The Tax Cuts and Jobs Act: What It Means for You
The Tax Cuts and Jobs Act (TCJA), signed into law in December 2017, was the most sweeping update to the U.S. tax code in over 30 years. While many of its provisions are scheduled to sunset after 2025, the law has had — and continues to have — major implications for individuals, businesses, and estate planning.
Here’s a high-level summary of what changed, and what to watch for going forward:
🔹 Lower Rates, New Brackets
The TCJA lowered most individual income tax rates and widened the brackets. For example, the top marginal rate dropped from 39.6% to 37%. These individual changes are set to expire after 2025, reverting to pre-2018 rates unless extended by Congress.
For C corporations, the tax rate was permanently reduced to 21%, down from a graduated structure that topped out at 35%.
🔹 20% Pass-Through Deduction (Section 199A)
One of the most impactful features for small business owners: the creation of the Qualified Business Income (QBI) deduction, allowing up to 20% of business income from sole proprietorships, S corps, and partnerships to be deducted — subject to income thresholds and exclusions for certain “specified service trades or businesses” (like law, accounting, consulting).
Planning around QBI has become central to many tax strategies — especially for high-income earners in phaseout ranges.
🔹 Limits on SALT and Other Itemized Deductions
The TCJA capped state and local tax (SALT) deductions at $10,000 — a major hit for taxpayers in high-tax states like California and New York.
Other changes:
Mortgage interest limited to loans up to $750,000 (down from $1 million).
Miscellaneous itemized deductions (like tax prep fees and unreimbursed employee expenses) were eliminated.
Standard deduction nearly doubled, reducing the number of taxpayers who itemize.
🔹 Bonus Depreciation and Expensing
Businesses saw a major benefit from expanded bonus depreciation rules, allowing 100% expensing of qualified property — including used assets — placed in service after September 27, 2017, and before 2023. This bonus rate phases down through 2026 unless extended.
Section 179 expensing limits were also increased, giving small businesses even more flexibility on capital investments.
🔹 Estate and Gift Tax Exemption Doubled
The lifetime estate and gift tax exemption was nearly doubled — to over $13 million per person in 2024 — allowing high-net-worth families to transfer significant wealth without triggering federal estate tax.
But like many TCJA provisions, this too is temporary. Without Congressional action, the exemption will be cut roughly in half after 2025, requiring proactive planning.
🔹 No More Personal Exemptions — But More Child Credit
The TCJA eliminated personal exemptions, but increased the Child Tax Credit to $2,000 per child, with higher income phaseouts. It also introduced a $500 credit for non-child dependents.
🔹 Corporate AMT Repealed; Individual AMT Modified
The corporate alternative minimum tax (AMT) was repealed. For individuals, the AMT remains in place but with higher exemption thresholds, reducing its impact.
What Now?
With many of the TCJA’s provisions set to expire after 2025, tax planning has never been more critical. Business owners and high-income individuals should evaluate:
Entity structure: Should you remain an S corp or convert to a C corp?
Sunset planning: How would expiring rates and deductions affect your future tax bill?
Estate planning: Should you use the expanded exemption now while it’s still available?
Depreciation timing: Can you maximize bonus depreciation before it phases out?