Yes, it is time to prepare your 2024 tax return. However, your future tax situation is becoming more uncertain—and not in your favor. As tax law currently stands, we will experience major tax law changes on January 1, 2026, that will increase your tax bill. Unless new laws are passed, the 2017 tax legislation will sunset, meaning we will revert to the laws in place in 2017. This makes tax planning for the next two years very challenging.
The scheduled changes include:
- Individual income tax rates will revert to higher 2017 levels, and the size of each bracket will change. Here’s a comparison of the tax rates:
- 12% will increase to 15%
- 22% will increase to 25%
- 24% will increase to 28%
- 32% will increase to 33%
- 37% will increase to 39.6%
- The standard deduction will be cut roughly in half. For those filing jointly, the current standard deduction is $30,000. In 2026, it will drop to $12,700.
- The personal exemption will return. It is currently $0, but in 2026 the personal exemption will be $4,700 per dependent.
- The child tax credit will be reduced from $2,000 to $1,000.
- The estate tax basic exclusion amount will decrease from $13,200,000 to $5,000,000.
- Itemized deductions will revert back to unlimited tax deductions. Casualty losses will be allowed again, and miscellaneous deductions over 2% of adjusted gross income will return.
For S corporation owners, partnership owners, and those with self-rental income, several changes will have a unique impact:
- The 20% Qualified Business Income (QBI) deduction for partnerships, sole proprietorships, and other non-corporate businesses will disappear. This is critical for small business owners—not only will tax rates increase, but taxable income will also rise.
- The $10,000 cap on the State and Local Tax (SALT) itemized deduction will be removed and revert to allowing individuals a full deduction for these taxes. This may change the election as to whether the business or the owner pays the Wisconsin income taxes.
What can you do?
Be aware of how these changes will impact you. When we deliver your 2024 tax return, we will provide a high-level review of the tax savings you are currently receiving. Keep in mind that this may be the year to report business income versus next year.
Consider putting extra effort into tax planning for 2026. We schedule tax planning meetings in the fall, and by then, we should have a clearer picture of what to expect. Happy tax time!
