Unless Congress takes action, a number of temporary tax laws are going to expire at the end of 2025. This means you have this year and next to take advantage of the current rules. That doesn’t mean Congress won’t extend the current laws, but why take the chance? Here are some of the larger tax changes to consider:

Tax changes for individuals

• Tax rates will go up with very different income brackets. Most taxpayers will be subject to higher tax rates, with the top rate moving from 37% to 39.5%. The income subject to these rates will also change dramatically. Now is the time to effectively manage tax brackets to avoid higher rates!
• Many more taxpayers will itemize deductions and have them subject to phaseouts. Standard deductions may go down. Deductions may also decrease if income exceeds certain thresholds. There is good news, though! The $10,000 tax limitation will be removed, and currently excluded deductions are planned to be reintroduced.
• The alternative minimum tax will impact more people. Many more families may see a potential second tax calculation with the use of the higher of the two tax rates to tax income.
• The child tax credit will be reduced, and the qualifying process will be phased out. As a result, most families with children will see a higher tax bill.
• There will be different capital gain tax rules. Planning sales of assets will be more important than ever and is a tremendous tax planning opportunity to consider prior to the tax change!
• There will be a reintroduction of exemptions. This tax reduction provision may lessen the sting of rolling back temporary tax laws.

The impact on businesses

• Small businesses may lose their 20% QBI deduction. While small businesses in flow-through tax entities, such as S corporations, partnerships, and sole proprietorships, will lose a valued tax break, Congress should re-introduce other tax incentives to combat the perceived lack of tax fairness compared with other countries.

With these pending changes on the tax horizon, now is a great time to see if you can take advantage of the current tax laws before they change. For the most recent updates, contact our RRBB advisors.