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2025 Tax Sunset: What You Need to Know and How to Prepare

04 Mar
2025 Tax Sunset: What You Need to Know and How to Prepare

By: Colleen Weber

News and Updates / Tax Planning

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By Colleen Weber, CFP®, CPA

In 2025, a number of laws introduced in the 2017 Tax Cuts and Jobs Act (TCJA) are set to expire. This “sunset” could lead to significant tax adjustments that may affect both individuals and businesses.

As a CPA and a CFP®, during pivotal moments like the 2025 Tax Sunset, I strive to support both current and prospective clients by providing comprehensive information to support you in making well-informed and up-to-date financial planning choices.

In this post, I explain what to anticipate from the 2025 Tax Sunset, covering the expiring provisions and potential implications.  

Individual Taxes

Let’s start with an explanation of how the 2025 Tax Sunset could affect individual taxpayers.

  • Lower income tax brackets: The lower tax brackets that were put in place by the Tax Cuts and Jobs Act (TCJA) will revert to pre-2017 levels. That means that millions of taxpayers could potentially be pushed into higher tax brackets.
  • Decreased standard deductions and personal exemption: By decreasing both standard deduction amounts and personal exemptions, the 2025 Tax Sunset could cause higher taxable income for individual filers.
  • Child tax credit: Currently, the child tax credit allows families with children to reduce their taxable income; this allowance would expire.
  • State and local tax (SALT) deduction cap: If the current $10,000 cap on deductions for state and local taxes expires, residents in high-tax states like California, New York, and New Jersey could benefit. The downside is that eliminating the deduction cap could potentially shift the tax burden to the federal government. 

Business Taxes

Here’s a snapshot of how the 2025 Tax Sunset could impact business taxes:

  • Full expensing of deductions: This temporary condition that allows instant expensing of business expenses would expire. For affected businesses, the result would be increased taxable income.
  • Pass-through business income deductions: This tax provision allows the deduction for income from pass-through businesses like partnerships and S corporations. When this law expires, the tax liability for many small businesses could increase.
  • Bonus depreciation: Businesses that invest in equipment and machinery will be impacted when this deduction for specific depreciable property disappears.

Uncertainty

Ultimately, the consequences of the 2025 Tax Sunset are unsettled. There’s a possibility that Congress will extend or alter these tax laws before the end of 2025, but if that doesn’t happen, the above changes can take place. 

If the 2025 Tax Sunset occurs without intervention from the government, the effects on individuals and businesses will vary contingent upon their unique situations. Some taxpayers would experience an increased tax liability, while others could potentially gain from changes like the SALT deduction cap removal. Or, conversely, some businesses could face a higher tax bill if temporary deductions expire.

Get Ahead and Prepare Today

To get ready for the potential changes stemming from the 2025 Tax Sunset, we recommend seeking guidance from a professional financial advisor. At Colleen Weber CPA, CFP®, I work to create a thorough analysis of your income tax records, expenses, and the impact of investment decisions on your current and future tax liabilities. Because I operate as both a CPA and CFP® professional, my team and I are equipped with the latest tax information so your financial plan is equipped to handle the anticipated changes.

Whether you’re an individual taxpayer or a business owner, if you’re ready to partner with us to align your finances with the near-future 2025 Tax Sunset, get in touch! Book a free introductory meeting online or call (952) 470-0750 to get started today.

About Colleen

Colleen Weber is a fee-only financial advisor, CERTIFIED FINANCIAL PLANNER™ professional, and CPA with more than 20 years of financial planning experience. Providing comprehensive financial planning and wealth management, she specializes in serving clients nearing retirement, retirees, busy professionals, and women. She is passionate about developing financial plans that save clients on taxes and investment strategies that help them pursue their goals. Learn more about Colleen by connecting with her on LinkedIn or booking a complimentary phone call meeting.