By Matthew R. Staul, EA, MBA
With the Tax Cuts and Jobs Act of 2017 (TCJA) set to expire in 2026, we could see some major changes to the tax laws in the next couple of years. If the current laws are not extended, tax brackets, standard deductions, child tax credits, alternative minimum tax, cash contribution limitations, and gift tax exemptions will be affected.
Tax Brackets
• The tax brackets would revert to what they were in 2017, which were 10%, 15%, 25%, 28%, 33%, 35% and 39.6%, compared to the current tax brackets which are 10%, 12%, 22%, 24%, 32%, 35%, and 37%
Standard Deductions and Child Tax Credits
• After the Tax Cuts and Jobs Act of 2017 was announced, the standard deductions nearly doubled. If we return back to the laws prior to the TCJA, some people need to prepare to itemize their deductions in 2026. The child tax credits also doubled in 2017 after the TCJA passed, so people may need to pay higher estimates to avoid underpayment.
Alternative Minimum Tax
• The phaseout zones and higher exemption amounts after the TCJA meant that most people did not have to pay the alternative minimum tax if they owned a small business or held positions in a pass-through entity. If the laws reverted back to what they were before 2017, people need to be prepared to pay the alternative minimum tax.
Cash Contribution Limitations and Gift Tax Exemptions
• The adjusted gross income limitations on cash donations to qualified charities increased by 10% from 50% to 60% after implementing the TCJA laws, which was very helpful to large donors. The gift tax and estate exemptions would revert back to $5,490,000, compared to the $13,610,000 they were under the TCJA.
Matthew R. Staul is an enrolled agent with the Medical Management Consulting Group, Inc., a full-service consulting and accounting firm based in Virginia Beach. mmcgonline.com
