Just like that, June is in full swing, and we find ourselves in that early-summer stretch where Research Triangle schools are on break and our minds are on vacation before our bodies.
I say, enjoy the summer slow. It has its place in a healthy life calendar — to rest and prepare for the road ahead. And while you pause, put a dog ear on this note.
Because there are some changes coming down the pipeline in the next few years regarding the Tax Cuts and Jobs Act that you will want to prepare for as you make financial decisions. Nothing here is super urgent (no changes are happening tomorrow) — except for the fact that you want to start planning now so you don’t end up in a frenzy when these changes do materialize.
Let’s briefly look at what these changes mean for you. Let me know if you want to chat further:
And although it might not be as enjoyable as sitting by the pool on vacation, your future self will thank you for starting the planning process now.
The Clock’s Ticking on the Tax Cuts and Jobs Act
“The bad news is, nothing lasts forever. The good news is, nothing lasts forever.” – J. Cole
At this point, we’ve probably all heard about the Tax Cuts and Jobs Act of 2017 (TCJA), which made a lot of significant changes to tax laws.
It turns out, you’re going to start hearing a lot more about it soon — or rather, about the end of many provisions of the TCJA in 2026.
Congress may (or may not, more likely) act over the next two and a half years to keep some parts of the TCJA. Don’t depend on that, though. There may well be new, pricier tax brackets and other rules that Research Triangle taxpayers (especially wealthier ones) should start planning for now.
So, how can you get ready?
Maybe it didn’t always feel like it in recent years, but the Tax Cuts and Jobs Act tax rates were more generous than their predecessors… and those pre-2017 rates are returning.
Without Congressional action, the highest tax rate will jump from 37% back to 39.6%. Among other brackets, it’s estimated that 24% will go to 28%, 22% to 25%, and 12% to 15%. The 10% tax bracket won’t change.
If you’re well-heeled enough you might also have to worry about the Alternative Minimum Tax (AMT), another levy on high earners that got curtailed by the TCJA but will be headed back up in 2026. Start planning to minimize things like incentive stock options, private activity bond interest, foreign tax credits, passive income and losses, and net operating loss deductions as we get closer to 2026.
Also, the TCJA unhooked the tax-rate income thresholds for capital gains and dividend income from the tax brackets for taxpayers with higher incomes. In 2026, long-term capital gains (LTCG) taxes on the profit you make from the sale of assets that you’ve held longer than a year will also once again be tied to your income tax bracket: 0% LTCG if you’re in the 10% and 15% bracket; 15% LTCG if you’re in the 25%, 28%, 33%, and 35% bracket; and 20% LTCG if you’re in the 39.6% bracket.
Here’s another smart move to make, if you can: Accelerate income and asset sales into the next 30 months if, like many people, you’ll be in a more expensive income tax bracket after that.
It’s also important to note that the Tax Cuts and Jobs Act got rid of the personal exemption you claim on your tax return and doubled the standard deduction. That sounds great (and for many people, it is)… but it did mean that you couldn’t routinely deduct nearly as many itemized expenses.
The standard deduction is scheduled to drop back — maybe to as much as half its current amount — with the TCJA sunset. But you will be able to itemize more deductions again.
Your move: Start planning now to “bunch” as many deductible expenses as possible into 2026.
In the same vein, the TCJA limited the state and local tax (SALT) to 10 grand and the itemized mortgage-interest deduction to up to 750,000 dollars in principal. These limits are vanishing, too, so any of those taxes you can pay on or after January 1, 2026, or major real estate moves after that time, should figure into your plans to itemize. (We can help you set up an action plan for this.)
If you plan to leave your heirs well off, this could be the biggest change for you with the TCJA sunset.
Essentially, the Tax Cuts and Jobs Act doubled the federal estate and gift tax exemption. This year, it’s a whopping 12.92 million dollars per person. That’s how much you as an individual can leave (married couples can leave twice as much) without having to deal with Uncle Sam’s estate tax…
…Until 2026, anyway, when the exemption reverts to its pre-TCJA amount, which experts think will be about half of that. You have a few ways to tackle this:
- Whittle your estate now with gifts, a little every year. Under the current gift-tax exemption, you can give away 17 grand annually per recipient. This might even make sure your estate isn’t eventually above any exemption threshold.
- Converting a traditional individual retirement account (IRA) to a Roth IRA does incur income taxes on the amount you transfer now — and remember, income tax rates will likely be higher down the road — but there are no taxes on withdrawals from a Roth for you or anyone you leave the account to (with a few possible conditions… check with us on that one).
- You can use trusts, such as a spousal lifetime access trust, a charitable remainder trust, or a grantor trust. These can be complex vehicles to put together, so we are happy to help with that.
Like I said at the beginning, you have some time to make these changes. Although 2026 isn’t long off, it isn’t tomorrow, either. It gives you just the right amount of time to start planning now, so you aren’t surprised down the road.
These upcoming changes are just one example of how nothing ever seems to stay the same in tax planning. Even though laws and strategies change over time, we’re always here to guide you through those and be a resource for you.
In your corner,