate rate had been discussed by both parties for a decade. With one party controlling the White House and both chambers after the 2016 election, the bill moved under budget reconciliation, which allowed passage with a simple majority but required that it not add to the deficit beyond ten years. The corporate cut was made permanent; to fit the rule, the individual changes were written to expire after 2025 — the same device used in 2001.
What it did — individuals
| Provision | Before (2017) | After (2018) |
|---|---|---|
| Rates | Seven brackets, 10% to 39.6% | Seven brackets, 10 / 12 / 22 / 24 / 32 / 35 / 37%; the 37% rate began at $500,000 single, $600,000 joint |
| Standard deduction | $6,350 single / $12,700 joint | $12,000 / $24,000 — nearly doubled |
| Personal exemption | $4,050 per person | Zero |
| Child tax credit | $1,000, phasing out at $110,000 joint | $2,000, up to $1,400 refundable, phasing out at $400,000 joint; a new $500 credit for other dependents |
| State and local taxes | Fully deductible | Capped at $10,000 |
| Mortgage interest | Loans up to $1 million, plus $100,000 of home equity debt | Loans up to $750,000; home equity interest only if used on the home |
| Miscellaneous deductions | Employee expenses, tax prep, investment fees above 2% of income | Gone |
| Casualty losses | Any casualty, above a floor | Federally declared disasters only |
| Alimony | Deductible to payer, income to recipient | Neither, for agreements after 2018 |
| Moving expenses | Deductible | Military only |
| Alternative minimum tax | Exemption $84,500 joint, phasing out at $160,900 | Exemption $109,400, phasing out at $1,000,000 — the AMT nearly disappeared for the middle class |
| Estate and gift exemption | $5.49 million | $11.18 million, doubled |
| Health insurance mandate | Penalty up to 2.5% of income | Zero from 2019 |
| Inflation indexing | Consumer Price Index | Chained CPI, which rises more slowly — a permanent change |
The effect for most families was that itemizing stopped making sense. Before 2018 about 30% of returns itemized; after, about 10%. A couple with a mortgage, property taxes and charitable gifts that added up to $20,000 found the $24,000 standard deduction was simply larger — and that their charitable gifts no longer changed their tax. See itemized deductions vs. the standard deduction.
What it did — business
- The corporate rate: a flat 21%, permanent. From graduated rates topping at 35%. The corporate AMT was repealed. See C corporations.
- The 20% qualified business income deduction (section 199A). Owners of sole proprietorships, partnerships and S corporations could deduct 20% of their business income — a response to the corporate cut, so that a pass-through business was not left paying far more than a corporation. Above a taxable-income threshold ($157,500 single, $315,000 joint in 2018) the deduction was limited by the wages the business paid, and for a specified service trade or business — health, law, accounting, consulting, financial services, athletics, performing arts and a few others — it was phased out entirely. That rule has its own page: Specified Service Trade or Business.
- 100% bonus depreciation for equipment bought after September 27, 2017, new or used, scheduled to phase down from 2023; section 179 to $1 million.
- Business interest limited to 30% of adjusted taxable income for businesses over $25 million in receipts.
- Net operating losses limited to 80% of income, with no carryback and an unlimited carryforward.
- Entertainment no longer deductible at all; meals stayed at 50%.
- Like-kind exchanges limited to real estate. Trading in a business vehicle became a taxable sale.
- Research costs to be capitalized and amortized over five years from 2022 instead of deducted — a provision that took effect, caused real pain for small technology companies, and was reversed for domestic research in 2025.
- The cash method opened to businesses up to $25 million in receipts (indexed), with relief from inventory accounting.
- International: a move toward taxing only domestic income, with a one-time tax on the foreign earnings that had been parked offshore.
The sunset
Everything in the individual table above except the alimony rule, the chained CPI and the zero mandate penalty was scheduled to end on December 31, 2025, along with the 20% business deduction. Had nothing been done, the 2026 return would have had 2017 rates, a $6,500 standard deduction, personal exemptions back, no SALT cap, and a $1,000 child credit. The 2025 law resolved it. What it kept, what it changed and what it added is the next page.
What it meant
A couple with two children and $90,000 of wages, taking the standard deduction, paid about $2,000 less for 2018 than for 2017: lower rates and a doubled child credit outweighed the lost exemptions. A couple in a high-tax suburb with $30,000 of state taxes and a large mortgage saw their deductions capped and, in some cases, paid more. A dentist with $400,000 of practice income got no 20% deduction because dentistry is a specified service; a contractor with the same income got the full deduction. And every corporation in the country got a permanent 21% rate while every individual got rules with an expiration date — which is the story of the 2025 law.