YOUR BUSINESS AUTHORITY
Springfield, MO
Taxpayers only have this year and next to take advantage of the lower tax rates enacted by the Tax Cuts and Jobs Act of 2017. On December 31, 2025, barring an act of Congress, the current personal tax rates are scheduled to sunset and revert to the higher pre-TCJA rates in 2026. It’s a possibility worth planning for.
First, for background, let’s explore a couple of key items.
The American income tax system is a progressive system, meaning that the first dollar you make is taxed at a lower rate than the last dollar you make. The current tax rates for 2024 are 10%, 12%, 22%, 24%, 32%, 35% and 37%. The rates are scheduled to revert to the pre-TCJA tax rates, which are 10%, 15%, 25%, 28%, 33%, 35% and 39.6%.
In 2017, the Joint Committee on Taxation estimated 46.5 million Americans itemized their deductions when the standard deduction for married filing jointly was $12,700. In 2018, after TCJA, roughly 18 million Americans itemized. The standard deduction for 2024 is $29,200 for married filing jointly, adjusted for inflation. The personal exemption and other items are set to reappear along with the reduction of the standard deduction.
Finally, the estate tax exemption is scheduled to be reduced by roughly 50%. The estate tax exemption is the maximum amount an individual can leave at their death and not pay federal estate tax. In 2024, the exemption is $13.61 million per person, up $690,000 over 2023. The federal estate tax is also a progressive system reaching a rate as high as 40%, according to the IRS.
Given that backdrop, here are some ideas to discuss with your tax adviser ahead of the potential rate increases:
Work with your financial professionals to take control of your goals and have a plan for the possibility of higher tax rates in the years ahead.
Andy Drennen is a certified financial planner and senior portfolio manager at Simmons Private Wealth in Springfield. He can be reached at andy.drennen@simmonsbank.com.
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