Taxpayers only have this year and next year to take advantage of the lower tax rates enacted by the Tax Cuts and Jobs Act of 2017 (TCJA). On December 31, 2025, barring an act of Congress, the current personal tax rates are scheduled to sunset and revert to the higher pre-TCJA rates in 2026. With the current political discord in Washington, the looming election that is likely to result in a divided government no matter who wins the White House, and our $34.6 trillion national debt, the sunsetting of the current personal tax rates in 2025 is a possibility for which you should begin to plan around. Here are some ideas to consider:
First, for background let’s explore a couple of key items:
The American income tax system is a progressive system, meaning that the first dollar you make is taxed at a lower rate than the last dollar you make. The current tax rates for 2024 are: 10%, 12%, 22%, 24%, 32%, 35% and 37%. The rates are scheduled to revert to the pre-TCJA tax rates, which are: 10%, 15%, 25%, 28%, 33%, 35% and 39.6%.
In 2017, the Joint Committee on Taxation estimated that 46.5 million Americans itemized their deductions when the standard deduction for married filing jointly was $12,700. In 2018, after TCJA, roughly 18 million Americans itemized.1 The standard deduction for 2024 is $29,200 for married filing jointly, adjusted for inflation. The personal exemption and other items are set to reappear along with the reduction of the standard deduction.
You can read the full article by Senior Portfolio Manager, Director of ESG Strategies Andy Drennen in the Springfield Business Journal. Shared with permission from the Springfield Business Journal.
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