Change is inevitable. When those changes involve tax law, it is extremely important to meet with your financial professional, tax advisor, and legal advisor to discuss any adjustments that may need to be made to your financial, retirement, or estate plan.

One change that is looming is the expiration of provisions that were passed under the Tax Cuts and Jobs Act of 2017 (TCJA). Many of the provisions for individuals, including the higher estate tax exemption and the lower individual income tax brackets, were temporary and will expire (“sunset”) on December 31, 2025, without further congressional action.

This comprehensive discussion on the upcoming changes due to the sunset of the Tax Cuts and Jobs Act of 2017 offers several important takeaways for individuals, particularly those with significant estates, and for businesses, especially pass-through entities.

For individuals, it’s crucial to understand how the potential decrease in the estate and gift tax exemption could affect their estate planning. The opportunities for gifting at the current higher exemption levels could be a valuable strategy to consider before the changes take effect. The portability option is also an important tool for couples, though it comes with caveats that must be carefully considered in the context of the couple’s overall financial and estate planning goals.

On the business side, the changes to corporate tax rates and the qualified business income deduction for pass-through entities warrant a review of business structures and tax strategies. While corporations will continue to benefit from the flat 21% tax rate, owners of pass-through entities should be mindful of the expiration of the 20% deduction and plan accordingly.

Proactive planning is essential. With the sunset of these provisions on the horizon, now is the time for individuals and business owners to consult with their advisors and implement strategies that take advantage of the current laws. Waiting until the end of 2025 could result in missed opportunities and a rushed, possibly less optimal, response to the changes.

In summary, for those potentially affected by the sunset of the TCJA provisions, the key steps to consider include: 

  • Reviewing and adjusting estate plans to account for the possible reduction in tax exemptions.
  • Considering the use of trusts, life insurance, and family limited partnerships to manage and protect assets.
  • Understanding the implications of portability and whether it’s the right strategy based on individual circumstances.
  • Evaluating business structures and tax strategies considering the changes to pass-through entity taxation.
  • Taking action now, rather than waiting, to ensure that strategies can be implemented effectively and without haste.

Working with their financial, tax, and legal advisors to navigate these changes and align your strategies with your long-term goals is more important now than ever.  Give us a call at theKFORDgroup.  We would love to help you navigate these changing times.

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