Changes in Tax Law: What You Need to Know Now

Key Takeaways

• Several major Tax Cuts and Jobs Act provisions are set to expire after 2025, affecting individual rates, deductions, and the estate tax exemption.
• Proactive tax planning — not reactive filing — is the most effective way to manage exposure when tax law changes.
• Business owners and high-income earners face the most concentrated risk from pending legislative changes and should review their structures now.

Why Changes in Tax Law Demand More Than a Filing-Season Review

Tax law doesn't wait for April. Changes at the federal and state level take effect mid-year, phase in over multiple years, or expire quietly — often leaving taxpayers with a larger bill than expected because nobody flagged the shift in time. A filing-season-only relationship with your tax professional is a structural disadvantage.

The Tax Cuts and Jobs Act of 2017 (TCJA) introduced sweeping changes to individual and business taxation, many of which are scheduled to sunset after December 31, 2025. That means the standard deduction, marginal rates, the child tax credit, the qualified business income deduction, and the estate tax exemption are all in play. Without deliberate planning in 2024 and 2025, taxpayers may find themselves in a materially worse position starting in 2026 — not because of anything they did wrong, but because they didn't act when the window was open.

Understanding which provisions affect your situation requires more than reading a summary article. It requires mapping your income sources, entity structure, and asset base against the specific provisions that are changing — and modeling what the numbers look like under different legislative outcomes.

Key Changes in Tax Law Affecting Individuals After 2025

The TCJA's individual provisions are the most visible items on the expiration calendar. If Congress doesn't act, the top marginal rate reverts from 37% to 39.6%, and the income thresholds for each bracket compress. The standard deduction drops by roughly half in inflation-adjusted terms, pushing more taxpayers back into itemizing — which then makes the $10,000 SALT cap more consequential for residents of high-tax states.

The estate and gift tax exemption is another major exposure point. Under current law, the federal exemption sits above $13 million per individual. Post-2025, absent new legislation, that figure reverts to approximately $7 million (adjusted for inflation). For high-net-worth families who haven't moved assets out of their taxable estate, that's a compressed window to act on gifting strategies, irrevocable trusts, and other estate planning tools.

The child tax credit also reverts — from $2,000 per child to $1,000 — and the alternative minimum tax (AMT) exemption thresholds shrink back toward pre-TCJA levels. Taxpayers who were previously exempt from AMT exposure may find themselves caught by it again. Running an AMT projection now, rather than after the fact, is the kind of analysis that changes what decisions get made.

How Business Owners Are Affected by Shifting Tax Law

The 20% qualified business income (QBI) deduction under Section 199A is one of the most valuable provisions for pass-through entity owners — and it expires with the rest of the TCJA individual provisions after 2025. For S corporation shareholders, sole proprietors, and partners in LLCs taxed as partnerships, this deduction has meaningfully reduced effective tax rates. Its expiration would represent a direct increase in after-tax cost without any change in income.

Entity structure decisions made in 2018 or 2019 based on QBI eligibility may need to be revisited. An S election that made sense at a 29.6% effective rate on qualified income looks different at a 39.6% top rate with no deduction. The math on C corporation conversion has also shifted — the flat 21% corporate rate is permanent under current law, which changes the comparison depending on how profits are distributed and how long the business intends to retain earnings.

Bonus depreciation is another area where the law has already started to change. The 100% first-year expensing available through 2022 phased down to 80% in 2023, 60% in 2024, and continues declining. Capital-intensive businesses that relied on full expensing for equipment and qualified improvement property need to recalibrate their acquisition timing and cash flow projections accordingly.

Research and development costs present a related issue. The TCJA required R&D costs to be capitalized and amortized over five years (15 years for foreign research) starting in 2022, rather than deducted immediately. Congress has discussed reversing this change, but as of now it remains in effect — and businesses that haven't adjusted their tax positions accordingly may be carrying unexpected taxable income.

State-Level Changes in Tax Law Add Another Layer of Complexity

Federal changes get most of the attention, but state tax law moves independently — and the divergence between federal and state treatment creates compliance complexity that catches many taxpayers off guard. Several states have decoupled from federal bonus depreciation, meaning a deduction taken on a federal return doesn't automatically flow through to the state return. Others have their own R&D credit structures, pass-through entity tax elections, or conformity dates that lag federal law by a year or more.

Pass-through entity (PTE) taxes are one of the more significant recent developments at the state level. In response to the federal SALT cap, over 30 states now allow pass-through entities to pay state income tax at the entity level and deduct it as a business expense — effectively circumventing the $10,000 individual SALT limitation. The mechanics differ by state, and not every business owner in an eligible state has elected in. For those who haven't evaluated this, the missed deduction is real money left on the table.

Multistate businesses and remote workers add further complexity. Nexus rules, apportionment formulas, and withholding obligations have all shifted in response to pandemic-era work patterns. A business with employees working remotely across multiple states may have tax filing obligations in those states that didn't exist three years ago.

Building a Tax Position That Holds Up Through Legislative Uncertainty

When tax law is in flux, the most durable strategy is one built around flexibility and timing control. Accelerating income into lower-rate years or deferring deductions into higher-rate years are foundational techniques — but executing them correctly requires knowing where rates are likely to land, which depends on reading the legislative environment accurately, not just reacting to it.

Roth conversions are a concrete example. If marginal rates increase after 2025, converting traditional IRA or 401(k) balances to Roth accounts at today's rates could produce significant long-term tax savings. The calculus depends on current income, projected retirement income, state taxes, and expected holding period. It's a specific decision with a specific window — not a generic suggestion.

Charitable giving strategies also shift in response to tax law changes. The interaction between the standard deduction threshold, AGI-based limitations, and the value of qualified charitable distributions from IRAs changes the optimal structure for charitable intent. Donor-advised funds, bunching strategies, and QCDs each have different break-even points depending on the taxpayer's situation and the applicable law in the year of the gift.

The most consistent mistake taxpayers make isn't failing to file correctly — it's failing to plan proactively when the law gives them options. Tax law changes create both risk and opportunity. The difference between which one a taxpayer experiences usually comes down to whether they had a conversation with a qualified tax professional before the deadline passed, not after.

Tax law changes don't punish inaction uniformly — they punish it selectively, hitting hardest the taxpayers who had the most to gain from planning and didn't do it. The 2025 TCJA sunset is the most significant expiration event since the law was enacted, and the decisions made in the next 12 to 18 months will have consequences that compound over decades. The most productive starting point is a structured review of your current income sources, entity structure, and asset base against the specific provisions that are changing — not a general conversation about taxes, but a precise mapping of your exposure and your options while both still exist.