With the end of 2024 approaching, taxpayers must prepare for significant changes as many provisions of the 2017 Tax Cuts and Jobs Act (TCJA) are set to expire. Here’s a breakdown of what’s at stake, how it could impact your finances, and steps to take for effective tax planning and preparation in 2025.

Key Provisions Expiring in 2025

1. Standard Deduction and Personal Exemptions

Under the TCJA, the standard deduction nearly doubled, while personal exemptions were eliminated. For example, in 2026:

• Married couples filing jointly may see the standard deduction drop to approximately $16,525 (down from $30,725 under TCJA).
• Personal exemptions will return, potentially adding complexity for filers.

2. Individual Tax Rates

The TCJA reduced tax rates across most income brackets, including lowering the top rate from 39.6% to 37%. If the Act sunsets, rates will revert to pre-2017 levels, increasing the tax burden for many individuals.

3. Child Tax Credit

The TCJA increased the child tax credit to $2,000 per qualifying child and adjusted phase-out thresholds. Post-2025, the credit will revert to $1,000 per child, significantly impacting families.

4. State and Local Tax (SALT) Deduction

Currently capped at $10,000, the SALT deduction will return to being fully deductible after 2025. This change benefits taxpayers in high-tax states but may complicate planning strategies for others.

5. Estate and Gift Tax Exemption

The estate tax exemption will be halved, dropping from approximately $28.6 million for married couples in 2025 to about $14.3 million in 2026. This change emphasizes the need for advanced estate planning.

6. Qualified Business Income (QBI) Deduction

The 20% deduction for pass-through entities like LLCs and S-corporations is slated to expire. Without renewal, business owners will face higher tax liabilities.

7. Bonus Depreciation

The 100% bonus depreciation provision began phasing out in 2023. By 2025, it will drop to 40% and fully phase out by 2026, impacting business investment decisions.

Potential Congressional Actions

Renewing all TCJA provisions would cost approximately $4.6 trillion, forcing Congress to prioritize extensions. Provisions with bipartisan support, such as bonus depreciation and R&D expensing, are likely to be reworked. However, many other critical provisions may not make the cut, leaving taxpayers to navigate higher tax rates and reduced deductions.

What This Means for Tax Planning in 2025

These changes underscore the importance of proactive tax preparation. Here are a few strategies to consider:

• Review Your Tax Bracket: With potential increases looming, accelerating income into 2025 could help lock in lower rates.
• Maximize Deductions: Leverage the current SALT cap and QBI deduction while they’re still in effect.
• Plan for Estate Changes: Reassess estate plans to accommodate reduced exemptions starting in 2026.
• Consult a Tax Professional: Complex changes require expert guidance to minimize tax liabilities and maximize opportunities.

At Private Tax Solutions, we specialize in navigating these complexities. Our tailored approach ensures you’re prepared for tax planning 2025, whether you’re a business owner, real estate investor, or individual taxpayer.

Act Now to Stay Ahead

Don’t wait for Congress to act—start preparing for these changes today. Our team is now accepting new clients for December. Let us help you optimize your tax preparation for 2025 and beyond.