The Tax Cuts and Job Creation Act, signed in December 2017 and enacted in January 2018, expires on December 31, 2025, unless Congress approves an extension.

The Tax Cuts and Jobs Act included many great tax-saving measures—too many to fully describe in this article—but the most important of these were reduced tax rates for individuals, a larger standard deduction, a cut in the alternative minimum tax, and a greatly increased exemption from the federal estate and gift tax. Unless Congress steps in and passes new legislation, all of these measures will be gone at the end of December 2025.

Fortunately, there are some tax strategies you can use to lower your future tax bills. However, some of the more effective strategies take time to implement. It’s not too early to start now.

Many federal income tax provisions under the Tax Cuts and Jobs Act will revert to pre-2018 levels without congressional action. We’ll use 2017 federal income brackets for illustration purposes and estimate the impact on your income tax as follows:

• Federal income tax rates and brackets: A single person with an adjusted gross income between $100,526 and $191,950 currently pays a federal income tax rate of 24%. After the law expires, a taxpayer who falls closest to that income bracket will pay 28% (depending on how the final income tax brackets are determined for 2026).
• Flat-rate deduction amounts: Married couples filing jointly can claim a flat-rate deduction of $29,200 in 2024. That amount will be reduced to about $12,700.
• Alternative Minimum Tax Exemptions and Phase-out Amounts: To ensure that high-income taxpayers pay a minimum amount of tax, the current alternative minimum tax exemption amount of $609,250 for individuals will be reduced to approximately $120,700.
• Tax credits for children and other dependents: Currently, taxpayers can claim a tax credit of $2,000 for each child. This credit will be halved to $1,000 in 2026. The $500 credit for other dependents will be eliminated entirely.

But there is at least one bright spot: the cap on deductions for state and local taxes will be lifted. This means that taxpayers in high-tax states will be able to deduct the amount of their state and local taxes from their federal tax return.

There are at least two easy ways to prepare for possible higher income tax brackets in 2026:

• Defer your income if possible: If you defer your income from bonuses or consulting work to 2025, you can reduce your taxable income for 2026. Also, try not to defer your income to 2026, as this income may be subject to higher tax rates.

• Consider Roth conversions: If you transfer money directly from a traditional IRA to a Roth IRA, you’ll pay taxes on the converted amount at your regular rate, so if you act before the end of 2025, you’re effectively “buying” taxes on the sale.

For wealthy investors and families, the expiration of the estate planning benefits of the Tax Cuts and Jobs Act will have a significant impact. Federal estate tax exemptions will revert to pre-2018 amounts (adjusted for inflation), and new exemptions will be about half the current amount.

For single filers, who can currently deduct up to $13.61 million, that allowance will be reduced to about $7 million (based on the 2017 amount and adjusted for inflation).

The consequences of not taking steps to protect your estate can be seen in the following example. The estate of an elderly couple, currently valued at $20 million, is not subject to inheritance tax, but will be in two years when the law expires. They currently have simple wills in which they leave everything to each other.

The couple figures that with the current exemption amount of $27.22 million, they don’t have to worry about estate taxes. But let’s say Congress takes no action on the exemption issue and the federal exemption is reset to $14 million. At that point, their joint estate would exceed the exemption amount by about $6 million. At a 40% tax rate, the cost to their heirs due to their inaction would be about $2.4 million, reducing the value of the estate by 12%.

Whether you’re single or married filing a joint tax return, if your net worth brings you close to the federal exemption limit for 2017, you should review your tax planning with your financial advisor and your estate planning attorney. Strategies you might consider include the following:

• Annual and lifetime gifts: You can make tax-free gifts annually to any number of people valued at up to $18,000 in 2024, provided your total tax-free gifts over your lifetime do not exceed $13.61 million in 2024. In 2026, the federal estate tax exemption will revert to pre-2018 amounts, which will be about half the current amount. Additionally, gifts to approved charities are always tax-free, so if you were planning to gift assets to your family or charity anyway, now could be a good time to do so — and reduce the size of your taxable estate.
• Special trusts: There are a number of trust arrangements that can help you achieve various estate planning goals while reducing the size of your estate. A Spousal Lifetime Access Trust, for example, allows the donor to make gifts to the trust, taking advantage of the lifetime gift exception. After the donor dies, the beneficiary spouse receives net income and capital distributions; after the spouse dies, the secondary beneficiaries (usually the children and grandchildren) receive the remaining net income and capital. Other trusts can be structured to hold family business interests, insurance policies, or a primary residence, removing those assets from the taxable estate.

One reason not to procrastinate is that estate planning is a complex process that takes time. Detailed estate plans can take 12 to 18 months to develop. Start by getting your estate evaluated if you don’t already have one. Make sure you have or update basic estate planning documents like wills, powers of attorney, and health care proxies. Most importantly, contact a financial advisor to discuss your options well in advance of the December 31, 2025 deadline. And remember to talk to a financial advisor, tax preparer, or estate planning attorney before taking any action that could have serious financial consequences.

The opinions expressed in this material are for general information purposes only and are not intended to constitute specific advice or recommendations for any individual.