Passing key tax legislation will be a major priority in the next Congress. Without it, several provisions of the tax code will expire at the end of 2025.

President-elect Donald Trump proposed several tax cuts during his campaign. Republicans will control the Senate in 2025. Although several elections have not yet been called, Republicans are on track to control the House of Representatives as well, according to the Associated Press (at least today as of noon).

This means further tax cuts are likely. What is not known is how much debt hawks in Congress will resist during the negotiations and the vote. Additionally, the specific rates, deductions, limits, phase-out levels and credits that are revised will impact your taxable income.

Here are the key provisions of the Tax Cuts and Jobs Act (TCJA) of 2017 that expire at the end of 2025 and will affect many individual investors.

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  Marginal tax brackets: Tax rates for the second and third tax brackets, in which many taxpayers fall, will increase by three percentage points (from 12% and 22% to 15% and 25%, respectively) without new legislation. Additionally, the thresholds at which each upper bracket is reached will decrease if they are not extended.

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  Qualified capital gains and dividends: The TCJA assigned them their own income brackets. They are expected to return to the less generous income tax brackets in 2026.

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  Standarddeduction: This was doubled down by the TCJA. It now stands at $29,200 for married couples filing joint returns and $14,600 for singles. Next year it will be $30,000 and $15,000 respectively. If not extended, it will be halved in 2026, on an inflation-adjusted basis.

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  Personal exemption: It has been in hibernation since 2018 but could return in 2026. The same goes for the ability to deduct various itemized deductions in excess of 2% of adjusted gross income (AGI). For the typical taxpayer, the return on both will not exceed the value of the higher standard deduction.

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  Deduction of state and local taxes (SALT): This could well be a point of contention in the negotiations. The $10,000 cap on deducting state and local taxes on federal income tax returns will end after December 31, 2025. The current cap has not been indexed for inflation by the TCJA. Lawmakers in areas affected by the SALT deduction cap are facing pressure from their constituents to end it, although lawmakers in other states may object.

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  Inheritance taxes: The TCJA doubled the basic exclusion amount for estate taxes. It currently stands at $13.61 million per spouse and will increase to $13.99 million in 2025. The estate exemption will be cut in half (although adjusted for inflation) in 2026 without congressional action.

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  Alternative minimum tax (AMT): Income exemptions and phase-out levels were increased by the TCJA. They are expected to return to lower pre-TCJA levels (adjusted for inflation) in 2026.

Your total taxable income matters, and the effective tax rate you pay on that income matters more than the general tax numbers you hear about on the news. This makes tax planning beyond 2025 tricky. If you prefer a certain level of certainty, here are actions you can take this year and next:

• Make Roth individual retirement account (IRA) conversions this year and in 2025 while keeping an eye on your marginal tax brackets and 2026-2027 Medicare Part B premium thresholds (“IRMAA”).
• Take a withdrawal from inherited IRAs subject to the 10-year rule this year, although you can still avoid doing so this year. Penalties will be imposed for failure to meet the required minimum distribution (RMD) from these IRAs in 2025.
• Make gifts to heirs this year and next year if your estate will be subject to inheritance tax. Gift tax exclusions are currently $18,000 for single filers and $36,000 for consenting couples. These limits will increase to $19,000 and $38,000 respectively in 2025.
• Transferring assets to trusts to reduce the size of one’s estate may also be an option for some. Consider the costs and limitations before doing so.
• Consolidating charitable donations this year or next year may allow you to claim a higher deduction than the standard deduction.

Individual investors’ pessimism about the near-term outlook for stocks declined in the latest AAII sentiment survey. Meanwhile, optimism and neutral sentiment have increased.

Bullish sentiment, or expectations that stock prices will rise over the next six months, rose 2.1 percentage points to 41.5%. Bullish sentiment is above its historical average of 37.5% for the 52nd time in 53 weeks.

Neutral sentiment, or expectations that stock prices will remain essentially unchanged over the next six months, rose 1.3 percentage points to 30.9%. Neutral sentiment is below its historical average of 31.5% for the 17th time in 18 weeks.

Bearish sentiment, or expectations that stock prices will fall over the next six months, fell 3.3 percentage points to 27.6%. Bearish sentiment is below its historical average of 31.0% for the 12th time in 13 weeks.

The bull-bear spread (bullish minus bearish sentiment) increased by 5.4 percentage points to 14.0%. The bull-bear spread is above its historical average of 6.5% for the 26th time in 27 weeks.

This week’s special question asked AAII members their views on inflation.

Here’s how they responded:

• It returns to a more acceptable rate: 44.6%
• It slows down but not enough: 35.7%
• It is still increasing too quickly: 15.5%
• Not sure/no opinion: 3.9%

Individual investors’ allocations to cash declined while allocations to stocks and bonds increased slightly in the October asset allocation survey.

Allocations to stocks and stock funds increased 0.2 percentage points to 68.9%. Allocations to stocks and stock funds are above their historical average of 61.5% for the 53rd consecutive month.

Allocations to bonds and bond funds rose 0.2 percentage points to 14.6%. Allocations to bonds and bond funds are below their historical average of 16.0% for the ninth consecutive month.

Cash allocations decreased by 0.4 percentage points to 16.4%. Cash allocations are below their historical average of 22.5% for the 23rd consecutive month.