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11/21/2024

TCJA 2017 Sunsets: Quick Hits for Individual Taxpayers

The tax expirations could create tax planning uncertainty

Enacted in 2017, the Tax Cuts and Jobs Act (TCJA) introduced significant changes to individual federal taxes. However, many of these provisions are set to expire, or “sunset,” at the end of 2025, creating uncertainty for tax planning. Here’s a list of quick hits on the major provisions that could revert to prior rules and the potential impacts on taxpayers.

Reduced Tax Rates for Ordinary Income and Short-Term Capital Gains

The TCJA temporarily lowered individual tax brackets, with rates ranging from 10 percent to 37 percent. If these provisions expire, the top rate would return to 39.6 percent, impacting many wealthy households. Short-term capital gains, which align with income brackets, would also be subject to these higher rates.

Favorable Rates on Long-Term Capital Gains and Qualified Dividends

The TCJA retained preferential rates for long-term capital gains (LTCGs) and qualified dividends, with brackets at 0 percent, 15 percent and 20 percent. Should Congress allow this provision to lapse, the 20 percent rate may kick in sooner for high earners, aligning with the highest income tax bracket.

Please select this link to read the complete article from OSAP Mission Partner Clark Schaefer Hackett (CSH). 

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