The Tax Cuts and Jobs Act (TCJA), enacted in December 2017, provided tax changes that offered relief for businesses and high-income individuals. One of the main goals of the TCJA was to make the U.S. more attractive to investors, however many of the following provisions are set to expire at the end of 2025. Taxpayers should be vigilant and plan accordingly.
Key business tax provisions set to expire:
• Section 199A: the TCJA had introduced a new deduction for pass-through businesses, allowing certain businesses to deduct up to 20% of their qualified business income. This deduction provides significant tax savings for many small business owners.
• Reductions of the corporate tax rate from 35% to 21%.
• Disallowed excess of business losses are treated as NOL (net operation loss) and carryover to the following tax year.
• Allowance of 100% expensing for business property acquired between September 2017 and December 31, 2022, decreasing this allowance by 20% per year between 2022 and January 1, 2027.
• Increase of the maximum deduction for Section 179 property from $500K to $1 million.
Key individual tax provisions set to expire:
• Changes to the individual tax rates, reverting to pre-TCJA levels (higher rates).
• Changes to the standard deductions, exemptions, and itemized deductions (could all revert to pre-TCJA amounts and regulations).
• Tax credits doubled from $1,000 to $2,000 per qualifying child under age 17 and a new $500 tax credit for dependents.
• Raised income thresholds for credits, which allowed more families to get benefits never received in previous years.
• The individual mandate for qualifying health insurance was repealed (no penalty assessed on 2018 and future tax returns).
Congress holds the power to extend, let expire, or make these provisions permanent. It is widely believed there will be no resolution on the above provisions until after the 2024 election. If you have any questions on how the expiring provisions might impact your tax situation, please reach out to our office.
