The Tax Cuts and Jobs Act Is Ending Soon: Are You Ready for What’s Next?

As we approach the end of 2024, significant tax changes loom on the horizon due to the scheduled expiration of key provisions under the Tax Cuts and Jobs Act (TCJA)

As we approach the end of 2024, significant tax changes loom on the horizon due to the scheduled expiration of key provisions under the Tax Cuts and Jobs Act (TCJA). Here’s an overview of what these changes mean for individual taxpayers and how you can prepare.

Expiring Provisions: What to Expect?

The expiration of several TCJA tax benefits could lead to higher taxes unless Congress takes action. Here are the major provisions affected:

State and Local Tax (SALT) Deductions: The current $10,000 cap on SALT deductions will expire, reverting to pre-TCJA rules that allow unlimited deductions—a favorable shift for residents of high-tax states.
Child and Dependent Tax Credits: The credit per child, currently set at $2,000 with higher income phase-out thresholds, will drop back to $1,000 per child. Additionally, the $500 credit for non-child dependents will no longer be available.
Standard Deduction and Personal Exemptions: The substantial standard deduction amounts will decrease, and personal exemptions will be reinstated. The overall effect will vary depending on individual tax situations.
Mortgage Interest Deductions: Debt limits for deductible mortgage interest will increase from $750,000 to $1 million. Additionally, interest on home equity loans will once again qualify as deductible.
Miscellaneous Itemized Deductions: Certain deductions, such as for investment fees and unreimbursed employee expenses, will be reinstated, potentially encouraging more taxpayers to itemize deductions.

Permanent Changes: What Remains?

While many TCJA provisions will sunset, some changes introduced by the act are here to stay:

1. Restrictions on 1031 Exchanges

Tax-deferred exchanges are permanently restricted to real property, excluding personal property transactions.

2. Alimony Rules

For divorce agreements finalized after 2018, alimony payments remain non-deductible for payors and non-taxable for recipients.

3. Roth Conversion Reversals

The TCJA permanently eliminated the ability to reverse Roth IRA conversions, underscoring the need for careful planning before making such conversions.

Mixed Impacts on Key Areas

Charitable Contribution Deductions: The limit for cash contributions to public charities will revert from 60% to 50% of adjusted gross income. However, more taxpayers may choose to itemize if the standard deduction decreases.

Income Tax Rates: The lower tax rates under the TCJA are set to expire, potentially increasing rates for many individuals. Additionally, the thresholds for higher tax brackets will shift, affecting a wide range of taxpayers.

How to Prepare for the Changes Ahead??

The tax landscape is set to shift dramatically as these provisions expire. It’s essential to plan ahead and consider strategies to mitigate potential impacts. Our team is ready to help you understand and navigate these tax law adjustments. For personalized advice, feel free to reach out directly at Mid America Tax Planners - Contact Us.

Feel free to reach out to discuss your individual tax situation!!