This photo combination, created on October 25, 2024, shows U.S. Vice President and Democratic presidential candidate Kamala Harris and former U.S. President Republican presidential candidate Kamala Harris in Houston, Texas, on October 25, 2024 Man Donald Trump in East Del Valle, Austin, Texas on October 25, 2024.
Getty Images
As millions of Americans cast their ballots on Election Day, advisers are bracing for major tax changes that may be coming.
The Tax Cuts and Jobs Act of 2017 (TCJA), enacted by former President Donald Trump, brought sweeping changes to individuals, including lower tax brackets, a higher standard deduction, a more generous child tax credit exemption and greater estate and gift tax exemptions.
Policy experts say that without action by Congress, many of the TCJA’s individual provisions will expire after 2025, which will become a key issue for the next president.
follow: 2024 election live updates: Trump and Harris await presidential results
Jim Guarino, a certified financial planner and managing director at Baker Newman Noyes in Woburn, Mass., said the TCJA expiration “has been a common theme among clients for much of the year.”
However, experts say planning could be complicated by the planned elimination of several tax rules.
Planning for possible higher taxes
Without TCJA extension, more than 60% of taxpayers could see Higher taxes in 2026According to the Tax Foundation.
However, it is difficult to predict which provisions, if any, Congress could extend Uncertain control Senate and House of Representatives. TCJA negotiations are also likely to be difficult amid growing concerns that the federal budget deficit will exceed $1.8 trillion in fiscal 2024.
Still, Guarino, a certified public accountant, said some investors have begun to accelerate deferring income to 2024 and 2025 with tax rates likely to rise in 2026.
If Congress makes no changes, the income tax brackets after 2025 will revert to 10%, 15%, 25%, 28%, 33%, 35% and 39.6%.
For retirees with large pre-tax retirement balances, higher rates can be significant when they need to take required minimum distributions (RMDs), he said. Starting in 2023, most retirees must begin withdrawing RMDs from pre-tax retirement accounts at age 73.
‘Every tax profile is different’
As some consultants perform Others are making predictions to prepare for the looming changes to the TCJA.
“Every tax situation is different,” said Mark Baran, managing director of the National Revenue Service at financial services firm CBIZ. “In some cases, not much will change.”
No matter who wins the election, outside groups are ready to fight lawmakers over various provisions of the TCJA, adding to uncertainty, he said.
“Pulling the trigger to do something is a big decision,” Baran said. “I think most of the time it’s too early.”
The exception may be estate planning, which often involves multi-year strategies, he said.
About The Author
