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Tax Time Travel: Unveiling Strategies Before Tax Laws Reset

Tax Time Travel: Unveiling Strategies Before Tax Laws Reset

February 21, 2024

The Tax Cuts and Jobs Act of 2017 (TCJA) was the largest modification to the tax code in a generation. While it was heavily politicized, it provided some major benefits. Amongst the many changes this legislation enacted was reducing federal tax rates and increasing the income thresholds for each tax bracket. For example, in 2017, a Married Filling Joint (MFJ) return earning $300,000 would fall in the 33% marginal bracket. In 2023, that same return would be in the 24% marginal bracket.

The TCJA is set to sunset at the end of 2025. This means that in 2026, if congress doesn’t act, the tax law goes back to the way it was in 2017. We now have 2 short years to do some tax planning. Here are a couple of ideas to consider:

  1. Roth it up! – If after reviewing the tax brackets above you determine that your tax rate is lower now than it will be in a couple years, you might want to consider making contributions to a Roth. If your employer offers a Roth 401(k) option, you can contribute to this account without any income restrictions. If not, then you can contribute to a Roth IRA if you make less than $138,000 single or $218,000 MFJ.
  2. Convert if you can – If after making your Roth contributions you still want to try and max out the lower tax brackets, you can consider doing a Roth Conversion. There are no income restrictions to do this, but you must have a Traditional IRA. Essentially, you are paying your taxes now, so you can avoid taxes later. Work with your advisor to make sure this is done correctly and that you can afford to pay the taxes on this strategy with money outside of the account.
  3. Max-out QBI Deduction (Business Owners) - The qualified business income deduction (QBI) is a tax deduction that allows eligible self-employed and small-business owners to deduct up to 20% of their qualified business income on their taxes. In general, total taxable income in 2023 must be under $182,100 single or $364,200 MFJ to qualify. Try to max out this deduction while you can.

Not only is it important to have a financial planner to help you with these strategies, but that they are in communication with your tax team as well. As full-service Financial Planners, we believe in wholistic advice. One of the benefits of working with us to create your plan is that we can include tax experts through our affiliation with FAA Tax LLC, to ensure that everyone is on the same page. So, don’t delay. Consult with your financial and tax team to make sure that you don’t miss out on these opportunities.


2101 Gaither Rd., Suite 600, Rockville, MD 20850. Securities offered through Cetera Advisor Networks LLC, member FINRA/SIPC. Advisory Services offered through Cetera Investment Advisers LLC, a Registered Investment Adviser. Cetera is under separate ownership from any other named entity. For a comprehensive review of your personal situation, always consult with a tax or legal advisor. Neither Cetera Advisor Networks LLC nor any of its representatives may give legal or tax advice. Converting from a traditional retirement account to a Roth retirement account is a taxable event. A Roth retirement account offers tax free withdrawals on taxable contributions. To qualify for the tax-free and penalty-free withdrawal of earnings, a Roth account must be in place for at least five tax years, and the distribution must take place after age 59½, or due to death or disability. Depending on state law, Roth accounts distributions may be subject to state taxes.