Ep. 90 Tax Countdown: Planning for the Expiration of the TCJA

In 2017, the Tax Cuts and Jobs Act (TCJA) introduced major changes to income and estate tax laws, offering tax cuts and adjustments that have shaped financial planning for high-net-worth individuals and business owners. However, these provisions are set to expire on December 31, 2025, which could result in higher tax rates and reduced exemptions.

In this episode of Live Life Liberated, Matt Griffith, CFP®, and Roby Kotcamp, CFP®, discuss what these changes mean and how individuals and businesses can prepare for the transition

Key Takeaways on the TCJA Sunset

1. What Happens When the TCJA Expires?

The expiration of the TCJA means a return to pre-2017 tax laws, leading to higher tax rates and reduced deductions for many taxpayers. Congress has the power to modify or extend certain provisions, but as of now, the law is set to sunset automatically.

“The reality is, if we want to continue spending at the current level, we will need to raise revenue. Higher tax rates are almost inevitable.” – Roby Kotcamp

2. Income Tax Rate Increases

If the TCJA expires as planned, most income tax brackets will increase by an average of 9.4%, affecting high earners the most. Notably:

• The top income tax bracket will rise from 37% to 39.6%
• The 22% bracket will jump to 25%, and the 24% bracket will increase to 28%
• The qualified business income (QBI) deduction—a crucial benefit for pass-through entities—will be eliminated

“High-income earners could see an 8-9% increase in their tax bill. If you’re already paying $2 million in taxes, that’s not small change.” – Matt Griffith

3. Estate and Gift Tax Exemptions Will Be Cut in Half

For those with significant wealth, one of the most impactful changes will be the reduction of the estate and gift tax exemption.

• In 2024, the exemption is approximately $27 million for married couples
• After the sunset, it will drop to around $13.5 million for couples and $6.75 million for individuals
• The estate tax rate will remain at 40%, making proactive planning essential

“If your net worth is between $7 million and $25 million, you may think estate taxes don’t affect you—but in 2026, they will.” – Roby Kotcamp

4. Tax Planning Strategies Before 2026

With just under two years before the changes take effect, now is the time to implement strategies to minimize tax exposure.

• Income Tax Planning:
  • Consider accelerating income before 2026 while rates are lower
  • Plan for deductions and credits that will be phased out
  • Optimize qualified business income (QBI) deductions while available
• Estate and Gift Tax Strategies:
  • Use irrevocable trusts, such as spousal lifetime access trusts (SLATs)
  • Leverage charitable lead trusts (CLTs) and qualified personal residence trusts (QPRTs)
  • Strategically gift assets now to lock in the current exemption levels

5. Why You Should Act Now

Waiting until 2025 to take action could lead to missed opportunities. By then, estate attorneys and tax professionals will be overwhelmed with last-minute planning requests.

“If you wait until 2025, estate planning attorneys may be fully booked. The best time to act is now.” – Matt Griffith

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Final Thoughts

The sunset of the TCJA will bring sweeping tax changes that could significantly impact high-net-worth individuals and business owners. Whether it’s planning for higher income tax rates, estate tax implications, or taking advantage of the current tax code, proactive planning is crucial.

To discuss how these changes affect your financial strategy, contact Matt Griffith at [email protected] or Roby Kotcamp at [email protected].

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Disclaimer

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