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Expiring Tax Provisions: What You Need to Know Before 2026

The year 2025 looms large on the tax horizon, as a slew of significant expiring tax provisions from the 2017 Tax Cuts and Jobs Act (TCJA) and other legislation are set to sunset. This article dives into these changes, their potential impact, and what you can do to prepare for the unknown tax landscape beyond 2025.

A Looming Fiscal Cliff

TCJA brought sweeping changes to individual and business taxes, but many were temporary, scheduled to expire at the end of 2025. This creates a potential “fiscal cliff” for taxpayers if these provisions are not addressed by Congress. Let’s explore some key expiring provisions and their potential implications:

Individual Taxes

  • Estate and Gift Tax Exemption: The current generous exemption of $13.61 million is slated to revert to approximately $5.49 million, significantly impacting estate planning for wealthy individuals.
  • Standard Deduction: The higher standard deduction introduced by TCJA could disappear, pushing more taxpayers back to itemizing deductions.
  • Personal Exemptions: The return of personal exemptions could bring relief to families, especially those with dependents.
  • Home Mortgage Interest Deduction: The current limitations on deducting mortgage interest could tighten further, impacting homeowners with larger loans.
  • State and Local Tax (SALT) Deduction: The $10,000 cap on SALT deductions might remain, affecting high-income earners in states with high income taxes.
  • Individual Tax Rates: Tax cuts at various income brackets could vanish, potentially raising taxes for middle-income earners and beyond.
  • Child Tax Credit: The enhanced child tax credit, a crucial support for many families, might revert to its pre-TCJA level.

Beyond Individual Taxes

  • Student Loan Debt Forgiveness: Tax-free discharge of student loan debt may no longer be available, posing a burden for borrowers seeking relief.
  • Employer Student Loan Payments: Tax-free employer contributions towards employee student loans could expire, hindering repayment efforts.
  • Moving Expenses: Exclusions for job-related moving expenses and reimbursements might make relocation more costly.
  • Bicycle Commuting Benefits: The tax-free exclusion for employer-provided bicycle commuting benefits could disappear, discouraging eco-friendly travel.
  • Discharge of Indebtedness on Principal Residence: Debt relief from mortgage foreclosures or surrenders might become taxable again, impacting homeowners facing financial hardship.
  • Premium Assistance Credit: Enhancements to this credit, crucial for many marketplace health insurance enrollees, could lapse, leading to higher premiums.
  • Casualty Losses: Deductions for personal property losses outside federally declared disasters are set to expire, limiting tax relief for affected individuals.
  • ABLE Account Enhancements: Expansions to ABLE accounts for supporting individuals with disabilities are slated to end, hindering financial planning for families.
  • Paid Family and Medical Leave Credit: This tax credit for employers offering paid leave could disappear, limiting employee benefits.
  • New Markets Credit and Work Opportunity Credit: These incentives for businesses investing in disadvantaged communities and hiring targeted groups are due to expire, potentially impacting economic development efforts.
  • Bonus Depreciation: Businesses might lose the ability to fully expense certain equipment purchases in the year of acquisition, impacting investment and depreciation schedules.
  • Employer De Minimis Meals and Related Eating Facilities Deduction: Employers may no longer deduct small employee meals and refreshments, increasing their operating costs.

Planning for the Unknown

With the uncertainty surrounding these expiring provisions, it’s crucial to be proactive. Here are some steps you can take:

  • Review your individual tax situation and potential impacts of the changes.
  • Consult with a tax advisor to discuss planning strategies and optimize your tax burden.
  • Stay informed about Congressional developments and potential updates on expiring provisions.
  • Consider potential changes to your financial decisions, such as investments, deductions, and spending habits.

Remember, this is not an exhaustive list, and specific provisions may have varying complexities and nuances. While the future of these tax breaks remains unclear, the potential impact on individuals and businesses is undeniable. By staying informed and taking proactive steps, you can navigate the upcoming tax landscape with greater confidence and preparedness.

JS Morlu LLC is a top-tier accounting firm based in Woodbridge, Virginia, with a team of highly experienced and qualified CPAs and business advisors. We are dedicated to providing comprehensive accounting, tax, and business advisory services to clients throughout the Washington, D.C. Metro Area and the surrounding regions. With over a decade of experience, we have cultivated a deep understanding of our clients’ needs and aspirations. We recognize that our clients seek more than just value-added accounting services; they seek a trusted partner who can guide them towards achieving their business goals and personal financial well-being.
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