The Tax Cuts and Jobs Act (TCJA), which was signed into law in December 2017 and took effect in January 2018, will expire on December 31, 2025, unless Congress approves an extension.

The TCJA contained many great tax-saving measures—too many to fully describe in this article—but the most important were reduced tax rates for individuals, a higher standard deduction, a cut in the alternative minimum tax (AMT), 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 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, so it’s not too early to start now.

What will change in January 2026?

Many federal income tax provisions under the TCJA will revert to pre-2018 levels if Congress does nothing. To illustrate, we’ll take 2017 federal income brackets and estimate the impact on your income tax as follows:

• Federal income tax rates and brackets: A single person with an adjusted gross income (AGI) between $100,526 and $191,950 currently pays a federal income tax rate of 24%. After the TCJA 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 deductions: Married couples filing jointly will be able to claim a flat-rate deduction of $29,200 in 2024, which will be reduced to about $12,700.

• Alternative minimum exemptions and phase-out amounts: To ensure that high-income taxpayers pay a minimum amount of tax, the current AMT phase-out amount of $609,250 for individuals will be reduced to about $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 cut in half to $1,000 in 2026. The other $500 dependent allowance will be eliminated entirely.

But there is at least one bright spot: the state and local tax deduction limitation (SALT) is expiring. This means that taxpayers in high-tax states can deduct the amount of their state and local taxes from their federal tax return.

Income tax strategies to consider

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

• Defer income if possible: If you defer income from bonuses or consulting work to 2025, you can reduce your taxable income for 2026. Also, try not to defer 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.

Estate planning strategies to consider

For wealthy investors and families, the expiration of the TCJA’s estate planning benefits 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 measures to protect the estate can be seen in the following example:

An elderly couple’s estate, currently worth $20 million, is not subject to estate taxes, but it will be in two years when the TCJA expires. Currently, they 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 assume 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 of 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 of up to $18,000 annually to any number of people in 2024, provided your total tax-free gifts over the course of 2024 do not exceed $13.61 million. In 2026, the federal estate tax exemption will revert to pre-2018 amounts, which will be about half the current amount. In addition, gifts to qualified 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 a variety of estate planning goals while reducing the size of your estate. A Spousal Lifetime Access Trust (SLAT), for example, allows the donor to make gifts to the SLAT, 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 these assets from the taxable estate.

If any of these strategies appeal to you, don’t wait!

One reason not to put off estate planning is that it’s 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 advisor, or estate planning attorney before taking any action that could have serious financial consequences.