Will the 2017 Tax Cut and Jobs Act ride off into the sunset?

We’ve received a lot of questions about how tax legislation might evolve under the incoming administration. While we expect a lot of Congressional noise about tax policy this coming year, we have no real confidence about what, if anything, will get passed.

What we do know is that there are major provisions of the 2017 Tax Cuts and Jobs Act (TCJA) that are set to expire after tax year 2025 unless Congress takes action.

Below is a list of specific provisions affecting individual taxpayers and small businesses that will go away if not renewed. We can’t think of a single client of ours who won’t be impacted if that happens, so we’ll be monitoring Congressional activity throughout the year and updating our clients on the outlook.

The exact impacts of each of these will vary according to your specific situation, please contact us if you’d like detailed calculations or specific examples for these provisions.

Individual Taxpayer Provisions

1. Lower Individual Income Tax Rates
   • The reduced rates for individual tax brackets will revert to pre-TCJA levels.
2. Increased Standard Deduction
   • The nearly doubled standard deduction will return to lower amounts (e.g., approximately $6,500 for individuals and $13,000 for married couples filing jointly from the current $15,000 and $30,000 respectively).
3. Child Tax Credit Expansion
   • The credit amount will decrease from $2,000 to $1,000 per qualifying child.
   • The refundable portion of the credit will also be reduced.
4. State and Local Tax (SALT) Deduction Cap
   • The $10,000 cap on SALT deductions will expire, potentially reinstating the ability to fully deduct these taxes.
5. Elimination of Personal Exemptions
   • The suspension of personal exemptions will end, restoring the deduction.
6. Limitation on Mortgage Interest Deduction
   • The deduction limit will revert to $1,000,000 of mortgage debt versus $750,000 under the TCJA.
7. Medical Expense Deduction Threshold
   • The threshold for deducting medical expenses will return to 10% of adjusted gross income (AGI), up from the current 7.5%.
8. Lower Alternative Minimum Tax (AMT) Exemptions
   • The increased AMT exemption amounts for individuals will expire.
9. Qualified Business Income (QBI) Deduction (Section 199A)
   • The 20% deduction for pass-through business income will no longer be available.
10. Expanded Estate and Gift Tax Exemption

• The estate and gift tax exemption will drop from approximately $13 million per individual to around $5.5 million (adjusted for inflation).

Small Business Provisions

1. Bonus Depreciation (100%)
   • The ability to deduct 100% of the cost of qualified property in the first year will phase out after 2022, with complete expiration after 2026.
2. Simplified Accounting Methods for Small Businesses
   • Businesses with gross receipts under $25 million will lose eligibility for simplified methods, such as cash accounting and inventory accounting exceptions.
3. Increased Section 179 Expensing Limits
   • The higher limits for immediate expensing of qualified assets (up to $1.16 million in 2023) will revert to pre-TCJA levels.
4. Net Operating Loss (NOL) Limitations
   • The favorable rules for carrying forward NOLs without a 20-year limit and deducting up to 80% of taxable income will change.
5. Deduction for Entertainment Expenses
   • The disallowance of deductions for entertainment expenses may revert, potentially restoring prior rules.

We note that pre-TCJA amounts are before potential inflation adjustments.