The Biden administration last week released their proposed budget plans for 2024, and if the proposal is any indication of what’s to come, there are sure to be many tax law changes on the horizon.
Preparers got a welcome breather this filing season when a major overhaul of tax code wasn’t done at the last minute with the existing Congress, but the break appears to be short lived as taxes are going to be on the discussion docket for this year. While proposals won’t mean law for quite some time, they’re a good road map for what the discussions will look like for the remainder of 2023.
Why should preparers be ready to pay attention? Because the changes could easily impact your clients, if not this year, definitely in future years and failing to keep your finger on the pulse of what might be coming down the pipeline could negatively impact sound planning advice. No one is safe when we look at the landslide of tax provisions currently set to expire in 2025 without a tax law change to the contrary.
Many provisions of the Tax Cuts and Jobs Act of 2017 are scheduled to expire in 2025. Not the least of these are the current tax brackets and lack of personal exemption for taxpayers and dependents. Absent any move to address these expiring provisions, the brackets, including personal exemption rules will return to 2017 rates.
No one is safe when we look at the landslide of tax provisions currently set to expire in 2025 without a tax law change to the contrary.
Oddly, the Biden proposal did not address any of these expiring provisions, and while they aren’t slated to immediately impact the most current tax years, the changes that are looming are certainly not small.
The proposal did include provisions like a global minimum tax to address, especially corporations with significant foreign operations as well as a “billionaire” minimum tax. Provisions expected to impact a wider majority of taxpayers include proposals for expanded health care premium tax credits as well as expanding the earned income credit.
The proposal also seeks to make the prepayment of the child tax credit that was sent to many families in monthly installments during 2021, a permanent part of the tax code. It is estimated that the pre-payment of the child tax credits helped to lift over 2 million children out of poverty and the administration undoubtedly sees benefit to continuing it.
While many of the current proposals will miss the mark in terms of actually making it into laws, this sets the stage for what professionals in the industry can expect over the next year. Taxes are likely going to be a battle with the number of provisions expiring at the same time as politically charged new ones are being brought to the table. Biden notably included in his proposal a push to eliminate tax code preferences for fossil fuels in support of his clean energy initiatives.
As always, we have to sit tight and wait but as advisors, keep an ear to the ground this year as the discussion unfolds to provide the best forward strategy advice to your clients.
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