Actions to consider as potential tax changes draw near.
As we begin the second half of 2025 — and draw nearer to potential tax law changes — you may want to revisit your tax planning strategy for the months and years ahead.
The Tax Cuts and Jobs Act of 2017 (TCJA), which doubled the estate, gift, and generation-skipping transfer (GST) tax exemption amounts, is scheduled to sunset at the end of 2025. While budget proposals are being discussed that may extend at least some of the 2017 tax cuts, the outcome of these discussions remains unclear.
“I would offer my clients the same guidance, regardless of their net worth or who is in office,” says Nikki McCain, senior fiduciary strategist with Wells Fargo Wealth & Investment Management, Wells Fargo Bank, N.A. “Be proactive and stay the course when it comes to tax planning.”
What should you do when tax changes remain a question mark?
TCJA benefits: McCain notes that the provisions in the TCJA have been positive for many individuals and businesses. “A lot of my clients saw lower overall tax rates,” she says. “And the higher gift and estate tax thresholds have also opened up some interesting estate planning techniques, such as a spousal lifetime access trust (SLAT), for some of my ultra-high-net-worth clients who want to transfer wealth in a more tax-efficient way.”
What individuals should consider: “Given that we don’t know for sure what will happen with the TCJA, we’d suggest our clients continue with their current tax planning,” says McCain. She offers four strategies that can help insulate taxpayers against potential tax code changes in 2025.
- Take advantage of the 2025 federal estate tax exemption of $13.99 million ($27.98 million for married couples) by exploring tax and estate planning strategies like a SLAT, which removes assets from the estate but allows a spouse or future generations to access those assets as needed. By selecting a trustee located in a favorable trust jurisdiction (such as Delaware), the tax benefits of the gift may be able to be extended in perpetuity.
- Consider making monetary gifts in 2025 while the annual federal gift tax exclusion stands at $19,000 per recipient.
- Some business owners may consider strategies such as accelerating income or even restructuring their business entity to account for potential changes to the Section 199A qualified business income (QBI) deduction in 2025.
- Consult with your financial and legal teams about future personal and business plans that could impact your income taxes, especially if the TCJA sunsets.
Considering the potential upcoming tax changes, you may want to revisit your estate plan and discuss potential gifting strategies with your advisors. The uncertainty surrounding tax laws in today’s environment is a good reminder to talk about these opportunities with your legal and financial advisors sooner rather than later.
Wells Fargo & Company and its affiliates do not provide tax or legal advice. This communication cannot be relied upon to avoid tax penalties. Please consult your tax and legal advisors to determine how this information may apply to your own situation. Whether any planned tax result is realized by you depends on the specific facts of your own situation at the time your tax return is filed.
Wells Fargo Wealth & Investment Management (WIM) provides financial products and services through affiliates of Wells Fargo & Company.
