Ohio Farmer

Tax Cuts and Jobs Act sunset: Change on the horizon?Tax Cuts and Jobs Act sunset: Change on the horizon?

Country Counsel: Whether it is income taxes or estate taxes, farm families will feel the weight of the sunset if it occurs.

January 24, 2025

3 Min Read
A woman with a tablet in a greenhouse
TAX SUNSET: The sunset would impact virtually all income tax filings. The tax brackets established in 2017 would reset to pre-2017 levels. Increases in the standard deduction, child tax credit, state and local tax deduction, alternative minimum tax, and several other areas would disappear. stockbusters/Getty Images

by Ryan Conklin

If you have been following farm publications over the past few years, you may have read a few articles about the upcoming tax sunset. This refers to specific provisions of the Tax Cuts and Jobs Act of 2017 that are set to expire at the end of 2025.

The sunset would affect virtually all income tax filings. The tax brackets established in 2017 would reset to pre-2017 levels. Increases in the standard deduction, child tax credit, state and local tax deduction, alternative minimum tax, and several other areas would disappear. Bonus depreciation is on a separate phase-out that would wrap up in 2027.

A separate issue that would hit fewer taxpayers is the reset of federal estate tax law. Today, generally speaking, each reader of this article has an estate tax exemption of $13.99 million, minus any prior declared gifts. The sunset would cut the exemption almost in half, dropping the exemption down to $7 million to $7.5 million per person.

Whether it is income taxes or estate taxes, farm families will feel the weight of the sunset if it occurs. For the agriculture community, watching the progress of tax legislation should be front and center in the first half of 2025. With that in mind, here are a few discussion points to forecast the tax debate in the coming months.

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In short, there are three potential outcomes for parts of the Tax Cuts and Jobs Act sunset:

  1. The sunset occurs.

  2. An extension is passed, with or without modifications.

  3. Specific provisions become permanent law.

With a Republican Congress and Republican White House, passage of new tax legislation is not guaranteed. A couple of votes in the House or Senate can decide whether a bill passes or fails.

Remember, when the TCJA was passed, it took a Republican Congress and President Donald Trump a year of work to get a bill passed in December.

The Congressional Budget Office must score each of the legislative proposals based on the positive or negative impact on the budget. This scoring process will be important to watch.

Some representatives or senators are elected in their district or state to be fiscally conservative, not grow a budget deficit, or avoid overspending. Meaning, they will likely vote based on those voter preferences.

There is a litany of complex rules and parliamentary procedure elements in Congress that may also determine whether a bill survives. This is especially true in the Senate.

Tax changes and immigration are two key issues that will take priority in Congress. Though the House would like to combine these topics into one bill. The Senate already indicated that is a non-starter.

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While legislation is moving forward, the Senate is also grappling with Cabinet confirmations for Trump.

The first nine months of a new Congress is the period of maximum activity for legislation. After the first nine months or so, campaigning for midterm elections restarts.

The last point is where I would like to finish. The congressional calendar is very tight, and the windows for passing a bill are slim. If the summer arrives and meaningful traction on tax legislation has not been achieved, farm families may need to prepare as if the sunset is happening.

Bottom line, pay close attention to tax talk this year. The further we progress into 2025 without a solution, the more you should consider a planning meeting with your professional team to have an emergency plan in place. Though remote, it is possible the sunset happens, and your income tax and estate tax situations could look bleaker.

Conklin is an attorney and owner of Wright & Moore Law Co. LPA.

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