*Note: There have been no official changes to the tax law at the time of this posting.
As you may be aware, the provisions of the 2017 Tax Cuts and Jobs Act (TCJA) are due to sunset on December 31, 2025, unless extended by new legislation. Please be aware that any tax law changes related to the sunsetting of TCJA will go into effect beginning in tax year 2026.
While we cannot predict what action Congress may take, we are closely monitoring developments and are committed to keeping you informed. We understand the uncertainty of this situation may raise concerns about how the potential changes will directly affect your financial situation.
In the meantime, here are some key areas to monitor:
- Individual Income Tax Rates: The current reduced rates could revert back to pre-TCJA levels, which would increase your taxable income. In 2025, the regular tax brackets are 10%, 12%, 22%, 24%, 32%, 35% and 37%. In 2026, the new brackets would be 10%, 15%, 25%, 28%, 33%, 35% and 39.6%.
- Standard Deduction and Personal Exemptions: The TCJA nearly doubled the standard deduction and eliminated personal exemptions. If these revert, it could alter your taxable income calculation significantly. The current standard deductions of $15,000 (single) and $30,000 (married filing jointly) will be reduced to $6,500 and $13,000, respectively.
- State and Local Tax (SALT) Deduction Cap: The $10,000 cap on SALT deductions has been a notable change, particularly impacting many taxpayers in high-tax states. This provision is also set to sunset, potentially reinstating full deductions.
- Child Tax Credit: The increased credit amount and expanded eligibility may revert, affecting families who have benefited from this provision.
- Estate and Gift Tax Exemption: The current higher exemption levels could decrease, meaning more people could benefit from estate planning strategies. The lifetime exclusion amount could revert to $6,995,000 from the current $13,990,000. There are gifting strategies to “lock in” some or all of today’s higher exemption. We would be happy to discuss these strategies with you in collaboration with your estate planning attorney.
- Corporate Tax Rate and Business Provisions: While many business-related provisions are permanent, potential shifts in corporate tax rates and rules for pass-through businesses could affect business strategies.
We will continually monitor tax policy and advise you of changes as they become legislation.