2025 is well underway, and at Kramer Wealth Managers, we believe it’s important to be aware of key changes that could impact your financial planning. Several tax laws introduced under the 2017 Tax Cuts and Jobs Act (TCJA) are set to expire at the end of 2025 unless Congress takes action to extend or modify them. Here’s a breakdown of what’s changing and what it might mean for individuals, families, and businesses.
Individual Tax Brackets and Rates
The TCJA significantly lowered individual income tax rates and adjusted tax brackets. For example, the top tax rate dropped from 39.6% to 37%, and other brackets saw similar reductions. These lower rates are scheduled to revert to their pre-2017 levels, potentially increasing tax burdens for many taxpayers.
Standard Deduction and Personal Exemptions
The TCJA nearly doubled the standard deduction, making it more attractive for many taxpayers to forgo itemizing deductions. However, the personal exemption was eliminated as part of these changes.
What’s changing? The standard deduction is set to decrease, and the personal exemption may return. This could make itemizing deductions worthwhile for more taxpayers again.
Child Tax Credit
One of the TCJA’s most popular provisions was the Child Tax Credit (CTC) expansion, which increased the credit from $1,000 to $2,000 per qualifying child and made a portion refundable. If the law expires, the CTC will revert to its previous $1,000 limit, reducing support for families with children.
Estate and Gift Tax Exemptions
The TCJA doubled the estate and gift tax exemption, allowing individuals to transfer up to $13.99 million tax-free. However, this provision is set to expire, reverting to a lower exemption level of $5.49M (with an adjustment for inflation since 2017).
State and Local Tax (SALT) Deduction Cap
The TCJA capped the state and local tax (SALT) deduction at $10,000. This cap disproportionately affected taxpayers in high-tax states.
Unless extended, the SALT deduction cap may expire, providing some relief for previously limited taxpayers.
What’s Next?
While many unknowns remain, and no one can predict what Congress will do, it’s clear that these changes could have significant financial implications for taxpayers.
Understanding the upcoming shifts in tax policy can help you better prepare to navigate these changes with confidence and clarity.
Kramer Wealth Managers can help you navigate these complex tax changes and advise you of any action needs to be taken to maximize current tax law while you still can. Contact us today to schedule a consultation and take the first step toward confident financial planning!
This article is for informational purposes only and does not constitute tax, legal, or financial advice. Always consult a professional for advice specific to your situation.
Image Description: The image showcases a workspace where one person is writing in a notebook with a pen, while another holds a smartphone with a laptop on the desk. The text, enclosed within a red-outlined box, reads: “TAX LAWS EXPIRING IN 2025: What You Need To Know.” Beneath the text is the Kramer Wealth Managers logo.
