Many of the TCJA's provisions, however, are scheduled to expire at the end of 2025. Unless new legislation is enacted to extend or make permanent these soon-to-expire tax breaks, you should start preparing now for this potential change.
Start now to create your TCJA tax plan
If you wait until next year to begin creating your tax plan, you may find that many attorneys and financial professionals are booked solid through the end of the year. So consider scheduling your planning sessions now so you have enough time to meet with your entire team of trusted advisors and draft your plan long before this pending change occurs.
Here are some areas to consider including in your TCJA tax plan.
TCJA Tax Planning Ideas
Review your estate plan. Consider if you can use some or all of the estate and gift tax exemption ($13.61 million in 2024 for single taxpayers, $27.22 million for married) before it drops back to $5 million. While this reset amount will be adjusted for inflation, gifting money or other assets can help reduce the size of your taxable estate while taking advantage of this historically high exemption amount.
Consider tax-efficient investments. As higher tax rates are set to return in 2026, review your investments to be as tax efficient as possible. Municipal bonds and tax-deferred plans like 401(k)s and IRAs may become more attractive after 2025. Also consider tax-loss harvesting strategies to offset future gains.
Review pass-through income. If you are a small business owner, assess how the loss of the QBI deduction will affect your tax liability. Review whether you should change your entity type to minimize the loss of this deduction.
Accelerate income. If possible, consider accelerating income into 2025 before the TCJA provisions expire, while tax rates are still lower. This could include exercising stock options, converting traditional IRAs to Roth IRAs, or taking larger distributions from retirement accounts.
Delay itemized deductions. Consider whether you should delay itemized deductions to help offset higher tax rates and a smaller standard deduction starting in 2026. If you live in a high-tax state, the return of the full state and local tax deduction may also provide some relief post-2025.
Adjust withholdings and estimated payments. It's important to review your tax withholding and estimated payments to ensure you're not underpaying, which can lead to penalties and interest.
By creating your tax plan now, you can be prepared if the TCJA expires as currently scheduled at the end of 2025.
