Navigating the Tax Cuts and Jobs Act: Six Key Changes Expiring in 2025
The Tax Cuts and Jobs Act (TCJA), enacted in December 2017, introduced significant tax reforms. However, several key provisions are set to expire at the end of 2025, making it crucial for individuals and businesses to understand these changes as they plan for the future.
Key Changes from the TCJA
Reduced Individual Income Tax Rates: The TCJA lowered tax rates, with the top rate decreasing from 39.6% to 37%. These rates will revert to previous levels after 2025 unless Congress intervenes.
Increased Standard Deduction: The standard deduction rose from $6,350 to $12,000 for individuals and from $12,700 to $24,000 for married couples. This increase will expire in 2025, potentially raising taxable income for those who don’t itemize.
Limit on SALT Deductions: The cap on state and local tax deductions was set at $10,000. This cap is set to expire in 2025, which could benefit taxpayers in high-tax states.
Corporate Tax Rate Reduction: The corporate tax rate was reduced from 35% to 21%. This change is permanent, but ongoing discussions about corporate taxation should be monitored.
Changes to Estate Tax Exemptions: The estate tax exemption was doubled to $11.18 million but will revert to approximately $5.49 million after 2025, impacting estate planning for high-net-worth individuals.
Child Tax Credit Increase: The Child Tax Credit increased from $1,000 to $2,000 per child, with eligibility thresholds raised. This increase will also expire at the end of 2025.
Planning Ahead
As these changes approach their expiration, it’s essential to develop a plan:
Tax Projections: Assess how your tax situation may shift post-2025, considering both current and future rates.
Review Deductions: Decide whether to take the standard deduction or itemize, and keep records for potential deductions.
Stay Informed: Monitor legislative changes to adapt your tax strategies accordingly.
Schedule your consultation with Archmore Group for help navigating the upcoming changes and identifying how they may affect you or your business.
