Tax Cuts and Jobs Act (TCJA) Sunset after 2025
What is on the table:
In less than two years, one of the largest tax reforms in American history will likely sunset.
The Congressional Budget Office recently forecasted the cost of extending individual income tax provisions of the TCJA at over $3 trillion, as well as boost debt to 125% of GDP, and boost deficits above 85 of GDP over 10 years (1).
The ‘sunset’ reverts the most powerful tax table – the Income Tax – back to 2016 brackets plus inflation. What does this mean for you? See table A:
What does this mean:
Who does this impact most? See table B:
| Joint Income | Percentage increase |
|---|---|
| $200,000 | 16% |
| $400,000 | 18% |
| $600,000 | 12% |
| $1,000,000 | 10% |
(Table B)
CONSIDERATIONS:
- Gift, gift, gift! 2024 Limit is $18,000 per person per beneficiary (i.e., if you are married, $36,000 per beneficiary)
- Defer capital losses to higher tax years
- Reevaluate trust structures
- Maximize the 24% tax bracket through 2025
- Charitable giving strategies in high tax years (2026) like Donation bundling. Donor Advised Funds, donate appreciated property
- Utilize Qualified Charitable Distributions (QCD)
- Assess Long-Term Care needs, consider hedging to avoid estate depletion
Citations:
Congressional Budget Office. (2023, August 14). Tax Cut extensions cost over $3.3 trillion. Committee for a Responsible Federal Budget. https://www.crfb.org/blogs/tax-cut-extensions-cost-over-33-trillion#:~:text=Extending%20the%20TCJA%20in%20full,6.8%20percent%20under%20current%20law.
Bush, J. (2024, January). The Washington Update. General Session. San Diego; The Westin San Diego Gaslamp Quarter.