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Preparing for Expiration of the Tax Cuts and Jobs Act of 2017
Today, I want to discuss the upcoming changes as we approach the expiration of the Tax Cuts and Jobs Act (TCJA) of 2017. This significant tax legislation, which brought numerous tax reductions, is set to sunset on December 31, 2025. Let’s dive into what this means for you and how to prepare for the changes ahead.
Overview of the Tax Cuts and Jobs Act of 2017
The TCJA introduced several key changes, including reduced individual tax rates, business tax relief, and higher estate tax exemptions. These provisions, which have been in place for nearly a decade, will change significantly starting January 1, 2026.
What’s Changing?
Individual Tax Rates: The TCJA reduced individual tax rates, but these rates are set to increase in 2026, affecting a broader base of taxpayers.
- Business Tax Relief: The tax relief provided to businesses will expire, increasing the tax burden on business owners.
- Estate Taxes: The estate tax exemption, which currently allows estates valued up to $13.61 million to be passed on tax-free, will be cut roughly in half. For married couples, the exemption will drop from $27.22 million to approximately $14 million.
Impact on Business Owners
If you own a business or are not a W-2 earner, your taxes are set to increase. The qualified business income deduction, which allows a 20% deduction on pass-through income, will also expire, significantly impacting your tax planning.
Proposed Changes and Preparations
In addition to the expiration of the TCJA, proposed fiscal year 2025 changes under the Biden administration could further impact taxes. It’s crucial to start preparing now:
1. Review Your Estate Plan: Ensure your estate plan takes into account the lower estate tax exemptions. Consider strategies like making substantial gifts before the exemption decreases.
2. Consult Your Financial Advisor: Work closely with your financial advisor to understand how these changes will impact your financial situation. Plan to accelerate income or deductions where beneficial.
3. Tax Planning for Business Owners: If you own a business, consider the timing of income and deductions to optimize your tax position before the changes take effect.
Conclusion
Navigating these changes can be complex, but with careful planning, you can mitigate their impact. At Alexander Legacy Law, we’re here to help you understand and prepare for these tax changes.
Contact Us Today
If you have any questions or need assistance with your estate planning in light of these upcoming changes, don’t hesitate to contact me, Jonathan Alexander. Schedule a consultation today, and let’s ensure your estate and financial affairs are in order.
Contact Alexander Legacy Law at (949) 334-7823 for more personalized assistance.