When it comes to the trend of taxes, would you say they’re going to go up, go down, or stay the same? If you guessed, “go up,” congratulations—you win the grand prize of foresight! But don’t worry, you don’t need to clear room on your shelf for a trophy; instead, let’s talk strategy.

The Tax Cuts and Jobs Act’s Expiration: What’s on the Horizon?

Back in 2017, the Tax Cuts and Jobs Act (TCJA) gave taxpayers a bit of a break, but that break is set to end in December 2025. Here’s a snapshot of what’s at stake:

• Individual Income Tax Rates: The TCJA lowered tax rates across the board, with the top rate dropping from 39.6% to 37%. If these provisions expire, rates will revert to their higher, pre-2017 levels.
• Standard Deduction and Personal Exemptions: The nearly doubled standard deduction we’ve been enjoying? It’s scheduled to shrink. For example, a married couple could see their standard deduction drop from approximately $30,725 to around $16,525. Personal exemptions, which were set to $0 under the TCJA, will make a comeback.
• Child Tax Credit: The current credit of $2,000 per child will revert to $1,000, potentially squeezing family budgets.
• State and Local Tax (SALT) Deduction: Currently capped at $10,000, the SALT deduction cap could disappear, allowing taxpayers to deduct all eligible state and local taxes—a potential boon for high-tax states.

The expiration of these provisions could result in higher taxes for the majority of filers. In fact, estimates suggest that over 62% of taxpayers will see their tax bills increase if Congress doesn’t intervene.

What Does This Mean for You?

The writing on the wall is clear: taxes are likely to increase in the not-so-distant future. So, what’s the best way to prepare? It’s all about strategy.

Now is the time to explore ways to take advantage of today’s lower tax rates. Moving funds strategically into tax-advantaged accounts can be a game-changer. By paying taxes now at lower rates, you could shield yourself from higher rates down the road.

Additionally, consider:

• Roth Conversions: Converting traditional IRA funds to a Roth IRA allows you to lock in today’s tax rates while enjoying tax-free growth in retirement.
• Tax-Efficient Investments: Evaluate your portfolio to ensure you’re minimizing tax drag and maximizing growth.

Take Action

If you don’t yet have a tax strategy in place, now is the time to act. Waiting until tax rates rise will only limit your options. Let’s work together to formulate a plan that positions you to navigate these changes confidently.