TCJA Changes That Are Here to Stay
TCJA Permanent Changes: Six Key Provisions
The Tax Cuts and Jobs Act (TCJA) of 2017 brought significant changes to the U.S. tax code. While many of these changes are set to expire in 2025, there are several provisions that will remain permanent, affecting individuals’ tax obligations for years to come.
Permanent Changes to Individual Taxes
Here are six key TCJA changes that are not scheduled to expire:
1. Disallowed Charitable Deductions for Sports Tickets
Prior to the TCJA, individuals could claim a charitable deduction for 80% of payments made to colleges or universities if those payments were used to benefit athletic programs. However, the TCJA permanently eliminated this deduction, effective in 2018.
2. No Deductions for Alimony Payments
For divorce or separation agreements executed after 2018, the TCJA eliminated the deduction for alimony payers and the corresponding income inclusion requirement for alimony recipients. This change means that divorcing spouses can no longer shift income from the higher-earning spouse to the lower-earning spouse through alimony payments.
Important: The TCJA generally didn’t change the treatment of alimony payments required by pre-2019 divorce agreements.
3. Elimination of Like-Kind Exchanges for Personal Property
The TCJA restricted the tax-deferred treatment of like-kind exchanges to real property. This means that individuals can no longer defer capital gains taxes when exchanging personal property, such as vehicles or collectibles.
“It’s hard to keep track of which TJCA changes are permanent and which ones are scheduled to expire at the end of 2025.”
4. No More Roth Conversion Reversals
Before the TCJA, individuals could reverse a Roth IRA conversion within a certain timeframe to avoid paying taxes on the converted amount. However, the TCJA eliminated this option, making Roth IRA conversions irreversible starting in 2018.
5. Repeal of the Individual Mandate Penalty
The TCJA permanently repealed the penalty for not having health insurance under the Affordable Care Act (ACA), effective for months beginning in 2019.
6. Tax-Free 529 Account Distributions for K-12 Education
The TCJA allows taxpayers to withdraw up to $10,000 per year from a 529 college savings plan tax-free to pay for K-12 tuition.
Understanding the Permanent Changes
The ever-evolving tax landscape can make it difficult to stay informed about which TCJA changes are permanent and which are temporary. As Congress continues to debate the fate of expiring provisions, it’s essential to focus on the changes that are here to stay. By understanding these six permanent provisions, you can begin to develop tax-saving strategies for the upcoming years. Don’t hesitate to reach out to a tax advisor for personalized guidance and the latest tax law updates.
Questions?
Cody has been guiding closely held businesses across diverse industries since joining the firm in 2016. His expertise spans individual and corporate taxation, long-term business planning, and seamless succession and exit strategies.