Stay Ahead with Tax Planning
Effective tax planning isn’t just about cutting your current tax bill—it’s about long-term strategies that secure your financial future. With the Tax Cuts and Jobs Act (TCJA) set to sunset in 2025, this is the perfect time to start thinking about multi-year tax strategies. Under current law, individual income tax brackets will rise, personal exemptions will return, and the standard deduction will shrink. For example, the standard deduction for married couples filing jointly is projected to drop from $29,200 in 2024 to approximately $16,000 in 2026. Planning ahead can help you avoid higher taxes later.

Optimize Deductions and Credits
To minimize taxable income, individuals should take advantage of deductions and credits while they are more favorable. Currently, medical expenses above 7.5% of adjusted gross income (AGI) are deductible, and the home mortgage interest deduction applies to acquisition indebtedness up to $750,000. However, as the TCJA sunsets, home equity loan interest deductions may return, offering more flexibility. Additionally, the Child Tax Credit will drop from $2,000 per qualifying child to $1,000 post-2025. By maximizing your deductions and credits now, you can mitigate potential tax hikes.

Charitable Contributions
If you’re planning to make charitable donations, this may be an opportune time. The current deduction for cash contributions is limited to 60% of your AGI, but this will revert to 50% after 2025. Ensure that your charitable donations are to qualified organizations, and always keep detailed records for documentation purposes. Timing your contributions wisely can result in substantial savings.

Roth Conversions and Retirement Strategies
With the impending rate hikes, converting traditional IRAs to Roth IRAs before the TCJA sunsets could make financial sense. Roth IRAs allow for tax-free growth and withdrawals, and by converting while tax rates are lower, you may save significantly over time. Moreover, tax-free withdrawals from Roth accounts can be an important part of estate planning, ensuring that beneficiaries receive more of your estate without additional tax burdens.

Prepare for 2026 and Beyond
As the individual provisions of the TCJA sunset, personal exemptions are set to return at an estimated $5,300 for married couples, which could affect how you approach your tax filings. Careful planning can help you navigate the higher tax rates and reduced deductions that will come into play. By considering these changes now, you can make strategic decisions that reduce your tax burden both now and in the future.