The candidates of the 2024 U.S. presidential election proposed vastly different tax policies. With the end of year 2025 expiration of the estate and income tax cuts contained in the Tax Cuts and Jobs Act (“TCJA”) looming large, there has been a challenge in creating estate plans that adequately anticipated the potential increase in estate and income taxes. Now, with President-elect Donald Trump preparing for the beginning of his second term, the next four years of federal tax policy, though not certain, are clearer, particularly concerning the future of the policies created by the Tax Cuts and Jobs Act.

The Tax Cuts and Jobs Act.

The Tax Cuts and Jobs Act was signed by President Donald Trump on January 2, 2018. Among the changes to the tax code were changes to the individual income tax brackets, an increase to the standard deduction, and an increase to the federal estate tax, gift tax, and generation skipping-transfer tax exemptions.

The law retained the individual income tax brackets while lowering the rates for the majority of the brackets.

tax and estate planning table

The TCJA also raised the standard deduction. The standard deduction for single filers in 2024 was set at $14,600, and it will increase to $15,000 in 2025. The estate tax exemption was increased as well. In 2024, the maximum estate tax exemption for single filers is $13.61 million, and it will increase to $13.99 million for 2025.

However, these increases to the standard deduction and the estate tax exemption will expire on December 31, 2025.

If the TCJA reforms are not extended, more than four trillion dollars in tax increases will take effect January 1, 2026. For example, the estate tax exemption for individuals will revert to five million dollars, as adjusted for inflation, or half of the current exemption. On the other hand, if Congress extends the tax cuts, it may be necessary to find other avenues to obtain tax revenue to offset the contemplated cuts.

President-elect Trump’s Proposed Tax Plan.

Among his tax proposals, President-elect Trump has proposed to extend the individual and estate tax cuts of the TCJA and lower the corporate income tax rate from twenty-one percent to fifteen percent for companies making products in the U.S. and to twenty percent for most other corporations. He has also proposed replacing the revenue from individual income tax cuts with increased tariffs, along with exempting Social Security benefits from income taxes, and removing taxes on tips and on overtime.

Though these changes have been proposed by President-elect Donald Trump, there is no guarantee that he will be able to gather a coalition in Congress to support his tax plan. The 2024 election resulted in the Republican Party holding just a five-seat majority in the House of Representatives, which will shrink by three seats in January 2025. The President-elect could face additional conflict within his own party, as his proposed tax plan may not contain sufficient revenue sources to offset the tax cuts, resulting in a greater increase in deficit spending, which has historically been opposed by his party.

Regardless of whether President-elect Trump finds success in passing his proposed tax plan, the individual and estate tax cuts of the TCJA will expire at the end of 2025, and it is vital to review your estate plan with a professional to ensure that your plan anticipates those changes.

If you have questions or concerns about what the upcoming presidential term means for your tax and estate planning, reach out to your accountant or the experienced estate planning attorneys at Solomon Dwiggins Freer & Steadman.