Preparing for TCJA Uncertainty: What Sacramento Business Owners Should Consider for 2025

The potentially approaching sunset of the Tax Cuts and Jobs Act (TCJA) at the end of 2025 marks a pivotal moment for Sacramento business owners. Originally enacted in 2017, the TCJA introduced transformative tax changes, including reduced corporate rates, the QBI deduction, and expanded depreciation options. However, as these provisions near expiration, businesses face an increasingly uncertain future. 

While many provisions are set to expire, the outcome still remains unpredictable. Congressional action could extend, modify, or replace key elements of the TCJA, complicating tax planning for businesses across California. This legislative uncertainty demands flexibility, as strategies that work today may need to be adjusted. In this shifting landscape, it’s essential for Sacramento business owners to seek guidance from qualified tax professionals to navigate potential changes and position their businesses for long-term success

Key Provisions to Consider

While the exact future of the TCJA remains unclear, here are some potential areas that could change after 2025 that Sacramento business owners should keep in mind:

Corporate Tax Rates
The TCJA permanently reduced the corporate tax rate to 21%. While this rate is not set to expire when the act sunsets, future legislation could potentially change this rate depending on economic and political developments.

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Qualified Business Income (QBI) Deduction
Owners of pass-through businesses, such as sole proprietorships, partnerships, S corporations, and LLCs, currently enjoy a 20% deduction on qualified income. If this provision expires, it could potentially increase taxable income for small business owners.

Bonus Depreciation
The TCJA allowed businesses to deduct 100% of qualifying property and equipment expenses upfront. However, this benefit started phasing out two years ago. It decreased to 80% in 2023, 60% in 2024, and is scheduled to reduce to 40% in 2025 and 20% in 2026 before being eliminated entirely in 2027. The end of this provision could impact how quickly businesses can write off capital expenditures, which could impact cash flow and investment decisions as companies revert to traditional depreciation methods. 

Estate and Gift Tax Exclusion
The TCJA doubled the estate and gift tax exemption for tax years 2018-2025. Initially, the exemption went from $5.49 million in 2017 to $11.18 million in 2018. That exemption has been indexed for inflation annually, reaching 2024’s exemption of $13.61 million per individual. After 2025, the exemption might revert to approximately half its current value. This reduction could significantly impact business succession plans, limiting tax-free transfers of business interests to the next generation.

State and Local Tax (SALT) Deduction
The current $10,000 cap on SALT deductions may expire when the TCJA sunsets. Lifting the cap after 2025 could potentially allow businesses to deduct more state and local taxes, which could benefit those in high-tax states like California.

Potential Preparation Strategies for Sacramento Business Owners

Business owners should focus on both short-term and long-term planning when navigating the expiration of the TCJA. Short-term strategies may include maximizing deductions, accelerating income, and reviewing capital expenditures. Long-term planning may include restructuring financial plans, diversifying investments, and optimizing employee compensation structures. Proper timing is also crucial. Assessing whether to defer income or accelerate deductions can make a significant financial impact.

Seek Professional Insight When Preparing For TCJA Updates

Navigating the expiration of the TCJA requires a strategic approach tailored to each business’s unique needs. Sacramento business owners should assess their current tax position with the help of a business tax advisor. An experienced tax professional can help you review taxable income trends, evaluate deductions, and create a strategic approach that considers any upcoming California tax changes. A clear implementation timeline should be established, including immediate actions and long-term strategies for post-2025 tax planning.

Partnering with a professional financial advisor can also provide invaluable support. A team that includes tax professionals, financial advisors, and legal consultants can help develop a plan that supports your business goals. 

Take the Next Step with Capital Wealth Planners

As the uncertainty around the TCJA sunset continues, Sacramento business owners have a critical window to prepare. At Capital Wealth Planners, we provide tailored financial strategies to help Sacramento business owners adapt to an evolving economic landscape. Our experienced financial advisors can help you create an approach that aligns with your long-term objectives. Schedule a free consultation today to learn more.

Investment advice offered through Capital Wealth Planners, an investment advisor able to provide investment advice in states where it is registered, exempt, or excluded from registration.  Content contained herein should not be construed as an offer or solicitation for investment advice or for the purchase or sale of any security, insurance, or other investment product.  Investments involve the risk of loss, including possible loss of principal.  Please consult with a qualified financial, tax, accounting, or legal professional before implementing any ideas or strategies discussed here.  Content provided is obtained from sources believed to be reliable but cannot be guaranteed as to its accuracy or completeness.