Are You Ready for the Expiration of the 2017 Tax Cuts and Jobs Act?

This article was originally featured in Triangle Business Journal.

Those of you who wait for last-minute Mother’s Day reservations and ultimately get stuck with unappealing times (9 p.m. dinners) or restaurant options (the local shopping center) need to sit up and pay attention.

The 2017 Tax Cuts and Jobs Act (TCJA) is set to expire on December 31, 2025, unless Congress acts to extend or replace it. As you may recall, the TCJA provided 10 years of estate and gift tax relief and notable changes to income taxes. The planned sunsetting of the TCJA gives taxpayers less than 18 months to prepare and act. Here are some things you can consider between now and next December to minimize the impact of your potential tax liability.

Do you need to update your estate plan?

Given the dollar size associated with the estate tax exemption component of the TCJA, it tends to receive many headlines. The federal estate tax and gift tax exemption allows individuals to transfer a certain amount of wealth to their beneficiaries free from tax during their life or at death.

In 2024, individuals can transfer $13.61 million to beneficiaries without triggering an estate or gift tax. Collectively, couples can transfer $27.22 million. Under current law, this exemption rolls back to an inflation-adjusted level estimated at approximately $6.8 million individually and $13.6 million jointly at the end of 2025. This does not just relate to one’s investment assets, but includes total assets — property, businesses, etc.

The potential impact is significant. A couple’s $25 million estate that hasn’t used any of its lifetime exemption would not owe any estate taxes today. However, in 2026, the same $25 million estate in 2026 could result in almost $11.4 million subject to estate taxes. Taxed at 40%, the estate would leave almost $4.6 million for Uncle Sam with $20.4 million going to its beneficiaries—an 18% reduction in what you may have planned since the TCJA was implemented in 2017.

Here are actions you can take now to minimize the estate tax impact:

Articulate your broader estate planning goals to your advisory team. Do you wish to maximize what your children receive? Or, do you want your estate to go mostly to charity? Or something between the two?

If warranted, consider maximizing your exemption usage now via various strategies with the help of your advisory team.

Yet, don’t let the tax tail wag the dog, especially if you are young and/or find your total assets falling between the two levels. While some flexibility exists, completed gifts are irreversible, so you’ll want to consider your options carefully and with the help of qualified advisors.

Your income taxes will likely be impacted by the sunsetting TCJA

Changes to the federal income tax code will affect all taxpayers. Income tax brackets will revert back to higher rates and broader income levels. Today’s highest tax bracket of 37% begins at $731,200 for Married Filing Jointly (or $609,350 for single filers), while the pre-2017 highest bracket of 39.6% begins at only $583,750 or $518,850 for single filers.

Here are actions you can take to minimize the impact of a growing tax bill:

To the extent you can time large income events, like Roth IRA conversions, you should consider doing so before 2026.

The standard deduction is set to fall from $29,200 today for Married Filing Jointly; $14,600 for single filers to $15,750 and $7,850, respectively. The $10,000 State & Local Taxes (SALT) cap will be removed, meaning that those who itemize and have significant property taxes will see an increase in the amount they can deduct. Deductibility of advisory fees, like tax prep and investment advice, are set to return, subject to a 2% adjusted gross income floor.

Ask your advisor to project what the changes in the tax law might do to your taxes. My firm leverages technology that allows for scenario planning, enabling us to compare a recently filed tax return with a scenario that incorporates these changes.

The annual deduction limit for cash contributions to public charities will fall from 60% of adjusted gross income (AGI) to 50%, so anyone who plans to make a significant contribution may experience a larger tax deduction before January 1, 2026.

Ultimately, many of these considerations require careful planning with your advisory team. Don’t wait until the fourth quarter of 2025 to begin the conversations or you may find it nearly impossible to schedule time as their calendars may be full. As is the case with Mother’s Day dining options, don’t wait until the last minute.

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