What Will the End of the Tax Cuts and Jobs Act Mean For You?
Audio version available here (1 min. 40 sec.)
In the coming year, several provisions of the Tax Cuts and Jobs Act of 2017 are up for renewal. Unfortunately, it’s possible they will not be renewed, and instead will be allowed to expire, at the detriment to taxpayers across the nation. The provisions? Significant tax savings.
Under the Tax Cuts and Jobs Act, passed by the Trump administration in 2017, both individuals and businesses benefit from several provisions. Individuals enjoy lowered tax brackets and higher standard deductions. Meanwhile, businesses like partnerships, sole proprietorships, and S corporations benefit from the qualified business income deduction. And C corporations have a permanent cap on income tax, set at 21%. Business owners attribute these provisions towards saving thousands of dollars every year on their tax returns, but now they may go away in 2025.
It’s likely that these provisions of the Tax Cuts and Jobs Act will not be renewed due to concerns about the United States national debt. The TCJA has been attributed towards the national debt’s incredible swelling over the past few years. Despite this, business owners hope the qualified business income deduction will be renewed. With the QBI deduction, businesses can deduct up to 20% of qualified business income, significantly lowering their taxable income. Without this deduction, it’s very likely businesses will face much higher tax bills.
It’s possible the provisions will be extended, as promised by the Biden administration. However, it would not be a universal extension. Instead, past 2025, the TCJA’s tax breaks would only apply to taxpayer’s making less than $400,000.
For those who do not qualify under this threshold, the proposal seems unfair. For all business owners worried about the TCJA expiring, action needs to be taken soon. As Congress prepares to make decisions about this vital legislation, tune into the XQ CPA blog for regular updates. We strive to keep business owners informed about the latest and greatest tax tips and business news.
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