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Weekend Reading: Preparing for the Great Sunset: What You Need to Know if Tax Code Provisions Expire

Posted:
|Tax |"Market Watch" Articles
This article appears as part of Casey Weade's Weekend Reading for Retirees series. Every Friday, Casey highlights four hand-picked articles on trending retirement topics and delivers them straight to your email inbox. Get on the list here.
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Weekend Reading

While new tax provisions proposed by the Biden administration might still be up in the air, there is one thing we can be certain of in the realm of tax planning: The expiration of the Tax Cuts and Jobs Act (TCJA) in 2026.

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Change is on the horizon: In efforts to limit the revenue cost associated with the TCJA to remain consistent with the 10-year revenue loss in the Congressional Budget Resolution, the majority of the individual tax payer provisions in this act will sunset at the end of 2025. The most noteworthy areas set to expire include:

📌 Income taxes and deductions - The top individual, estate and trust income tax bracket will jump from the current 37 percent to 39.6 percent. Additionally, personal exemptions were repealed in the act, standard deductions increased this year, the phaseout for overall allowable itemized deductions was removed, the structure of major itemized deductions was changed and the mortgage interest deduction also changed.

📌 Alternative minimum tax (AMT) - The act kept the individual AMT exemption levels and income threshold at which the AMT exemption phases out.

📌 Charitable giving - The annual deduction limit for cash contributions to public charities increased from 50 percent of Adjusted Gross Income (AGI) to 60% of AGI. In 2026, it will go back to 50 percent.

📌 Estate and gift tax - Estate and gift tax exemptions were doubled and continued to index in line with inflation. In 2026, they will be cut back in half again to roughly $6.5 million per individual, or $13 million for a married couple.

Act accordingly: You may have missed out on planning opportunities last year, primarily in the area of taking advantage of current low tax rates. Don’t miss that chance this year. There has arguably never been more certainty around taxes increasing in the future.
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