At Extreme Investor Network, we take pride in providing our readers with valuable and unique information on personal finance that can help them make informed decisions and maximize their financial wellbeing. Today, we want to delve into the topic of tax planning strategies in light of the uncertain future of certain provisions of the Tax Cuts and Jobs Act (TCJA).
With the upcoming changes in control of the Senate, House, and White House, it’s unclear which TCJA provisions, if any, will be extended by Congress. This uncertainty has led financial advisors to proactively start tax planning for clients who could be affected. Here are some key strategies that advisors are focusing on:
Estate planning is a ‘large focus’:
One significant provision under the TCJA is the higher estate and gift tax exemption, allowing tax-free transfers from wealthy individuals to the next generation. In 2024, the lifetime estate and gift tax exemption stands at $13.61 million for individuals and $27.22 million for married couples. However, this limit is set to drop by half after 2025 if Congress does not extend the provision. Financial advisors are leveraging these exemptions to remove assets from estates through various techniques such as trusts, gifts, and direct payments to educational institutions. It’s essential to explore these options based on individual circumstances like wealth level, goals, and life expectancy.
‘Accelerate income’ before tax hikes:
As federal income tax brackets are expected to increase after 2025, advisors are recommending strategies to accelerate income into lower brackets now. This could involve making Roth IRA conversions or recognizing business income sooner. Pass-through businesses may also want to accelerate income to take advantage of the 20% qualified business income deduction before it potentially expires after 2025.
Consider ‘deferring deductions’:
With changes in standard deduction expected after 2025, it may be beneficial to consider deferring deductions like charitable donations to optimize tax benefits. By strategically planning deductions, individuals can maximize their tax savings in the long run.
At Extreme Investor Network, we understand the importance of staying ahead of changes in tax laws and using strategic planning to optimize financial outcomes. Our goal is to empower our readers with the knowledge and tools they need to make smart financial decisions. Stay tuned for more insightful content on personal finance strategies and investment tips.