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Are You Prepared for an Estate Tax Sunset?

Are You Prepared for an Estate Tax Sunset?

June 27, 2023

The Tax Cuts and Jobs Act (TCJA) is scheduled to sunset in 2026. What does this mean for you?

The TCJA was passed in 2017 and made significant changes to the U.S. tax code. Some of the key provisions of the TCJA include:

  • Tax cuts for individuals and businesses
  • A reduction in the corporate tax rate
  • Changes to the estate tax

The TCJA is scheduled to sunset in 2026, meaning that many of the provisions will expire unless Congress takes action to extend them.

If the TCJA sunsets, some of the changes that will take effect include:

  • The top individual income tax rate will revert from 37% to 39.6%
  • The estate tax exemption will be cut in half, from $25.84 million to $12.92 million for a married couple

These changes could have a significant impact on wealthy families, as they could face higher taxes on their income and estates.

Here are some additional things to consider:

  • The TCJA sunsetting could also impact businesses. For example, businesses that benefited from the TCJA's lower corporate tax rate could see their taxes increase.
  • The TCJA sunsetting could also impact state and local taxes. For example, some states may increase their own income taxes to offset the loss of federal revenue.

It may not be time to shift gears, at least not yet. Congress has a long history of extending or replacing expiring tax reforms with similar bills. The best place to start may be a conversation with your financial professional to evaluate your situation and make a plan considering multiple scenarios.