The Tax Cuts and Jobs Act (TCJA) has been part of our tax landscape for nearly seven years, shaping how businesses and individuals plan their finances. As we approach the end of 2025, when many key provisions expire, here are some critical changes that could affect you and your business.
Expiring Provisions: Mixed News for Businesses
Some of the most impactful changes, including lower individual tax rates and the qualified business income (QBI) deduction, are slated to sunset after 2025. Here are some highlights:
- Lower individual tax rates. Rates under the TCJA are generally lower, but thresholds for higher rates can affect upper-middle-income taxpayers. Unless extended, pre-TCJA rates will return, including a top rate of 39.6 percent.
- QBI deduction. This valuable 20 percent deduction for qualified pass-through business income will expire after 2025, potentially increasing your tax burden.
- Bonus depreciation. First-year bonus depreciation is phasing out, dropping to 40 percent in 2025 and disappearing after 2026 unless extended.
Permanent Provisions: Long-Term Opportunities
Certain TCJA changes are permanent, offering stability and planning opportunities:
- Corporate tax rate. The flat 21 percent federal corporate tax rate remains a game-changer for C corporations, including personal service corporations.
- Section 179 deductions. Enhanced deduction limits ($1.22 million for 2024) and expanded eligibility provide opportunities for capital investment.
- Repeal of C corporation AMT. This permanent repeal simplifies planning for corporations.
Winners and Losers: Assessing the Impact
The TCJA introduced both benefits and limitations for taxpayers:
- Winners. Businesses benefit from faster depreciation rules, more generous Section 179 deductions, and liberalized vehicle depreciation.
- Losers. Restrictions on 1031 exchanges for personal property, limits on business interest deductions, and the disallowance of entertainment expense deductions have increased costs for some.
Planning for the Future
The expiring provisions and ongoing legislative uncertainty make proactive tax planning essential. Key considerations include:
- Adjusting for potential higher individual tax rates
- Maximizing the benefits of expiring deductions and credits
- Evaluating your entity structure