Key Takeaways
- The Tax Cuts and Jobs Act (TCJA) introduced sweeping changes affecting individuals, businesses, and international operations.
- Key impacts for individuals include new tax brackets, a higher standard deduction, a cap on state and local tax deductions, and the 20% qualified business income deduction—many of which expire after 2025.
- For domestic businesses, the TCJA established a permanent flat 21% corporate tax rate and expanded expensing options, prompting reconsideration of entity structure and proactive tax planning.
The Tax Cuts and Jobs Act (TCJA) remains one of the most sweeping tax law changes in more than 30 years. Although enacted in December 2017, many provisions still shape planning decisions today.
- Dive Deeper: Major Tax Overhaul: What the New Law Means for You
Impact on Individual Taxpayers
| Key Change | What It Does | Action Items |
|---|---|---|
| Seven new brackets (10–37%) | Lower top rate from 39.6% to 37% through 2025. | Time income recognition events—e.g., Roth conversions or bonuses—before rates rise. |
| Nearly doubled standard deduction | $27,700 MFJ / $13,850 single (2023 amounts, indexed) reduces need to itemize. | Bunch charitable gifts into alternate years to clear the higher threshold. |
| $10,000 SALT cap | Limits state & local tax deductions through 2025. | Consider shifting income producing assets to entities that can deduct SALT at the entity level where available. |
| Section 199A 20% pass-through deduction | Up to 20% QBI deduction for owners of S-corps, partnerships, LLCs, sole props (phased-out for some service trades). Expires after 2025. | Test wage/UBIA limits, aggregate entities, or re-set reasonable compensation to maximize the deduction. |
| Other notable changes | Higher child tax credit, curtailed unreimbursed employee expenses, reduced AMT reach; ACA individual mandate penalty repealed (2019). | Re-evaluate withholding and quarterly estimates to align with the new regime. |
Impact on Domestic Businesses
| Provision | Details | Planning Angle |
|---|---|---|
| Flat 21% corporate rate | Permanent reduction (no sunset). | Remodel entity choice—C-corp vs. pass-through—especially with looming 20% QBI sunset. |
| Full expensing (100%) | 100% bonus on new and used qualified property placed in service 9/28/17–12/31/22; phases down 20% per year (0% after 2026). | Accelerate purchases or use “qualified improvement property” fixes before phase-down accelerates. |
| Interest expense limitation (30% of ATI) | Stricter definition of “adjusted taxable income” begins 2022 (no add-back for depreciation/amortization). | Evaluate electing real property trade or business out (with ADS cost) or restructuring debt. |
| NOL & excess business loss limits | NOLs limited to 80% of taxable income; carrybacks repealed (except certain farming & insurance); excess business losses deferred. | Layer entity level planning and monitor tentative minimum tax (if IRA builds up). |
| Other items | 1031 exchanges limited to real property, tighter comp deduction rules, 50% meals / 0% entertainment disallowance. | Update T&E and fringe benefit policies; revisit executive comp packages. |
Impact on International Businesses
| TCJA Feature | What It Means | Steps to Consider |
|---|---|---|
| Deemed Repatriation (“Transition Tax”) | One-time tax on post-1986 untaxed foreign E&P—15.5% cash / 8% other—spread over eight years. | Confirm that prior year inclusions are on track, and installment payments are scheduled. |
| GILTI & FDII Regimes | Ongoing inclusion of global intangible low taxed income (10.5% effective rate with 50% deduction; rate increases post2025); FDII 13.125% effective rate through 2025. | Model entity restructuring (passthrough to C-corp) to leverage GILTI/FDII deductions, foreign tax credit offsets, or Section 962 elections. |
| 100% DRD for foreign source dividends | Domestic C-corps (≥10% foreign ownership) exclude dividends from taxable income. | Weigh costs/benefits of C-corp conversion for operating LLCs or S-corps with significant foreign earnings. |
| Base Erosion & Anti Abuse Tax (BEAT) | Minimum tax for large groups (> $500 M receipts) with deductible payments to related foreign parties. | Forecast BEAT exposure in cashflow models; consider supply chain shifts or P-card recharacterizations. |
Looking Ahead: The 2026 Sunset & Beyond
Most individual and a handful of business focused TCJA provisions were set to expire on December 31, 2025.
However, Congress passed a new tax legislation in July 2025 that extended several of the TCJA’s provisions. You can learn more here: Major Tax Overhaul: What the New Law Means for You.
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