With year-end just around the corner, many of us are diving into tax planning to make sure we’re maximizing every opportunity—and preparing for a smooth year ahead. In our latest webinar, Mitch Beckwith and I covered some important updates on the Tax Cuts and Jobs Act (TCJA) and the new Beneficial Ownership Information (BOI) reporting requirements, both of which have a real impact on the choices we’re making this season. Here’s a quick recap of what we discussed, plus some actionable tips to keep you ahead of the curve.
1. Making Sense of TCJA: What’s Changed and What’s Ahead?
The TCJA introduced several changes that continue to shape both personal and business tax strategies. Here’s what’s still relevant:
- Corporate Tax Rate Reductions: For business owners, the lower 21% tax rate for C corporations (down from 35%) is a clear benefit.
- Qualified Business Income Deduction (QBID): This 20% deduction has been a game-changer for many small businesses, but it’s due to expire soon. Without renewal, some business owners may see an increase in taxable income.
- Estate Tax Exemption: The exemption currently stands at $13.61 million per person, but it’s set to drop back to around $7.3 million in 2026. If estate planning is on your list, now may be the right time to lock in these higher exemptions.
Tip for 2024: The TCJA sunset provisions could have a significant impact in just a few years. Whether you’re planning for personal or business finances, consider talking with your tax advisor about the changes and how to prepare for 2026.
2. Depreciation Strategies: Bonus Depreciation and Section 179
Many businesses have benefited from the TCJA’s 100% bonus depreciation rule. However, the bonus depreciation percentage started decreasing in 2023, so if you’re planning to invest in equipment or other big-ticket assets, here’s what to consider:
- Phase-Out Timing: Bonus depreciation decreased from 80% in 2023 to 60% in 2024 and will fully phase out in 2026. Section 179 will remain available, but with slightly different rules.
- Flexibility with Section 179: While slightly more restrictive, Section 179 can still be a useful way to deduct asset purchases immediately.
Tip for Business Owners: Look ahead at your capital expenditure needs. If there’s a big purchase on the horizon, you might want to act sooner rather than later to maximize your tax benefits.
3. Navigating SALT and Itemized Deductions
For many, the state and local tax (SALT) deduction cap of $10,000 was a big change, especially for those in higher-tax states. A few other itemized deductions also saw limits or changes under the TCJA:
- Mortgage Interest: The cap on deductible mortgage interest is $750,000 (down from $1 million), but this could revert in 2026.
- Charitable Contributions: Deductible up to 60% of your adjusted gross income; however, this could drop back to 50% post-TCJA.
Personal Tip: If charitable giving is important to you, consider contributing this year to maximize your current deduction options. A donor-advised fund might also help streamline contributions while providing flexibility for future giving.
4. Get Ahead with Year-End Financial Planning
The end of the year is always a busy time, but carving out a little time for tax planning can really pay off. Some quick ideas:
- Charitable Contributions: Make donations to causes that matter to you while also benefiting from deductions.
- Maximize Retirement Contributions: Contribute as much as you can to your retirement accounts for a tax break now and added security later.
- Education Savings with 529 Plans: Mississippi and many other states offer tax benefits through 529 plans, which are useful for education savings but can be repurposed as needed.
5. BOI Reporting: What Small Businesses Need to Know
Starting in 2025, many small businesses must comply with the new BOI reporting requirements. This impacts companies of all sizes, including smaller ones that may not typically have to file as extensively. Here’s what to know:
- Filing Requirement: Most businesses with fewer than 20 employees and under $5 million in revenue must file BOI reports.
- Quick Updates Required: Once you file, you’ll need to report and  changes or any updates within 30 days, so staying on top of any ownership or control shifts is key.
- Penalties Are Steep: Non-compliance penalties run up to $10,000 or two years in prison for willful neglect.
Small Business Tip: Connect with your legal counsel early on BOI reporting requirements to make sure you’re ready. Taking care of it now can help avoid last-minute headaches and penalties.
Looking Ahead
As the TCJA sunsetting policy gets closer, we’re here to help you navigate these changes. If you have questions or want to explore your tax strategy options, please don’t hesitate to reach out. Year-end can be busy, but taking the time to plan can mean real savings and peace of mind as we head into 2025.
