Broker Check
Planning Ahead

Planning Ahead

| December 01, 2023

I would love to be the first to wish you a Merry Christmas, but most of the major retailers have been doing that for the last two months. 2023 has been a year of contrasts – both dragging and somehow simultaneously flying by.  The year started with a tepid market, followed by a solid seasonal November rally that will help the market feel a bit more cheery and bright!

While prognosticating about the future is a dangerous game, I thought we might look down the road to something that seems pretty certain. 2024 will be the last year of the tax cuts we have enjoyed since passage of the 2017 Tax Cuts and Jobs Act. What many don’t remember is that those tax changes expire on December 31, 2024 and we will revert to the way we did things before.

Before we review what the new (old) 2025 system looks like, you might ask why bring it up now – That’s more than a year away. Well, the main reason is it makes this next year a year of transition – and a year of expiring opportunities. Remember that taxable income events happen all year. They all add up to what must go on the year-end return. Having an awareness early can often allow you to plan accordingly and be as efficient as possible.

So, what will change in 2025:

  • We will revert to the previous tax brackets. Most taxpayers (married, filling jointly) roughly earning over $90k per year will see their tax rates go up about 3-4%.
  • The large standard deduction will revert to the much smaller deductions we had before.
  • Personal exemptions will return.
  • Caps on property taxes, state taxes, and mortgage interest will be removed.
  • Estate tax exemptions will be significantly reduced.
  • The special tax rate for many pass-through businesses will go away.

This represents quite a bit of change in the overall way we will be evaluating your income planning and tax withholding. It also means that 2024 will be an important year for you to communicate with us if you have any new or unique potential tax events coming in the next year or more! Activities like a business sale or changes to charitable giving are just a couple of the things you should be contemplating in light of these upcoming changes.

For most of you these changes will not significantly change your tax structure. They will likely create opportunities to make small changes that could save some tax dollars. For a few of you knowing these changes are coming will give us the opportunity to make plans that could save significant money. Remember, I only know what you tell me – and planning is what takes place BEFORE an event. In either case, please keep these upcoming changes in mind as you start preparing your taxes this year and try to have a discussion with your tax preparer about how these changes may affect your situation going forward. 

We want to take this opportunity to say “Thank You” for letting us serve you this year. We hope the holidays are full of family, joy, and meaning – and all the things you Value First.