We are halfway through the 2024 calendar year and the election rhetoric will only be ratcheted up as we draw closer to the election. As presidential debates have begun, anticipation grows for business owners, individuals, and the broader business landscape as we all try to predict how election results will impact near-term and long-term strategy. While you can do your best to prepare, there is no way to be certain of what changes will take place as the election concludes. A flexible and adaptable approach is the most effective strategy in this situation, plan based on what you know to be true and factor in “what-if” scenarios.
Tax Cuts and Jobs Act provisions revert to prior standards
Our primary focus in tax planning is based on factual information and has little to do with the 2024 election. We are focusing on the various tax provisions from the Tax Cuts and Jobs Act of 2017 (TCJA) that will expire at the end of 2025 (pending congressional action) and the significant impact that those expirations may have on business owners and individuals. The following list will highlight some of the most impactful changes, but will not cover all changes:
- Estate tax exemption reverts back to pre-2017 levels. The current estate exemption for 2024 is $13.6 million for individuals and $27.2 for married couples. This threshold will decrease substantially in 2026.
- Elimination of qualified business income 20 percent deduction for small businesses
- Phase out of bonus depreciation continues
- 2023 - 80%
- 2024 – 60%
- 2025 – 40%
- 2026 – 20%
- 2027 and later – 0%
- Changes to standard deduction and itemized deductions
- Individual tax rates increase to pre-2017 levels
- Child tax credit reduction
Election speculation
There is concern that the 2024 presidential election will have a considerable impact on tax policy, but in today’s climate that seems to be a recurring theme. The potential impact ranges from changes or outright removal of renewable energy tax credits, elimination of certain programs, and, changes to federal corporate tax rates. Leading up to the election, we will hear about “proposed changes” from both sides but until any legislation is signed and implemented, it is not wise to plan around proposals.
Our current split Congress with Republicans controlling the House of Representatives and Democrats controlling the Senate is another significant factor in how any changes will play out. The balance of power in Congress will have a substantial impact on how much change can be imparted by the newly elected President, no matter who it is.
Final word
The 2024 Presidential race will play out before our eyes, each day bringing new information about policies and proposed changes to the economic and tax environment. The best way to prepare for potential legislative changes is to be intimately aware of your current state and work with a qualified professional to create a comprehensive strategy with “what-if” scenarios built in.
While taxes are a large factor, it is important for taxpayers to consider all factors that impact your business and/or family and “not let the tax tail wag the dog” in terms of long-term planning.
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