Tax deadline next year looms large as Democrats rally in Chicago

As Democrats rally this week around Vice President Kamala Harris at their convention in Chicago, a major tax deadline is looming at the end of next year.

With financial advisors and tax professionals paying close attention to the sunset date on of Dec. 31, 2025, for many parts of the 2017 Tax Cuts and Jobs Act, the presidential election between Harris and Republican former President Donald Trump and down-ballot races for Congress will decide whether either party gets a mandate to reshape the law to their liking. 

The provisions set to expire will affect the taxes paid by every household and business in the country, according to certified public accountant Miklos Ringbauer of Los Angeles-based MiklosCPA. Those up for potential renewal or expiration include items as important as the basic income brackets setting federal rates, the higher floor in estates subject to duties and the percentages of profit that corporations pay, along with potential changes in areas such as child credits, bonus depreciation, the alternative minimum tax, the standard deduction and personal exemptions, state and local duties, the deductions for mortgage interest and qualified business income for pass-through entities, and even the rules for gambling winnings, Ringbauer noted.

Shifts in the income tax brackets stand out as the "absolute No. 1 point, and as soon as you tell people their wallet will feel it, they will start paying attention to it," he said in an interview. Business owners and other taxpayers should meet with their advisors or tax professionals to figure out their plans with an eye toward the ramifications to their rates and strategies under a Harris or Trump administration with divided power or one-party control in Congress.

"They will be even emotionally less stressed and financially less stressed because they planned and they're aware of what's happening," Ringbauer said about clients who get ready in advance. "There is nobody who is not going to be impacted by these changes."

The tax policy proposals from the Trump and Harris campaigns and the Biden administration show major differences when it comes to the sunsetting statutes, according to a tracker maintained by the nonprofit, nonpartisan Tax Foundation. Neither campaign responded to a request from Financial Planning for their official position on the Tax Cuts and Jobs Act.

READ MORE: 26 tips on expiring Tax Cuts and Jobs Act provisions to review before 2026

During her presidential campaign in the 2020 cycle, Harris called for tossing out the entire law, except for the parts benefitting taxpayers who earn less than $100,000 per year, and President Joe Biden has argued for extending the provisions applying to households under $400,000. However, the Tax Foundation listed Harris' position as "to be determined," based on the fact that she might "continue the same policies put forth in the FY 2025 budget of the Biden-Harris administration or may propose additional tax policy changes."

Last week, Harris unveiled an economic plan with breaks and subsidies that the Committee for a Responsible Federal Budget found would boost the deficit by $1.7 trillion over a decade without accompanying taxes or another source of revenue.

"The steps announced today will cut taxes for the middle class, reduce grocery costs, take on price gouging, lower the costs of owning and renting a home, continue to bring down the costs of prescription drugs, and relieve medical debt for millions of Americans," the Harris campaign said in a statement. "These bold actions will address some of the sharpest pain points American families are confronting and bolster their financial security."

In contrast, Trump is pushing to make all provisions affecting individual income and estate taxes permanent, while considering replacing some personal duties with increased tariffs, the Tax Foundation noted. In recent weeks, he also said he would end any taxes on Social Security benefits — which the Committee for a Responsible Federal Budget said would hike the federal deficit by $1.6 to $1.8 trillion. Its estimate of the cost of extending "large parts" of the Tax Cuts and Jobs Act has reached $4 trillion.

"Republicans will make permanent the provisions of the Trump Tax Cuts and Jobs Act that doubled the standard deduction, expanded the child tax credit and spurred economic growth for all Americans," the official 2024 GOP platform said. "We will eliminate taxes on tips for millions of restaurant and hospitality workers, and pursue additional tax cuts."

Tobias Salinger

Outside Chicago's McCormick Place conference hall, where the Democrats are hosting caucus meetings and the other daytime events during the convention, retired cardiovascular invasive specialist Maureen Rzasa said a cutoff of $400,000 per year seemed "very high." 

Most people would "be pretty happy with it" if the next administration and Congress raise rates on "the higher end income-level people," she said. Still, she supports tax breaks for seniors who are often helping their extended families financially.

"For tax cuts, I think it's really important for senior citizens," said Rzasa, 73. "I'm a senior now, so those are concerns. Making sure that the seniors maybe get a little break on the taxes, maybe under a certain income, no tax at all. That would be really great."

The sheer size of the law, not to mention the impossibility of knowing the makeup of the next Congress and presidential administration, leaves advisors, tax professionals and their clients in a degree of limbo. Campaign promises and soundbites about changes to laws usually lack detail and require the always-complicated passage of a bill through Congress.

READ MORE: Project 2025 goals would transform wealth management landscape

Harris and Trump are "trying to target and suggest items that will drive additional voting blocs" to their side, and it's certainly "valuable to understand what a candidate stands for," Ringbauer said. Rather than trying to predict the future, though, advisors and their clients can lay out several different scenarios for possible shifts in policy based on the results, he said.      

"Non-action is not an option," Ringbauer said. "Not planning is not an option. It is really that simple this time around, because everyone will be impacted one or another. It's better to be prepared than be surprised, and you may not be able to make changes as a result. 'Plan, plan, plan' are the magic words right now."