Tax cuts are here, but for how much longer? Whether your “Hooray!” is a fist-pump or a sarcastic shrug depends on your incorporation status. With the Tax Cuts & Jobs Act (TCJA) provisions currently in a “sunset” phase, effective Tax Planning Strategies are more important than ever. I’ve done multiple CE courses on these laws, and the running joke is always the same: “It’s clear as mud.”
Below, 9m Investments will give you some insight into the changes so you can see exactly what your “Hooray” looks like before the rules shift again.
Individual Tax Planning Strategies
On the individual side, the TCJA didn’t change the 7-rate structure, but it did lower rates at the top six levels. However, many of these benefits are temporary. One of the most critical Tax Planning Strategies for families is understanding the trade-off between losing personal exemptions and gaining a higher standard deduction.
- Standard Deduction: Now $12,000 for singles or $24,000 for married couples (adjusted for inflation through 2025).
- SALT Cap: A major pain point is the $10,000 limit on state and local tax deductions.
- Mortgage Interest: Reduced to a $750,000 principal limit.
- Child Tax Credit: Doubled to $2,000, providing a significant boost for families.
Even with the loss of miscellaneous itemized deductions (like tax prep and investment management fees), the higher standard deduction simplified filing for millions. But with these rules scheduled to revert to 2017 levels in 2026, Tax Planning Strategies like “bunching” charitable donations or exploring Roth conversions are becoming vital for long-term financial planning.
Tax Planning Strategies for Business Owners
On the business side, it’s been “party time” for many. Corporate rates dropped from 35% to a flat 21%—a change that is actually permanent. However, for the millions of small business owners, the Tax Planning Strategies revolve around the 20% Qualified Business Income (QBI) deduction.
This 20% deduction is a massive win for pass-through entities, potentially keeping $10k or more in the pocket of the average business owner. But be careful—unlike the corporate rate, the QBI deduction is scheduled to expire. We often get asked, “Should I switch to a C-corp?” The short answer is usually no, but we recommend a free business assessment to ensure your entity structure is still optimized for your current profit levels.
The Macro Impact: Deficits and the National Debt
What does this mean for the economy? While the tax cuts were sold as a catalyst for growth, they have been expensive. With the CBO forecasting significantly lower inflows, we are seeing the national debt and yearly deficits expand rapidly.
Economists are currently warning about a “slowdown paradox”—where the economy might overheat from tax cuts just as interest rates rise. For investors, this means that Tax Planning Strategies must account for a future where tax rates may eventually have to rise to pay the bills.
The Takeaways
So, what did we learn today?
- Businesses won big, but small business owners need to watch for the QBI sunset.
- Most individuals saw a decrease, but the loss of SALT and miscellaneous deductions hurt high-earners in high-tax states.
- Proactive planning is key. Because the IRS is still clarifying these “clear as mud” rules, your best defense is an informed offense.
Do you have questions about your specific situation? We’d love to help you build a resilient strategy. Let’s Chat today!