Post-TCJA planning and projected 2024 bracket changes

Approximately two years from now, absent congressional action, the individual tax environment will change significantly. After 2025, individual tax provisions enacted under the Tax Cuts and Jobs Act (TCJA) automatically expire. Key items include the top tax rate for individual taxpayers reverting to 39.6% (applying at approximately $553,600), ending the 20% §199A qualified business income deduction, removing the $10,000 cap on the state and local tax deduction and reinstating the personal and dependent exemption deductions, plus the income phase-outs. The standard deduction will be cut almost in half and the child tax credit will be reduced. Additionally, the alternative minimum tax (AMT) exemptions and phase-outs will revert to pre-TCJA levels. Coupled with the SALT cap removal, this will likely place more taxpayers into AMT beginning in 2026.

Not only are many TCJA provisions set to expire, but many amounts used regularly from the Internal Revenue Code are tied to the chained Consumer Price Index. This means tax brackets and thresholds change during periods of inflation. Furthermore, these inflation adjustments impact the section 199A qualified business income deduction, excess business loss threshold, and the Social Security wage base, among others. Generally, the IRS releases final adjustments during the fall. However, given the continuing price volatility, it is possible that final adjustment information will be released later than normal.

The charts below summarize key rates for 2023, plus projected 2024 and estimated amounts for post-2025.

Individual taxes

Remember, the thresholds for the net investment income tax (3.8% tax) and additional Medicare tax (0.9% tax) are not tied to inflation and remain at $250,000 for married filing joint taxpayers, $125,000 for married filing separate taxpayers and $200,000 for other taxpayers.

Business taxes

The gross receipts threshold is used to help determine eligibility for a number of exceptions to different rules and limitations, including computing the business interest limitation under §163(j), use of the cash method of accounting in computing taxable income, ability to determine taxable income for long-term contracts under the percentage-of-completion method and having to capitalize certain direct and indirect costs into inventory.