Former Republican President Donald Trump attends a rally at the site of the July terrorist attack against him in Butler, Pennsylvania, on Oct. 5, 2024.
Brian Snyder | Reuters
It is unclear what, if any, provisions of the TCJA Congress might expand, especially with uncertain control of the Senate, House, and White House.
Meanwhile, some financial advisers have begun tax planning for clients who may be affected. Here are some of their key strategies.
Estate planning is a “big focus.”
There is currently a significantly larger estate and gift tax exemption under the TCJA, viz allows tax-free transfers from wealthy Americans to the next generation.
In 2024, the lifetime estate and gift tax exemption is $13.61 million for individuals or $27.22 million for married couples. Next year, that cap will adjust for inflation before roughly halving after 2025, unless Congress extends the provision.
Transfers above these thresholds are subject to a maximum tax rate of 40%.
“That’s been a really big focus for us,” Peter Traphagen Jr. said. certified financial planners, managing directors. Traphagen Financial Group in Oradell, New Jersey, which ranked No. 9 on CNBC 2024 FA 100 list.
Estate planning strategies utilize exemptions to remove assets from the estate during life. However, techniques vary by family, depending on wealth level, goals, life expectancy and other factors.
Plans can include trusts, gifts to beneficiaries, direct payments to educational institutions or medical providers, a grant. 529 college savings plan and other tactics, said Shea Abernethy, an investment adviser representative in Winston-Salem, North Carolina.
“Once it’s out of your estate, it’s not earning interest or compounding,” said Abernethy, who is also a compliance officer. Salem Investment Advisorswhich reached number 8 on the FA 100 list.
‘Revenue Acceleration’ before tax increase
Some consultants are planning higher Federal Income Tax brackets from 2025 onwards.
With no changes from Congress, the ranges will return to 2017 levels, changing to 10%, 15%, 25%, 28%, 33%, 35% and 39.6%.
“We are now looking at strategies to accelerate income in the lower brackets,” said Samantha Pahlow, head of wealth management. Ferguson Wellman Capital Management in Portland (Oregon). The company was ranked 10th on the FA 100 list.
For example, it could be a Roth retirement account conversions or earlier recognition of business revenue, he said.
Pass-through businesses, such as sole proprietorships, partnerships, or S corporations, may want to accelerate income to take advantage of the 20%. qualified business income deductionThat could even sunset after 2025, Traphagen said.
Consider “deferring deductions”
At tax time, filers claim the standard deduction or total deductions, whichever is higher. After 2025, it’s likely to split if the standard deduction is cut in half.
For 2024, the standard deduction is $14,600 for single taxpayers and $29,200 for married couples filing jointly. This means that most filers will not claim specific tax benefits such as the deduction charitable giftsmedical expenses, and state and local taxessay the experts.
But with a lower standard deduction planned for 2026, you can consider “deferring deductions” such as a charitable donation, Pahlow said.
