Key Provisions Expiring in 2025

1. Individual Tax Rate Reductions:
• The TCJA temporarily reduced individual income tax rates for most taxpayers. These reductions are set to expire at the end of 2025.
• Business owners should be aware of how these rate changes may impact their personal tax liability and overall financial planning.
2. Corporate Tax Rate Reduction:
• The TCJA lowered the corporate tax rate from 35% to 21%. This reduction is also scheduled to expire in 2025.
• Businesses should consider the potential implications of a return to the higher corporate tax rate on their profitability and future investments.
3. Qualified Business Income Deduction (QBI):
• The QBI deduction allows pass-through entities (sole proprietorships, partnerships, S corporations, and LLCs) to deduct a portion of their qualified business income. This deduction is subject to certain limitations and is scheduled to expire in 2025.
• Business owners should evaluate the impact of the QBI deduction on their tax liability and explore potential strategies to maximize its benefits before it expires.
4. Bonus Depreciation:
• Bonus depreciation allows businesses to deduct a larger portion of the cost of certain capital assets in the year they are placed in service. This provision is currently set at 100% but is scheduled to phase down over the next few years, eventually expiring in 2026.
• Businesses should consider accelerating capital investments to take advantage of the current bonus depreciation rates.
5. 100% Deduction for Certain Business Expenses:
• The TCJA allows businesses to deduct 100% of the cost of certain expenses, such as Section 179 deductions and qualified property. This provision is set to expire in 2025.
• Businesses should review their capital expenditures and explore opportunities to maximize deductions before the expiration of this provision.

Planning for the Future

As the expiration of these TCJA provisions approaches, it's essential for businesses to proactively plan for the potential changes. Consulting with a tax professional can help you:

• Assess the impact: Evaluate the potential financial implications of the expiring provisions on your business.
• Develop strategies: Identify strategies to mitigate the negative effects and maximize benefits before the provisions expire.
• Stay informed: Keep up-to-date on any legislative developments that may affect these provisions.

The Tax Cuts and Jobs Act introduced significant changes to the U.S. tax code, but several key provisions are set to expire in 2025. Understanding these expiring provisions and their potential impact on your business is crucial for effective financial planning. By working with a qualified tax advisor like Davis Crawford Accounting and Tax, you can develop strategies to navigate these changes and optimize your business's tax position.