With President-elect Trump preparing to take office in 2025, tax policies he proposed on the campaign trail will be a central focus moving forward, in particular the expiring Tax Cuts and Jobs Act of 2017.
Tax experts are advising high-net worth individuals to prepare for potential changes in tax law. The TCJA is set to expire at the end of 2025, and Congress and the President are expected to take up the issue next year.
Lindsey Gerlock, managing director at Andersen in West Palm Beach, an advisor specializing in income tax and estate planning and a member of the Community Foundation’s Philanthropic Advisory Council, said advisors and clients alike are monitoring whether key provisions, including those that affect charitable giving, will be extended.
The TCJA increased income limitations for cash gifts to certain charities, allowing individuals to donate up to 60 percent of their adjusted gross income in cash to charity, up from 50 percent. This increased limit could be at risk if Congress does not extend it, potentially impacting how much individuals can donate for tax benefits.
Gerlock noted that decisions around the TCJA’s provisions are unclear.
“Republicans will likely extend at least some of the tax cuts, which would have a significant impact on high-net worth individuals,” she said. For clients, this uncertainty affects both income tax and charitable planning.
The uncertain tax future also has implications for estate planning, particularly the exemption for gift and estate taxes, which is set to drop by half if the TCJA expires. With a Republican sweep in Congress, it’s less likely the gift and estate exemption will drop. However, there are still significant benefits to planning early and Gerlock advises clients not to wait until the last minute to make adjustments.
“There’s so much benefit to gifting now,” she said, explaining that current tax laws allow individuals to transfer wealth outside their taxable estate. Delaying these actions could result in higher taxes if the exemption decreases.
Gerlock highlighted the importance of meeting with financial advisors to assess clients’ income, tax situation, and philanthropic goals.
For clients interested in maximizing charitable donations, Gerlock suggests tools such as donor-advised funds and charitable trusts to manage assets. Options such as charitable remainder trusts and charitable lead trusts can also provide tax benefits while supporting philanthropic goals.
The Community Foundation can work with advisors and their clients.
“They have a great Donor Advised Fund platform that client’s should consider if they want to maximize charitable giving while having a positive impact on their community,” Gerlock said.
As year-end approaches, Gerlock advises that all documentation for charitable contributions, including substantiation and valuation for non-cash items over $5,000, are essential for IRS audits.
Gerlock’s message to clients is clear: meet with advisors and develop a strategy now, rather than waiting until the potential tax changes take effect in 2025.
