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The Berman Buzz

Tax Tip Tuesday: It’s Time to Tax Plan for 2026 – Yes 2026!

Updated: Feb 13

TNT stick, alarm clock, black wires and a red duffle bag with dark dramatic lighting

As individuals rush to file their 2023 tax returns, it is crucial to be mindful of a looming "ticking tax timebomb" set for 2026.


Tax Planning Considerations

The 2017 Tax Act, which significantly cut the tax rate for Americans, is set to expire at the end of 2025 unless Congress acts before then. When it does, tax rates will return to the considerably higher 2017 levels for most Americans. The highest rate could reach 39.6 percent, impacting single individuals with incomes around $400,000.


Furthermore, the standard deduction for all taxpayers will also revert to 2017 levels, decreasing from nearly $30,000 for married individuals to $12,700. Other impending changes include a reduction in Estate Tax Exemptions for married couples, plummeting from over $26 million to approximately $7 million. As a result of this legislation, the annual gift tax exclusion has also risen to $17,000 for 2023 and $18,000 for 2024. The annual exclusion beyond 2025 remains uncertain.


Given the dysfunction in Congress, the unthinkable could become a reality, and only Congress has the power to address this issue. As unconventional as it may sound, it might be worth considering accelerating income into 2024 and 2025 to capitalize on the current tax rates. Think of our current low-tax-rate environment as a tax sale. Just as we would seize the opportunity to stock up on items at the grocery store during a big sale, many of us could benefit from paying taxes now rather than waiting for rates to increase.


Additionally, estate planning should be a priority for everyone in anticipation of these highly likely changes. One approach is through a Roth IRA conversion, where money from a tax-deferred account is transferred to a Roth IRA account. You will pay taxes on the amount converted now, but you will not pay taxes on withdrawals made later. This strategic move could result in more money for retirement expenses.


Here to Help

If you have questions about your unique situation or need strategic advice regarding tax planning, we are here to help. We build value-added relationships with each client to understand their business structure to provide solid solutions, and our approach offers direct access to the firm's decision-makers. Our innovative cross-functional services help businesses address the challenges ahead. Contact us to let us know how we can best support you.


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