Preparing for the Sunsetting Provisions of the Tax Cuts and Jobs Act (With John Kammerer of Redpath and Company)

John Kammerer, Partner and Tax Leader at Redpath and Company, joined Mind the GAAP to discuss some of the sunsetting provisions in the Tax Cuts and Jobs Act (TCJA) of 2017. He also explains what business owners can do to prepare themselves for the many potential outcomes—which may be dependent on how the presidency swings in November of 2024.

While widely regarded as “sweeping tax reform” at the time of its passing, the TCJA is on its last legs without an act of Congress to either extend or make permanent the tax provisions enacted back in 2017. Outside of some provisions that have already begun to phase out, the clock is ticking as we inch closer to December 31, 2025. 

Some of the provisions that are affected:

• Tightening of the interest limitation rules under IRC 163(j) by no longer allowing it to be based on adjusted taxable income that is before the deduction for depreciation and amortization (for tax years starting before 1/1/22).
• Beginning of the phase out of bonus depreciation (80% started in 2023).
• Required capitalization of research and experimental expenditures for years beginning after 12/31/2021.
• For years beginning after 12/31/2025, the 199A deduction will no longer available.
• The top rate of 37% is scheduled to once again move to a top rate of 39.6%. There are other changes to the tax brackets as well for years beginning before 1/1/2026.
• The expanded estate tax exemption is scheduled to sunset and be cut in half for transfers/gifts made after December 31, 2025.

While the changes that have started taking place have been impactful for many businesses, the upcoming sunset of the IRC 199A deduction will be especially significant and could cause many businesses to have to rethink their current tax classification or tax structure.