Is the Tax Cut and Jobs Act Expiring

As we navigate through 2024, a looming question persists in the minds of taxpayers and corporations alike: "Is the Tax Cuts and Jobs Act (TCJA) expiring?" The answer is yes, but the implications are far from simple. Let's explore what this means for you and your business.

Understanding the Tax Cuts and Jobs Act (TCJA)

Enacted in December 2017, the TCJA introduced significant changes to U.S. tax code¹. It lowered tax rates for individuals and corporations, almost doubled the standard deduction, and expanded the Child Tax Credit².

However, these changes were not designed to be permanent. Many provisions within the Act are set to expire at the end of 2025³.

What Provisions are Set to Expire?

Most of the changes affecting individual taxpayers will sunset after 2025⁴. This includes the lower tax rates, the increased standard deduction, the expanded Child Tax Credit, and the new credit for non-child dependents⁵.

Business-related provisions are also on the chopping block. The 100% allowance for certain business assets is set to decrease by 20% per year in taxable years beginning after 2022 and expires on January 1, 2027⁶.

Moreover, the corporate tax rate, which was reduced from 35% to a flat 21% under the TCJA, is also under scrutiny. While there's no set expiration date for this provision, it's possible that future legislation could reverse this cut⁷.

Impact on Corporations

The expiration of these provisions could have profound implications for corporations⁸. The reduced corporate tax rate has been a boon, making U.S. businesses more competitive globally. However, an increase in this rate could lead to higher taxes and potentially slow economic growth⁹.

The phasing out of the 100% allowance for certain business assets could also impact investment decisions, as it may increase the cost of capital investments¹⁰.

Moreover, with the current regulatory landscape, corporations are facing increasing scrutiny and potential changes in regulations that could further impact their tax situation and overall profitability¹¹.

The Future of the TCJA

The future of the TCJA is uncertain. Unless Congress passes new legislation, the specific provisions within the Act will expire on December 31, 2025¹². However, there's always a possibility that some or all of these provisions could be extended or even made permanent.

The Bottom Line

The looming expiration of the TCJA provisions brings uncertainty for both individual taxpayers and corporations. As we approach the end of 2025, understanding these changes and their potential impact on your tax situation is crucial. As always, consult with a tax professional to ensure you're making the most informed decisions.

Sources:

1. CRS Reports ↩
2. Tax Foundation ↩
3. Brookings ↩
4. Tax Policy Center ↩
5. Kiplinger ↩
6. IRS ↩
7. Investopedia ↩
8. Paychex ↩
9. CNBC ↩
10. Investopedia ↩
11. Sanction Scanner ↩
12. Becker ↩