The Tax Cuts and Jobs Act (TCJA), enacted in 2017, introduced significant tax changes for individuals and businesses alike. However, many of its provisions are set to expire after 2025, unless Congress acts to extend them. While no one can predict whether or not TCJA will be extended, it is prudent to plan for the possibility that it will sunset as scheduled. With the potential for higher taxes and a shifting financial landscape, proactive planning today can help mitigate future tax burdens and position you for long-term success. Here are some key areas to consider and steps to take, assuming a post-TCJA environment: 

1. Understand What’s Changing — And Why It Matters 

Many of TCJA’s most favorable provisions will revert to pre-2018 tax rules. Here is what is at stake:

• Individual Tax Rates: The current lower marginal tax brackets (e.g., 12%, 22%, 24%) will revert to higher rates, potentially increasing your tax liability even if your income stays the same.
• Standard Deduction and Personal Exemptions: The nearly doubled standard deduction will shrink, and personal exemptions that were previously eliminated may return, further complicating filing strategies.
• State and Local Tax (SALT) Deduction: The $10,000 cap on SALT deductions may be lifted, which could benefit taxpayers in high-tax states.
• Child Tax Credit: The credit will likely decrease from $2,000 per child to $1,000 or less, reducing support for many families.
• Estate and Gift Tax Exemption: The current estate tax exemption of over $13 million per individual could be cut in half, exposing more estates to taxation.
• Qualified Business Income (QBI) Deduction: The 20% deduction for pass-through business income is set to expire, impacting small business owners and entrepreneurs.

ACTION STEP: Review your current tax situation with these changes in mind. Understanding what is changing is the first step toward effective TCJA sunset planning. 

2. Maximize Current Tax Benefits While They Last

With potentially time-limited opportunities, now is the moment to act. Before these provisions sunset, consider taking advantage of tax-saving opportunities:

• Accelerate Income: If your tax bracket is expected to rise post-2025, consider accelerating income to take advantage of your current tax bracket. This could include taking bonuses, realizing capital gains or converting traditional IRAs to Roth IRAs.
• Utilize the Standard Deduction: If you typically claim the standard deduction, consider bunching itemized deductions, like charitable donations or medical expenses, into a single year before the limit potentially drops.
• Maximize QBI Deduction: Business owners should consider optimizing pass-through income and expenses to fully leverage the 20% deduction before it expires.

ACTION STEP: Work with a tax advisor to identify which deductions and income strategies make sense for your financial situation.

3. Adjust Investment and Retirement Strategies Proactively

The TCJA sunset could significantly impact your long-term financial plans:

• Consider Roth Conversions: Converting traditional retirement accounts to Roth IRAs now locks in today’s lower tax rates and allows for tax-free growth.
• Harvest Capital Gains: If capital gains tax rates increase, selling investments strategically before 2026 could reduce your future tax burden.
• Estate Planning Adjustments: High-net-worth individuals should consider the current estate and gift tax exemption before it is reduced. Making gifts before the limit decreases can potentially save millions in future taxes. 

ACTION STEP: Revisit your retirement and estate plans to ensure they are optimized for a higher-tax environment. 

4. Reevaluate Business Tax Strategies

Business owners face unique challenges and opportunities with TCJA sunset planning:

• Entity Structure Review: The potential end of the QBI deduction may change the calculus on whether to remain a pass-through entity or consider incorporation.
• Accelerate Capital Investments: Bonus depreciation will phase out. Consider purchasing major assets like equipment or property before the end of 2025 to maximize deductions.
• Payroll Strategy: Rising tax rates may affect how you compensate yourself and your employees. Adjusting salary vs. distributions could be key.

ACTION STEP: Conduct a full tax strategy review for your business to prepare for a post-TCJA environment. 

5. Consult a Tax Professional — Don’t Go It Alone

The complexity and scope of these changes make professional guidance essential:

• Tax Exposure Analysis: Understand how the sunset will affect your personal and business exposure to higher taxes post-2025
• Strategic TCJA Sunset Planning: A tax advisor can help you optimize your tax strategies for the changing landscape.
• Estate Planning Execution: Professionals can help you navigate gifting strategies, trusts and other tools to implement before the exemption drops.

ACTION STEP: Schedule a consultation with a tax advisor or financial planner as soon as possible — especially if you have significant assets or own a business.

Final Thoughts: Take Control Before the Clock Runs Out

The sunset of the TCJA could bring significant tax increases for individuals and businesses. Planning ahead — by maximizing current tax benefits, reevaluating investment strategies and consulting with professionals — can help mitigate the impact. With proactive steps, you can position yourself for a smoother transition into the post-TCJA tax environment. Consider meeting with a local Texas Capital Private Bank advisor in your area to explore tailored strategies that can keep you on track and prepared for the year ahead.