Prepare for Tax Changes

The Tax Cuts and Jobs Act (TCJA) has shaped tax planning for nearly seven years. As 2025 approaches, many key provisions are set to expire, impacting both individuals and businesses. Here’s what you need to know.

Expiring Provisions: Mixed News for Businesses

Several major tax benefits are set to disappear unless Congress extends them:

• Lower Individual Tax Rates: Current tax rates will revert to pre-TCJA levels, with the top rate increasing to 39.6%.

• QBI Deduction: The 20% deduction for pass-through businesses will expire, increasing the tax burden for many entrepreneurs.

• Bonus Depreciation: The first-year bonus depreciation deduction is phasing out, reducing to 40% in 2025 and disappearing after 2026.

Permanent Provisions: Long-Term Opportunities

Some TCJA provisions are here to stay:

• Flat 21% Corporate Tax Rate: A major advantage for C corporations, including personal service corporations.

• Expanded Section 179 Deductions: Higher deduction limits ($1.22 million for 2024) encourage capital investment.

• Repeal of Corporate AMT: Simplifies tax planning for corporations.

Winners and Losers

The TCJA brought both benefits and restrictions:

Winners: Businesses benefiting from faster depreciation rules, enhanced Section 179 deductions, and improved vehicle depreciation rules.

Losers: Businesses facing restrictions on 1031 exchanges for personal property, limits on business interest deductions, and the disallowance of entertainment expense deductions.

Planning for the Future

With potential tax hikes on the horizon, proactive planning is key:

• Adjust for possible higher individual tax rates

• Maximize expiring deductions and credits

• Evaluate your business entity structure

The TCJA brought significant tax changes, and as its provisions evolve, so must your tax strategy.

2024 Year-End Tax Strategies for Crypto Investors

With Bitcoin hitting all-time highs in 2024, tax planning for crypto investors is crucial. Here are some strategies to reduce your tax burden before year-end:

• Harvesting Crypto Losses: Sell underperforming crypto assets to offset gains from profitable sales.

• Charitable Donations: Donating appreciated crypto avoids capital gains tax and qualifies for a charitable deduction.

• Gifting Crypto: You can gift up to $18,000 per recipient ($36,000 for married couples) without triggering taxes.

• Using a Self-Directed IRA or 401(k): Invest in crypto through tax-advantaged retirement accounts.

Tax Credits for EVs: What’s New?

The Inflation Reduction Act revamped EV tax credits, but restrictions have limited their availability. Here’s how you can benefit:

1. Clean Vehicle Credit ($7,500): Available for new EV purchases, but subject to income, price, and domestic sourcing restrictions.

2. Previously Owned Clean Vehicle Credit ($4,000): For used EVs, with stricter income and price caps.

3. Commercial Clean Vehicle Credit ($7,500): No income or price caps, making it a better option for business buyers.

4. EV Leasing: Dealers claim the commercial clean vehicle credit and pass savings to customers, making leasing the most popular choice.

U.S. Supreme Court Eases Challenges to IRS Regulations

The Supreme Court’s decision in Loper Bright Enterprises v. Raimondo overturned the 40-year-old Chevron doctrine, which required courts to defer to IRS regulations. Now, courts will interpret tax laws independently, making IRS rules more vulnerable to legal challenges.

What This Means for Taxpayers

• More Legal Challenges: IRS regulations, including new cryptocurrency tax rules, may face increased litigation.

• Fewer Regulations, More Guidance: The IRS may rely more on subregulatory guidance like notices and FAQs.

• Potential for Settlements: The IRS might become more willing to settle disputes rather than risk court losses.

The tax landscape is changing rapidly. Stay informed and consult a tax professional to navigate these shifts effectively.