This combination of photos created on October 25, 2024 shows US Vice President and Democratic presidential candidate Kamala Harris in Houston, Texas on October 25, 2024, and former US Republican presidential candidate Donald Trump , in East Del Valle, Austin, Texas, on October 25. , 2024.
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As millions of Americans voted election dayadvisors prepare to major tax changes it could be on the horizon.
Signed into law by former president Donald TrumpTHE Tax Cuts and Jobs Act of 2017, or TCJA, brought radical changes for individuals, including lower tax bracketshigher standard deductions, child tax credit and a bigger exemption from inheritance and gift taxamong others.
Many individual provisions of the TCJA will expire after 2025 without Congressional action, which will be a problem. key question for the next presidentsay political experts.
TCJA expirations “have been the universal theme for much of this year” with clients, said certified financial planner Jim Guarino, managing director at Baker Newman Noyes in Woburn, Massachusetts.
However, planning can be complicated with several tax provisions set to expire, experts say.
Planning for possible tax increases
Without TCJA extensions, more than 60% of taxpayers could see higher taxes in 2026according to the Tax Foundation.
However, it is difficult to predict what provisions, if any, Congress might extend uncertain control of the Senate and the House. TCJA negotiations could also be difficult amid growing concerns about the federal budget deficitwhich exceeded $1.8 trillion for fiscal year 2024.
Still, with possible increases in tax rates in 2026, some investors are already accelerating their income through 2024 and 2025, said Guarino, who is also a certified public accountant.
Without changes from Congress, income tax brackets will return to 10%, 15%, 25%, 28%, 33%, 35%, and 39.6% after 2025.
Higher rates could be important for retirees with large pre-tax retirement balances when they need to take required minimum distributionsor RMD, he said. Since 2023, most retirees must withdraw RMDs from retirement accounts before taxes starting at age 73.
“Each tax profile is different”
While some advisors execute tax strategiesothers are conducting projections to prepare for impending changes to the TCJA.
“Every tax profile is different,” said Mark Baran, managing director of the national tax office at financial services company CBIZ. “In some cases, there won’t be much change.”
Regardless of who wins the election, outside groups are already preparing to confront lawmakers over various provisions of the TCJA, adding to the uncertainty, he said.
“Pulling the trigger to do something is a big decision,” Baran said. “I think it’s premature most of the time.”
The exception might be estate planning, which typically involves a multi-year strategy, he said.
