As we continue 2025 and approach 2026, several significant changes in tax policy are expected to impact individuals, families, and businesses. These various changes stem from the expiration of provisions under the Tax Cuts and Jobs Act (“TCJA”) passed in 2017, and they could reshape the tax landscape. Here are a few major changes to be aware of:

Estate and Gift Tax Changes

The TCJA temporarily increased the estate and gift tax exemption amounts, which currently sit at $13.99 million per individual and $27.98 million per couple (as of 2025). However, this provision is set to expire in 2026, meaning that the exemption will revert to pre-2017 levels — between 6 and 7 million, adjusted for inflation. This change could result in substantial estate tax liabilities for individuals with estates exceeding the new exemption threshold. As a result, estate planning will become even more crucial.

Furthermore, the annual federal gift tax exclusion – commonly referred to as the “annual exclusion” – is the amount that a taxpayer may gift to another individual without incurring gift tax or using up the taxpayer’s lifetime estate and gift tax exemption. The 2025 annual exclusion amount is set at $19,000, up from $18,000 in 2024.

SALT Deduction Cap Changes

Since 2017, the TCJA has capped the state and local tax deduction at $10,000. This cap has been a significant concern for taxpayers in high-tax states, such as California and New York. While this cap is currently in place, there is ongoing discussion about whether it will be extended, increased, or eliminated altogether, and at the moment, it is unclear which direction it will go.

Top Individual Income Tax Rate Changes

The TCJA temporarily lowered the top individual income tax rate from 39.6% to 37%, but this change is also set to expire at the end of this year. As a result, the top rate could revert back to 39.6% unless further legislation is passed to maintain the lower rate.

Bonus Depreciation Phase-Out

When enacted by TCJA, bonus depreciation enabled businesses to immediately write off 100% of the cost of eligible property acquired and placed in service after Sept. 27, 2017, and before Jan. 1, 2023. Prior to TCJA, it was 50%. The bonus percentage is now decreasing 20 points each year (40% for 2025) and will fully phase out beginning Jan. 1, 2027. President Trump has proposed to reinstate and make permanent 100% bonus depreciation.

Conclusion

The tax landscape in 2025 will bring substantial changes, particularly as the TCJA’s provisions expire. These changes will affect individuals’ estate plans, tax liabilities, and business decisions. As we approach the expiration date, it’s crucial for clients to engage in proactive tax planning and consider adjustments to their strategies. Contact one of the attorneys at FGKS Law if you’d like to discuss your estate and tax planning strategies.