VIDEO: Are You Prepared for the Tax Sunset in 2025?
By Joe Dowdall, CFP®, RICP®, CRPC®, CCFC
Big changes are on the way with the 2017 Tax Cuts and Jobs Act next year. These changes, called the 2025 Tax Sunset, could impact certain people and businesses. It’s essential to understand what’s coming so you can make smart financial planning choices before these changes happen. Watch this quick video that informs you of what you need to know and how to get ready.
Transcript
Tax Changes Ahead: Preparing for the 2026 Tax Impact
Hi, I’m Joe Dowdall, a financial planner at Worth Asset Management. Today, I’m going to talk about a significant tax change coming in 2026—the sunset of the Tax Cut and Jobs Act. It’s essential to understand what this means for your tax planning, as it could lead to higher taxes for many. Let’s explore this together.
The Sunset of the Tax Cuts and Jobs Act
The Tax Cut and Jobs Act, which provided significant tax relief, is set to expire at the end of 2025. When it sunsets, taxes are likely to increase. Tax brackets will be adjusted, and rates will go up. Most taxpayers can expect to pay more in 2026 unless they take proactive steps to manage their tax exposure.
Impact on Standard Deductions and Tax Brackets
For individual filers, including those married filing jointly, the changes will result in higher taxes. The standard deduction, which many people rely on, will decrease significantly. This means that many will likely find themselves itemizing deductions once again, leading to a higher tax liability for most people.
Relief for Property Taxes in High-Tax States
On a positive note, for residents in high-tax states, the $10,000 cap on property tax deductions will be removed. This means that individuals who previously couldn’t deduct all their property taxes will be able to deduct more in the future. This change may help offset some of the tax increases.
Child Tax Credit Expiration
For families with children, the child tax credit, which allows parents to reduce their taxable income, will expire as part of the sunset. This is another factor contributing to higher taxes after 2025.
Estate Tax Exemption Reductions
For those with large estates, there’s another consideration. The estate tax exemption, which has been set at a higher level, will be significantly reduced in 2026—more than halved. This means that individuals with substantial estates may see a dramatic increase in estate taxes after 2025. It’s important to consult with an estate planning attorney or financial planner to prepare for this change.
Strategies to Prepare for the Tax Changes
So, what can you do now to plan for these tax changes? First, it’s a good idea to consider realizing any investment losses you may have. This can help reduce your taxable income by offsetting gains. Additionally, if you’re in a lower tax bracket in the coming years, it might be worthwhile to convert some of your traditional IRA funds to a Roth IRA. This strategy can help manage your tax exposure moving forward.
Is Your Tax Plan Ready for 2026?
The key question is, “Are you prepared?” Now is the time to review your tax strategy before these changes take effect. To help you navigate these changes, I recommend consulting with your financial planner or, if you manage your own finances, start planning now.
Schedule a Consultation for Personalized Tax Planning
If you’d like to discuss your specific situation and explore potential strategies to mitigate the impact of these tax changes, feel free to reach out. We can schedule a 15-minute call to review your options.
You can contact me at 469-423-1989 or email me directly at joe@worthassetmgmt.com. There’s no cost or obligation to have this conversation, and I’m happy to assist with your planning.
Final Thoughts on Preparing for 2026
This upcoming tax change is significant, and it’s important to start preparing now. Don’t wait until the last minute to understand how these changes may affect you. Reach out today if you have any questions, and let’s start working on a plan that works for you. Thank you for watching.
The information provided is for general guidance and informational purposes only. Please consult with a qualified tax professional for advice tailored to your specific financial situation.