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      Old National Investments

      For Your Life January 23, 2025

      The Topic of Q1 2025: Extension of the Tax Cuts and Jobs Act?

      By 1834, a division of Old National Bank

      We think the 2017 Tax Cuts and Jobs Act (TCJA) is arguably the biggest topic for many investors and companies this year.

      What is it? -- The TCJA was enacted in December 2017, with most of the provisions taking effect on Jan. 1, 2018. It marked one of the most substantial overhauls of the U.S. Tax Code in recent history. However, many changes were temporary.

      Why was it enacted? -- To increase economic growth and spur a more business-friendly environment.

      Key provisions for individuals:

      • Individual tax brackets were lowered.
      • The standard deduction for both single and joint filers nearly doubled. Alternative minimum tax thresholds also changed.
      • A State and Local Tax (SALT) deduction cap of $10,000 was created.
      • The estate and gift tax exemption nearly doubled and has been increasing. On Jan. 1, 2026, the exemption returns to an estimated $7 million, and the estate and gift tax rate will increase from 40% to 45%.

      Key provisions for businesses:

      • The corporate tax rate was cut to 21% from 35%. This provision is one of the few that will not expire at the end of 2025.
      • Owners of passthrough businesses can claim a deduction of up to 20% of qualified business income.

      The cost of property used in a trade or business or for the production of income may be expensed. The amount that can be expensed is currently being phased down and will end at the end of 2026.

      Financial planning insights and opportunities

      Many TCJA provisions are scheduled to sunset at the end of 2025. However, with the election behind us, it seems that the question has become not so much whether the TCJA will be extended but rather which portions will remain as they are, and which may be modified going forward.

      Other impacts include:

      Personal Income Tax Rates -- Given the lower tax rates in 2025, taxpayers may consider accelerating income.

      $10,000 SALT cap -- Depending on what happens with the SALT cap, it could make sense for taxpayers to defer payments of 2025 real estate taxes into 2026 if the deduction limit is higher.

      Passthrough business owners -- With the qualified business income deduction set to expire, business owners should evaluate their eligibility and ability to restructure if desired.

      Estate Planning -- While the rush to complete gifts before the end of 2025 seems less urgent for those who would not be subject to estate or gift tax unless the exemption rolls back, it would be prudent to get plans and necessary documents ready so they can be funded if needed.

      The most important thing you can do is stay informed and stay in touch with your advisors. This will help put you in a position to be flexible and adaptable to the outcome. For additional information go to 1834.com/insights.



      REFERENCES

      FactSet Service, Moody’s Analytics, Board of Governors of the Federal Reserve System, Federal Reserve Bank of St. Louis Economic Research, Bureau of Economic Analysis, First Business Trust & Investments, Fidelity Investments, Morningstar, Wall Street Journal, New York Times, The Hill, Piper Sandler Research, Advisor Perspectives, Russell Investment Research, Nasdaq, BlackRock, JP Morgan, Schroders, Midland State Bank, Nuveen, CQG Inc., Alliance Bernstein, Capital Economics, IEA, IMF, DataTrek, Congressional Budget Office, Goldman Sachs, CNBC, Oxford Economics, Wharton School of the University of Pennsylvania.

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      Investment and securities information presented herein is unique to 1834’s approach to investment management. All information and opinions have been obtained from sources believed to be reliable and current at the time of publication but are not guaranteed and do not claim to be a complete statement of all material factors. Examples or other representations made herein are for illustrative purposes and are not intended to be specific legal, tax, or investment advice and do not represent a solicitation.

      Investments and strategies that may be presented may not be suitable for all investors. 1834 wealth advisors and the expanded 1834 team will work with interested parties to execute plans based on further investigation of your specific goals and risk tolerance. We may also consult with your attorney or tax advisor in certain situations.

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