We strive to be proactive and inform our clients about potential changes that could impact their tax situations.
As you know, the Tax Cuts and Jobs Act of 2017 (TCJA) lowered marginal tax rates and the cost of capital. Although some provisions are permanent, most individual tax changes are not. Unless Congress acts, many of the changes implemented as part of the TCJA will “sunset” on December 31, 2025. At that time, rates may revert to pre-2017 levels.
We will be doing a series of communications each quarter, leading up to the 2025 sunset of the Act, in which we will share detailed information on the expected TCJA changes.
Overview of the Tax Cuts and Jobs Act in 2017
When passed in 2017, the TCJA lowered most individual income tax rates, including the top marginal rate, from 39.6 percent to 37 percent. The law maintained the seven-bracket rate structure, but the income thresholds were updated. TCJA increased the standard deduction to $12,400 for single filers and $24,800 for married filers, compared with $6,500 (single) and $9,550 (married) under the prior code.
What May Change
Below, we have summarized the most notable tax changes set for December 31, 2025.
The reduction in tax rates for individuals and married couples in 2017 may increase back to where they were in 2016. That means that after December 31, 2025:
- The 37% rate is scheduled to revert to 39.6%
- The 24% rate is scheduled to revert to 28%
- The 22% rate is scheduled to revert to 25%
- The 12% rate is scheduled to revert to 15%
The tax brackets you fall into based on income may also return to the broader ranges that were in effect before TCJA. Below is a visual of how much they changed in 2018 for “Married Filing Jointly” filers and the estimate for their reversion in 2026.
A well-thought-out tax strategy is critical to your client’s overall financial picture. Working together, we can help ensure that their financial strategy keeps pace with whatever comes down from Washington.
Feel free to contact us if you’d like to set up a time to discuss these changes and how we might work together to prepare your clients for the potential impact.
1. TaxFoundation.org, August 30, 2023
This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm.