The SEIA Report Q4 2024
By Len Hirsh, MBA, CFP®, CPWA®, AIF®
Partner
What’s Next for the TCJA?
Many of the tax provisions from the Tax Cuts and Jobs Act (TCJA) of 2017 are set to expire on January 1, 2026. Absent congressional action, a significant number of Americans will face higher tax bills and a more complex tax code starting in 2026. However, with a Republican President and Republican control of both chambers of Congress—albeit with a slim margin—it is reasonable to expect that certain TCJA tax provisions could be extended through a process known as “budget reconciliation.”
Earlier this year, several news outlets reported that the House Budget Committee Republicans began assembling policy options for a bill that may be introduced later this year. While there is no certainty as to which options will make it into the final legislation, some of the policy considerations being discussed include:
- Eliminating the home mortgage interest deduction
- Eliminating the exclusion on municipal bond interest
- Eliminating the Head of Household filing status
- Eliminating the child and dependent care credit
- Eliminating Health Savings Accounts (HSAs)
- Eliminating the estate tax
- Repealing the “Green Energy” tax credits for clean vehicles
- Amending the state and local tax (SALT) deduction
These potential changes reflect the priorities of legislators who will be shaping future tax policy. While it’s too early to know which measures will ultimately be included in the final legislation, this list provides insight into the proposals being considered. These items may be part of the “one big, beautiful bill” that President Trump wants Congress to pass, addressing taxes and border enforcement in the months ahead.
Budget Impact
One of the biggest challenges in extending many of the TCJA provisions is the associated cost. According to a November 13, 2024, update from the Congressional Budget Office (CBO), fully extending all expiring or scaled-back TCJA provisions would cost an estimated $4.0 trillion from fiscal year (FY) 2025 to 2034, with the bulk of the financial impact beginning in FY 2026.
However, not all extensions would lead to revenue losses. Certain provisions could actually increase government revenue over time. For instance, continuing the elimination of personal exemptions, which had a significant effect on Form W-4 and the federal income tax withholding process, is projected to generate over $1.7 trillion in additional revenue through FY 2034.
What’s Next?
Without congressional action, the expiration of TCJA provisions would lead to broad tax changes, impacting nearly every taxpayer and business. For individuals, the most significant shifts would likely include higher tax brackets and a reduction in the standard deduction, potentially leading to larger tax liabilities. For business owners, the most notable change will likely be the elimination of the Qualified Business Income (QBI) deduction, which has provided a substantial tax break for pass-through entities.
However, we anticipate that at least some of these tax provisions may be extended. With a long legislative process ahead, the outcome remains uncertain. Whether you’re a business owner or an individual taxpayer, staying informed of potential changes and considering proactive financial planning may help navigate these developments and help ensure your long-term financial success.
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