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The Background and Potential Impact

The 2017 Tax Act, often referred to as the Tax Cuts and Jobs Act, amended the Internal Revenue Code to reduce tax rates and modify deductions for individuals and corporations. Although the 2017 law made some permanent changes, there are several critical changes that are set to expire on December 31, 2025.

The upcoming election could impact the expiration of the 2017 Tax Act and provisions could be extended, but there is no guarantee. Preparing early can help you take advantage of these tax planning opportunities.

It's Important to Act Now 

Take the time to:

  1. Access tax and legal professionals, who likely will be inundated in 2025.

  2. Determine the best approach for your family’s goals and circumstances.

  3. Implement techniques thoughtfully to minimize the risk of a successful IRS attack.

  4. Consider whether and how to craft trusts, especially spousal lifetime access trusts, if necessary, to help avoid the reciprocal trust doctrine.

  5. Seek to manage your income tax liability.

Notable Provisions

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Estate & Gift Tax Exemptions

The 2017 Tax Act temporarily doubled the gift and estate tax exemptions and indexed them for inflation. Today, the exemptions total $13.61 million per individual and $27.22 million for married couples. The substantial increase provides breathing room for many families, dramatically reducing the number of estates subject to federal estate taxes.

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Individual Taxes

In addition to the estate and gift tax exemption amount, individual tax rates are set to increase and revert to pre-Tax Act levels. Without new tax legislation prior to December 31, 2025, individuals and married couples could pay taxes at a higher rate.

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Charitable Giving

The 2017 Tax Act made three significant changes that affect incentives for charitable giving:

  1. Lowered individual income tax rates, effectively reducing the value of a charitable contribution deduction.
  2. Increased the standard deduction, so that contributions when combined with a taxpayer’s other itemized deductions amounting to less than the enhanced standard will not generate a tax benefit.
  3. Increased the charitable contribution deduction percentage cap to 60% from 50% of adjusted gross income, thus allowing more of a deduction for those to whom this applies.
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Itemized Deductions 

Itemizing deductions is one strategy that can help reduce your income tax bill when the total of the deductions exceeds your standard deduction.

On a tax return, one uses the standard deduction or itemized deductions, whichever reduces the tax bill the most. The 2017 Tax Act nearly doubled the standard deduction for all filing statuses. As a result, those with modest itemized deductions benefitted and for many, this eased their tax return preparation. After December 31, 2025, the standard deduction will be about half, adjusted for inflation.

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Gifting Strategies

The temporary doubling of the estate, gift and generation-skipping transfer tax exemptions is scheduled to sunset on December 31, 2025. As a result, these exemptions will be reduced from approximately $14,010,000 to $7,200,000 per individual and from approximately $28,030,000 to $14,400,000 per married couple.

A Team of Specialists

Our team of knowledgeable professionals can help you understand the implications of the tax changes as they are happening.

Leading this effort is Glenmede’s Chief Wealth Strategist and American College of Trust and Estate Counsel Fellow, Mark R. Parthemer, who has over three decades of experience in trust, estate and tax planning.

 

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Educational Materials

2024 Election Spotlight: Presidential Candidates' Views on Estate Tax

Read

Unpacking Taxation of Unrealized Capital Gains

Read

2024 Election Spotlight: A Comparative Analysis of Key Income Tax Positions

Read

We're here to help

Glenmede Private Wealth is privileged to have the opportunity to partner with you. 

This material provides information of possible interest to Glenmede’s clients and friends, and does not provide investment, tax, legal or other advice. Any advice in this communication is not intended or written by us to be used, and cannot be used, for the purpose of (i)avoiding penalties that may be imposed by any governmental taxing authority or agency, or (ii) promoting, marketing or recommending to another party any matters addressed herein. Any opinions, recommendations, expectations and/or projections expressed herein may change after the date of publication. Information obtained from third-party sources is assumed to be reliable but may not be independently verified, and the accuracy thereof is not guaranteed. Any potential outcome discussed, including but not limited to performance, legislation or tax consequence, ultimately may not occur due to various risks and uncertainties. Clients are encouraged to discuss any matter discussed herein with their tax advisor, attorney or Glenmede Relationship Manager.