The potential tax battle that the next U.S. president may face in 2025 could have implications for investors.

• In 2025, the next US president may confront a tax dispute regarding the expiration of tax breaks introduced by former President Donald Trump.
• The TCJA of 2017 introduced lower tax brackets, increased standard deductions, enhanced the child tax credit, and raised the estate and gift tax exemption, among other modifications.
• With control of the White House and Congress uncertain, it's unclear which provisions could be extended.

On election day, millions of Americans voted, and advisors are preparing for potential tax changes that may occur in the future.

The Tax Cuts and Jobs Act of 2017, enacted by former President Donald Trump, introduced significant changes for individuals, including lower tax brackets, higher standard deductions, a more generous child tax credit, and a bigger estate and gift tax exemption, among other things.

The TCJA provisions will expire after 2025, requiring Congress to act to avoid their sunset, which will be a significant challenge for the next president and policy experts.

The expiration of the TCJA has been a common topic among clients, according to certified financial planner Jim Guarino, managing director at Baker Newman Noyes in Woburn, Massachusetts.

Experts say that planning can be challenging due to the scheduled expiration of several tax provisions.

Planning for possible higher taxes

According to the Tax Foundation, more than 60% of taxpayers could see higher taxes in 2026 without TCJA extensions.

It is uncertain which provisions Congress could extend with the uncertain control of the Senate and House, and TCJA negotiations could be challenging amid growing concerns about the federal budget deficit, which reached $1.8 trillion for fiscal 2024.

Some investors are already accelerating income into 2024 and 2025 due to the possibility of tax rate increases in 2026, said Guarino, a certified public accountant.

After 2025, the income tax brackets will revert to their original percentages of 10%, 15%, 25%, 28%, 33%, 35%, and 39.6% unless Congress takes action to change them.

Starting at age 73, most retirees must take RMDs from pretax retirement accounts, which could be significant for those with sizable pretax retirement balances, said he.

'Every tax profile is different'

Some advisors are executing tax strategies while others are preparing for upcoming TCJA changes by running projections.

"Mark Baran, managing director at CBIZ's national tax office, stated that each tax profile is unique and there may not be significant changes in some cases."

Lawmakers may face opposition from outside groups regardless of the election outcome, as preparations are already underway to challenge TCJA provisions, adding to the uncertainty, he stated.

"Baran stated that making the decision to act is a significant step, but he believes it is often premature."

Estate planning typically involves a multiple-year strategy, he said.