The provision in the Tax Cuts and Jobs Act of 2017 that allowed for the 20% qualified business income deduction for certain small businesses, along with the increased standard deduction and updated tax brackets for individuals, will expire if Congress doesn’t take action, wrote certified financial planner Ivory Johnson in an op-ed for CNBC. While legislators may be motivated to make permanent these tax cuts, they will negatively affect the country’s debt.
The 2017 law lowered five of the seven individual tax brackets, but a lack of extension would return them to the older groups. The legislation also eliminated a variety of tax deductions, including those for unreimbursed business expenses, moving, interest on a home equity loans and theft and catastrophic damage from an environmental event.
To find other ways to lower your tax burden, Johnson suggested increasing contributions to pretax retirement plans or invest in real estate, though current interest rates make that option much less desirable.
However, “as appealing as it may sound to reduce your tax exposure, the first call should be to your tax advisor because if you recall, it was the nuances of this legislation that many of us overlooked—namely the fact that the benefits for some were permanent and for others, temporary—that got us into this hot water in the first place,” Johnson concluded.
