By Clay Elliott, CFP®, AWMA®

If you haven’t heard yet, taxpayers can potentially experience significant changes in the coming year. The 2017 Tax Cuts and Jobs Act (TCJA) established a number of provisions that could expire in 2025. This 2025 tax sunset could cause significant changes in tax laws for both individuals and businesses.

My firm helps both current and new clients by providing them with all the knowledge they need to make informed financial planning decisions when significant changes like the 2025 Tax Sunset are scheduled to take place.

I wrote this article to summarize the upcoming changes for you, including what’s expiring and the potential consequences. 

Personal Taxes

First, let’s look at an explanation of how the 2025 Tax Sunset could affect individual taxpayers.

• Child tax credit: For every eligible child, the child tax credit currently lowers your tax obligation dollar for dollar. But under the current law, this allowance would end.
• Reduced standard deductions and personal exemptions: Individual filers’ taxable income may increase as a result of the 2025 Tax Sunset because it reduces both the standard deduction and also personal exemption amounts.
• State and local tax (SALT) deduction cap: Residents in high-tax states like California, New York, and New Jersey could gain if the existing $10,000 cap on deductions for state and local taxes expires. The drawback is that doing away with the deduction cap could make the federal government bear more of the tax burden.
• Reduced income tax brackets: The Tax Cuts and Jobs Act’s (TCJA) lower tax brackets could return to their pre-2017 levels. This means that millions of taxpayers could be forced into higher tax brackets.

Business Taxes

Now we can explore how the 2025 Tax Sunset could impact business taxes:

• Property depreciation: Businesses that buy machinery and equipment can be affected if this deduction for specific depreciable items is eliminated.
• Complete expensing of deductions: This temporary provision that allows company expenses to be immediately expensed would expire. For impacted businesses, the result would be increased taxable income.
• Pass-through business income deductions: This tax provision permits revenue from pass-through entities, such as partnerships and S corporations, to be deductible. The tax burden on many small firms could increase after this law expires.

To Be Determined

The effects of the 2025 Tax Sunset are still unsettled. Congress may decide to extend or modify these tax laws before the end of 2025, but in the event that they don’t, the changes mentioned above could occur.

If the 2025 Tax Sunset happens without intervention from the government, the effects on individuals and corporations would differ based on their specific circumstances. For example, some taxpayers would face a higher tax burden, while others would gain from changes such as the elimination of the SALT deduction cap. In contrast, other companies would have to pay more in taxes if their temporary deductions run out.

Get Prepared

Speaking with a qualified financial advisor is a smart approach to get your finances ready for any changes that may arise from the 2025 Tax Sunset.

Our team at Oak Capital Private Wealth analyzes your spending, income tax records, and the impact of investment decisions on your current income tax and future tax obligations. If you choose, we can work closely with your tax advisor to verify that your financial plan is ready for the changes summarized above.

In addition, we hold ourselves to the fiduciary standard, meaning we always put our clients’ interests first. Our reliable, responsive team provides comprehensive financial planning in a family-friendly environment. We believe in educating ourselves and our clients to develop wealth management strategies to help position our clients—who are our friends, neighbors, and community members—to pursue their financial goals with confidence.

Whether you’re an independent tax filer or a business owner, if you’re ready to work with us to align your finances with the upcoming 2025 Tax Sunset, you can schedule a meeting by calling  225-416-7373 or emailing [email protected].

About Clay

Clay Elliott is Owner, Principal, and Financial Advisor at Oak Capital Private Wealth, a financial services firm based in Port Allen, LA, dedicated to providing local financial advice held to the highest standards. Since becoming a financial advisor in 2016, Clay prides himself on working toward his clients’ best interests. He provides comprehensive financial planning and educates his clients to develop robust wealth management strategies to help them pursue their financial goals. He loves helping people pursue financial independence and strives to help them live out their financial plan successfully.

Clay holds a bachelor’s degree in marketing from Louisiana State University as well as the CERTIFIED FINANCIAL PLANNER® designation. He is also an Accredited Asset Management Specialist, Chartered Retirement Planning Counselor, and Accredited Wealth Management Advisor.

Outside of work, Clay enjoys spending time with his wife, Claire, and daughter, Camille, playing tennis, fishing, and attending LSU sporting events. An active participant in his community, Clay is involved with The Emerge Foundation Center for Autism, the West Baton Rouge Chamber as an ambassador and member of the Governmental Affairs Committee, is a board member for the Louisiana Chapter of the Financial Planning Association and West Baton Rouge Small Business Council, and a member of Port Allen Rotary Club. He was also named Young Professional of the Year by the West Baton Rouge Chamber of Commerce. To learn more about Clay, connect with him on LinkedIn.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. 

Tax advice not offered by Oak Capital Private Wealth, NewEdge Advisors, LLC, LPL Financial or affiliated advisors. We suggest that you discuss your specific situation with a qualified tax advisor.

Securities offered through LPL Financial. Member FINRA/SIPC. Investment advisory services offered through NewEdge Advisors, LLC, a registered investment adviser. NewEdge Advisors, LLC and Oak Capital Private Wealth are separate entities from LPL Financial.