A lot of regulation is up in the air this year. The Tax Cuts and Jobs Act’s sunsetting provisions make it one of the least surprising laws to face transition in 2025.
The possible shifts in the overall tax landscape mean that now is an ideal time to align your client’s financial strategy with a purpose beyond immediate concerns.
The TCJA reshaped individual and corporate tax laws in 2017. When introduced, the TCJA aimed to simplify taxes, lower rates and stimulate economic growth. As some of its provisions expire, Americans will predictably face changes in rates, deductions and credits. The expiration of the TCJA will form a new financial environment for many individuals families, and businesses.
For instance, the child tax credit will decrease from $2,000 to $1,000 per child. The highest individual marginal tax rate will rise from 37% to 39.6%. The standard deduction will revert to pre-TCJA levels, cutting the automatic offset against taxable income by nearly half. Gift and estate tax exemptions will decrease from $13.99 million per person in 2025 to an estimated $7 million in 2026.
Despite these changes, strategic planning and preparation can equip anyone to ensure philanthropy remains a cornerstone of Americans’ financial stewardship.
For families who are watchfully taking in these tax changes, now is a time to pause and consider this question: What is the purpose and role of resources in our lives?
As gift and estate tax exemptions are set to decrease, consider making or encouraging lifetime and similar legacy gifts to charity. Charitable gifts are often made without incurring gift or estate tax, and they offer a powerful way to impact causes that matter to your family for generations and leave a legacy of generosity.
Last year, I had the opportunity to sit with a family that was committed to strategic planning regarding generosity and had a vision to ensure its sustainability for the future.
Over several days, they built out their estate plan, with their highest priorities centering on more than saving on costs and taxes. Their decisions were more about leaving a legacy of generosity for their children and grandchildren and passing these values on to the generations that their choices would impact.
For this family, including multiple generations in charitable giving decisions was essential for creating a lasting impact and fostering a culture of philanthropy for all family members. Younger generations can gain a sense of responsibility and ownership over charitable efforts, helping them understand the importance of giving back and instilling values of empathy and social responsibility.
Additionally, older generations bring wisdom, experience, and long-term perspective, which can guide the selection of causes that align with a family’s legacy or broader societal needs. This collaboration ensures that charitable decisions reflect diverse viewpoints, harnessing the strengths of all generations to create a more sustainable and inclusive future.
The opportunity to use resources to support meaningful causes and initiatives that reflect your client’s values continues to be a core pillar of strategic planning. Making charitable gifts of assets—like appreciated stocks, real estate or business interests—can significantly enhance giving compared to cash-only giving. These types of contributions often come with valuable tax deductions, maximizing the impact of generosity beyond what giving cash alone can do.
So, if your clients are considering giving, ensure they stay informed on developing tax laws and their potential impact on the clients’ financial situation.
Secondly, like the family mentioned above, encourage clients to revisit their estate and financial plans to ensure they align with broader stewardship goals and values and include the input of multiple generations when possible.
Tax law changes like this are a powerful reminder that our commitment to purposeful stewardship can remain steadfast while financial landscapes evolve.
We can do more than successfully navigate a shifting tax environment by embracing these changes with foresight and intention. We can create a lasting and beautiful impact through purposeful, forward-thinking philanthropic decisions—no matter what laws may change.