Expiring Provisions of the Tax Cuts and Jobs Act

Filed in Economics, tax reform toolkit by on June 21, 2018 0 Comments

The Tax Cuts and Jobs Act (TCJA), signed into law at the end of 2017 by President Trump, added 52 temporary provisions to the tax code that will expire between this year and 2027.

Nearly half of these expiring tax provisions will lapse at the end of 2025, many of which are of most interest to the small business and housing community.

Most corporate tax provisions were made permanent in the TCJA, leaving tax cuts benefitting individuals and pass-through businesses on the chopping block. Twenty-three provisions in the new tax law relating to individual income taxes are set to expire on Dec. 31, 2025.

As most home builders are organized as pass-through entities (i.e. LLCs, LLPs, S-corps), perhaps the most important provision is the 20% deduction for pass-through income, which allows individuals to deduct up to 20% of their “qualified business income.”

Directly tied to the benefits of that deduction are individual income tax rates, all of which were lowered by the TCJA. Without any further legislative changes, tax rates will revert to their pre-reform levels beginning in 2026.

In isolation, expiration of the business income deduction and individual tax rate reductions would raise taxes on business owners. The effects would be exacerbated if both expire as scheduled. In that case not only would taxpayers pay higher income tax rates, but more of their income would become taxable.

It is possible – though highly uncertain – that future congresses could revisit the TCJA and consider changes before major provisions expire at the end of 2025.

NAHB tax economist David Logan provides further analysis in this Eye on Housing blog post.

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