It’s the time of year that most tax professionals begin reaching out to clients to begin planning for the tax season and tax years ahead — and this year, more than any in recent memory, is a very tough time to plan.

Why is it such a tough time to plan? “Historically, when we talk about tax planning, it involves deferring income or bunching expenses or implementing shifting strategies,” said Annie Schwab, franchise operations manager at Padgett Business Service. “But not this year!”

That’s because two events are looming to cause uncertainty: The Tax Cuts and Jobs Act is set to expire at the end of 2025, and the November elections will usher in a new president and Congress. Either or both may cause major disruptions in tax.

There are three possible outcomes of the elections: Republicans take control, Democrats take control, or a divided government. It’s likely that the new president will want to get legislation through as soon as possible, according to Padgett president Roger Harris, so it’s possible that we could see changes sooner rather than later, closer to the expiration of the TCJA at the end of 2025. 

• Individual tax rates. The TCJA lowered tax rates to 10%, 12%, 22%, 24%, 32%, 35%, and 37%. The top rate, 37%, was lowered from 39.6%. The TCJA rates will expire Dec. 31, 2025, and revert back to the prior rates. The top tax rate beginning Jan. 1, 2026 is currently slated to be 39.6%.
• Standard deduction. The standard deduction was nearly doubled for all filing statuses ($12,000 for single filers and $24,000 for married filing jointly) by the TCJA. As a result, many taxpayers itemized deductions. Starting in 2026, the standard deduction is slated to be about half of what it is currently.

The act also impacted various Schedule A deductions: 

• SALT: The state and local tax deduction was capped at $10,000. After 2025, this limitation will expire, allowing greater benefit from deducting taxes during the calendar year, including real estate taxes, state or local income taxes, and personal property taxes.
• Mortgage interest deduction: The TCJA generally suspended the home equity loan interest deduction. It limited the home mortgage interest deduction to the first $750,000 of deductible interest. Beginning in 2026, this is scheduled to revert to pre-TCJA levels, allowing interest to be deducted from the first $1 million in home mortgage debt and $100,000 in a home equity loan. 
• Miscellaneous itemized deductions: The TCJA temporarily eliminated these deductions, which will once again be allowed starting Jan. 1, 2026, under the previous rules, to the extent they exceed 2% of the taxpayer’s adjusted gross income. 
• Child Tax Credit. The CTC was increased from $1,000 to $2,000 per qualifying child. This higher tax credit will revert to pre-TCJA levels in 2026 to $1,000 per qualifying child.
• Alternative Minimum Tax exemption and phaseout. The TCJA increased exemption amounts, as well as the exemption phaseout threshold, lessening the AMT burden on taxpayers. At sunset, the AMT exemption will revert to pre-TCJA levels. The number of taxpayers subject to AMT is expected to double.

A number of business provisions are also up in the air: 

• QBI 20% deduction (Section 199A). Owners of passthrough businesses and partnerships and S corporations, as well as sole proprietorships, may currently claim a deduction of up to 20% of qualified business income. Beginning in 2026, the Section 199A QBI deduction will no longer be available. 
• Bonus depreciation on qualified property.  The TCJA changed the applicable percentage on qualifying property, ranging from 100% for property placed in service after Sept. 27, 2017, and before Jan. 1, 2023, to 0% for property placed in service after Dec. 31, 2026.

In a recent Accounting Today webinar on tax planning, Harris and Schwab also highlighted the complexities of the Clean Vehicle Credit, which must be claimed on Form 8936.

The credit is available to individuals and their businesses. To qualify, they must buy it for their own use, not for resale, and use it primarily in the U.S. In addition, their modified adjusted gross income may not exceed $300,000 for married filing jointly or a surviving spouse, $225,000 for head of household, or $150,000 for all other filers.

Taxpayers can use modified AGI from the year they take delivery or the year before, whichever is less. If they do not transfer the credit, it is nonrefundable when they file their taxes, so they can’t get back more than they owe in taxes, or apply any excess to future years.

At the time of sale, a seller must give the buyer information about the vehicle’s qualifications, and must also register and report the same information to the IRS. 

The vehicle must be an electric vehicle, plug-in hybrid electric vehicle, or fuel cell vehicle. The manufacturer’s suggested retail price of a pickup truck, van or SUV must be $80,000 or less; for all other passenger vehicles, $55,000 or less. Final assembly must have occurred in North America. For vehicles placed in service on or after April 18, 2023, the vehicle must meet the critical mineral and battery requirement. Visit FuelEconomy.gov to determine credit amount.

Planning for planners

Harris and Schwab also discussed the recently discovered breach of nearly 3 billion Social Security numbers. The IRS and the practitioner communities are asking that tax preparers encourage taxpayers to get an IP PIN, regardless of whether they were part of the breach. At a minimum, they should have the “Security Six” implemented: anti-virus software, firewalls, multi-factor authentication, backup software, drive encryptions, and a virtual private network.

They noted that a WISP — or written information security plan — is required by law. It has been around for several years, and has been added to the PTIN application. The IRS has issued a revised template, 28 pages in length, designed to help tax professionals, particularly those with smaller practices. 

“It is meant to be a living document, not something you put in a drawer,” remarked Schwab.

Tax professionals face a number of real challenges, according to Harris: Fewer people are going into the profession, workers want a great degree of flexibility, compensation packages are complex, and outsourcing is becoming a reality. 

“Practitioners tend to price by the hour or by form,” he added. “There needs to be a movement to price for value, and be the clients’ trusted advisor, not just a tax preparer.”