Key Tax Planning Highlights
The upcoming sunset of TCJA provisions impacts everyone who files taxes, and could be significant to your year-end planning.
As we approach the end of 2025, it is crucial to be aware of the upcoming changes due to the scheduled sunset of the provisions enacted in 2017 in the TCJA. Unless Congress acts, several key benefits will expire on December 31, 2025, impacting your tax situation starting in 2026.
A major change will impact individual income tax rates. The lower brackets will return to pre-2018 levels, and the nearly doubled standard deduction will drop back to its former amount (adjusted for inflation). Therefore, assessing your income and itemized deductions in 2024 and 2025 could be crucial to capitalizing on existing tax benefits.
Beneficial ownership interest (BOI) reporting
The Corporate Transparency Act (CTA), effective January 1, 2024, mandates the disclosure of the beneficial ownership information of certain entities to the Financial Crimes Enforcement Network (FinCEN). Notably, this reporting requirement may also apply to single member LLCs, which are typically disregarded entities for income tax purposes such as many Schedule C businesses and holding companies with rental real estate.
It is crucial to understand that this is not a tax filing requirement, but rather an online report submitted directly to FinCEN if applicable. There are severe penalties for businesses who willingly do not comply with the requirements. For entities in existence before January 1, 2024, the report must be filed by January 1, 2025. There are other deadlines related to entities created during 2024 and those with changes to reported information.
The reporting is made directly through FinCEN’s website at www.fincen.gov/boi. It is important to note that this is a one-time filing requirement unless there are changes to the reported information.
We have a dedicated team available to assist with questions regarding reporting.
Digital assets and virtual currency
Digital assets are defined as any digital representations of value that are recorded on a cryptographically secured distributed ledger or any similar technology. For example, digital assets include non-fungible tokens (NFTs) and virtual currencies, such as cryptocurrencies and stablecoins.
The sale or exchange of virtual currencies, the use of such currencies to pay for goods or services or having such currencies that you hold as an investment, generally have tax impacts –– and the IRS continues to increase its scrutiny and reporting requirements in this area. We can help you understand the tax and investment consequences.
If you hold and transact with digital assets, you should be aware of a safe harbor that allows for the allocation of unused basis before the end of the year if you used the universal method to determine the cost of those assets.