The Tax Cuts and Jobs Act of 2017, or TCJA, was the most significant pro-growth tax reform measure in years. Taxpayers in Iowa, whether individuals or small-business owners, benefited greatly from the tax relief and reforms as a result of the TCJA. However, effective policymakers failed to make the TCJA permanent, and key provisions are scheduled to sunset starting in 2025. These provisions, unless renewed or made permanent, will result in significant tax increases. Further, the tax increases will have a detrimental impact on the national economy, which is already on shaky ground.
The TCJA made several important tax reforms. Some of the key reforms included lowering both individual and corporate income tax rates, increasing the standard deduction, establishing a 20% deduction on qualified business income for passthrough businesses, among others.
In 2025, the individual income tax rates are set to expire and revert back to the 2017 rates along with a decrease in the standard deduction. Further, the 20% deduction on qualified business income will also expire, while the corporate rate reductions are permanent. Other provisions of the TCJA are also set to expire or change, but these are the most consequential because of the impact it will have on taxpayers.