Navigating the 2025 Tax Cut and Jobs Act Expiration

Authored by Tami Amici, Fiduciary Tax Services Manager, Tompkins Financial Advisors, Central New York. This article originally appeared in the Central new York Business Journal.

Each year, a new legislative cycle brings potential changes to the tax landscape that every individual, family, and business owner should be aware of. One major factor to look out for in 2025 is the expiration of key provisions included in the Tax Cuts and Jobs Act (TCJA) of 2017. Unless legislative action is taken in 2025, many significant tax benefits will end, potentially altering financial planning strategies in substantial ways.

What is the TCJA?

When first passed in 2017, the TCJA made sweeping changes to corporate and individual income taxes and the way your estate and charitable giving is taxed. The Act nearly doubled the standard deduction, eliminated the personal exemption and 2% miscellaneous itemized deductions, doubled the child tax credit, limited state and local tax (SALT) deductions to $10,000, and tightened limits on mortgage and home equity interest deductions.

In terms of charitable giving, the TCJA raised the ceiling for charitable contributions by 10% of adjusted gross income, roughly doubling the lifetime estate and gift tax exemptions. If the Act sunsets in 2025, the projected estate and gift tax exemptions would return to the levels of 2017, adjusted for inflation.

Ways the TCJA expiration will affect you:

• One of the most notable changes involves the individual lifetime estate and gift tax exemption. If the TCJA expires, this exception could be cut in half – from around $14 million per individual to approximately $7 million. The timing of gift and estate transfers could have a significant impact on what your beneficiaries would ultimately receive. High-net-worth individuals should evaluate their estate planning strategies now to ensure they maximize their tax efficiency and avoid unnecessary tax burdens.
  
  
• In the same way, charitable giving flourished under the Act; its expiration will have a significant impact on philanthropy. Under the TCJA currently, taxpayers can deduct up to 60% of their adjusted gross income for charitable contributions. However, this limit will revert to 50% when the TCJA sunsets. For individuals who rely on tax deductions to maximize their giving potential, it is recommended to connect with your financial advisor to explore strategies to optimize your tax benefits while supporting charitable causes: donate appreciated assets, utilize qualified charitable distributions, or set up donor-advised funds or charitable gift annuities.

These are just two everyday examples of how the expiration of the TCJA will impact Americans. The possibility of many changes on the horizon illustrates a broader point: tax planning should be proactive, not reactive. A thoughtful approach can help navigate uncertainties ahead. Whether it’s updating your estate plan, restructuring charitable contributions, or exploring other tax-saving opportunities, having a conversation with your financial team sooner rather than later can make all the difference.

By taking the necessary steps today, you can better position yourself and your family for financial success in 2025 and beyond.

If you have any questions about planning for the future, reach out to one of our Wealth Advisors today! https://www.tompkinsfinancialadvisors.com/about-us/contact-us