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, creating significant planning urgency for individuals and businesses.
• Changes in tax law affect standard deductions, estate exemptions, pass-through deductions, and marginal rates simultaneously — not in isolation.
• Proactive planning before legislative deadlines consistently produces better outcomes than reactive filing after the fact.

Why Changes in Tax Law Demand Proactive Planning

Tax law is not static. Congress amends the Internal Revenue Code regularly, and the gap between when legislation passes and when taxpayers adjust their behavior creates real financial exposure. Waiting until April to think about last year's law changes means the planning window has already closed.

The Tax Cuts and Jobs Act of 2017 (TCJA) reshaped individual and corporate taxation in ways that are still working through the system. Many of its provisions carry sunset dates — built-in expiration clauses that Congress either extends, modifies, or allows to lapse. As 2025 approaches, the number of expiring provisions creates a planning environment unlike anything seen since the TCJA's original passage.

Understanding which changes are permanent, which are temporary, and which are politically contested is the foundation of sound tax strategy. That distinction matters more than any single deduction or credit.

Key TCJA Provisions Expiring After 2025

The individual income tax rate reductions introduced by the TCJA are scheduled to expire after December 31, 2025. Without congressional action, the top marginal rate reverts from 37% to 39.6%, and the bracket thresholds compress. For high-income earners, that's a material shift in the effective rate on ordinary income.

The standard deduction nearly doubled under the TCJA — from $6,350 to $12,000 for single filers in 2017 dollars, indexed for inflation since. If Congress allows this provision to expire, the standard deduction drops substantially, and many taxpayers who stopped itemizing will need to revisit that calculation. Simultaneously, the $10,000 cap on state and local tax (SALT) deductions — which reduced the benefit of itemizing for high-tax-state residents — may also change depending on legislative negotiations.

The 20% deduction for qualified business income (Section 199A) is another provision on the expiration list. Pass-through business owners — sole proprietors, S-corporation shareholders, and partners — who have relied on this deduction since 2018 face a significant tax increase if it lapses without replacement. Business owners should be modeling their 2026 tax liability under both scenarios now, not after the law changes.

The estate and gift tax exemption, currently over $13 million per individual, is also set to revert to pre-TCJA levels — roughly half the current amount, adjusted for inflation. Families with taxable estates approaching that threshold have a narrowing window to use gifting strategies, irrevocable trusts, or other transfer techniques before the exemption drops.

Changes in Tax Law That Are Already in Effect

Not all significant tax law changes are pending — some are already active and affecting current-year returns. The Inflation Reduction Act of 2022 extended and modified several energy-related credits, including the residential clean energy credit and the energy-efficient home improvement credit. These credits have income limitations, product eligibility requirements, and annual caps that vary by improvement type. Claiming them incorrectly is one of the more common errors on individual returns.

The Corporate Alternative Minimum Tax (CAMT), also introduced by the Inflation Reduction Act, applies a 15% minimum tax on the adjusted financial statement income of large corporations with average annual book income exceeding $1 billion. While this doesn't affect most small and mid-size businesses directly, it signals a broader policy direction toward taxing economic income rather than taxable income — a distinction that matters for tax planning at any scale.

Required Minimum Distribution rules changed under the SECURE 2.0 Act, which passed at the end of 2022. The age at which RMDs begin increased to 73 in 2023 and will increase again to 75 in 2033. Roth accounts in employer plans are now exempt from RMDs during the owner's lifetime, beginning in 2024. These changes affect retirement distribution strategies, Roth conversion timing, and estate planning for retirement accounts.

How to Position Your Finances Ahead of Tax Law Changes

Accelerating income into lower-rate years is a strategy worth modeling when rate increases are on the horizon. For business owners with flexibility in timing distributions, bonuses, or asset sales, recognizing income before a scheduled rate increase can produce measurable savings. The same logic applies in reverse to deductions — deferring deductible expenses into a higher-rate year increases their after-tax value.

Roth conversions deserve particular attention in this environment. Converting traditional IRA or 401(k) balances to Roth accounts at current rates locks in today's tax treatment on those dollars. If marginal rates rise in 2026, the conversion cost increases. The math depends on each taxpayer's current bracket, projected future income, time horizon, and estate goals — but the directional case for conversions is stronger when rate increases are plausible.

For business owners facing the potential loss of the Section 199A deduction, restructuring entity type or compensation arrangements may shift the tax burden in ways that offset some of the lost benefit. These decisions carry legal and operational consequences beyond taxes, so they require coordination between tax advisors and legal counsel before any structural changes are made.

Estate planning conversations that were deferred because the current exemption seemed adequate may need to be reopened. Spousal Lifetime Access Trusts (SLATs), Grantor Retained Annuity Trusts (GRATs), and direct gifting strategies all carry lead times — legal drafting, asset transfers, and sometimes appraisals. Waiting until late 2025 to begin compresses the timeline and increases execution risk.

Working With a Tax Professional During Periods of Legislative Uncertainty

Legislative uncertainty is not a reason to delay planning — it's a reason to plan for multiple scenarios. A qualified tax professional can model the tax impact of expiring provisions under current law and under the most likely legislative outcomes, then identify strategies that produce favorable results across scenarios rather than optimizing for a single assumed outcome.

Enrolled Agents and CPAs with tax specializations track proposed legislation, IRS guidance, and Treasury regulations as they develop — not just when they're finalized. The IRS issues Notice documents, Revenue Procedures, and proposed regulations that affect planning well before a provision becomes final law. Staying current on that pipeline is part of what separates reactive tax compliance from forward-looking tax strategy.

Changes in tax law create both risk and opportunity. The risk is failing to act before a favorable provision expires. The opportunity is positioning income, deductions, and asset transfers in the year where the tax treatment is most advantageous. Both require knowing what's changing, when it takes effect, and what actions are available before the deadline passes.

Tax law changes operate on fixed legislative timelines that don't accommodate delayed decision-making. The provisions expiring after 2025 are written into current law — they take effect automatically unless Congress acts. That means the planning window is open now, and it closes regardless of whether taxpayers are paying attention. The most effective response is a structured review of income timing, deduction strategy, retirement account positioning, and estate exposure against both the current-law expiration scenario and the most plausible legislative alternatives. That review, done before the calendar forces the issue, is where tax strategy actually happens.