Preparing for Change: How the Expiring TCJA Provisions Could Impact Your Taxes
The Tax Cuts and Jobs Act (TCJA) has shaped the tax landscape since 2018, introducing significant changes for businesses and individuals. As many provisions are set to expire at the end of 2025, it’s crucial to stay informed and plan ahead.
Expiring Provisions: Changes on the Horizon
Several key tax breaks under the TCJA will sunset after 2025, potentially impacting your tax liability:
Lower Individual Tax Rates: Current rates will revert to pre-TCJA levels, including a top rate of 39.6%, potentially affecting upper-middle-income taxpayers.
Qualified Business Income (QBI) Deduction: The 20% deduction for pass-through business income will expire, increasing the tax burden for many small businesses.
Bonus Depreciation: First-year bonus depreciation will phase out, dropping to 40% in 2025 and ending after 2026 unless extended.
Permanent Provisions: Opportunities Remain
Not all TCJA provisions are temporary. Some changes are here to stay, offering long-term planning advantages:
Corporate Tax Rate: The flat 21% corporate tax rate remains a significant benefit for C corporations.
Section 179 Deductions: Enhanced deduction limits ($1.22 million in 2024) continue to encourage capital investment.
Repeal of C Corporation AMT: The elimination of the alternative minimum tax simplifies planning for corporations.
Planning for the Future
With expiring provisions and legislative uncertainty, proactive tax planning is more important than ever:
Prepare for potential higher individual tax rates. Adjust your strategies now to mitigate the impact of higher rates in 2026.
Maximize expiring deductions and credits. Take advantage of opportunities like bonus depreciation and the QBI deduction while they last.
Reevaluate your business structure. Ensure your entity type and tax strategy align with long-term efficiency and savings.
Closing Thoughts
The TCJA brought significant benefits to many taxpayers, but with major provisions set to expire at the end of 2025, now is the time to act. Whether you’re an individual planning for potentially higher tax rates or a business owner considering how to maximize deductions and credits, proactive tax planning is key.