If you’re retired or approaching retirement, the 2024 tax season might have you focused on your current return. But savvy planners know that true wealth management goes beyond annual tax preparation—it requires a comprehensive tax plan integrated with your overall financial strategy, particularly with significant tax changes looming at the end of 2025.

As you work with your tax professional on your 2024 return, now is the perfect time to also consider how the potential sunset of the Tax Cuts and Jobs Act (TCJA) provisions could impact your retirement finances in the coming years.

Here’s What to Know About the Potential Changes

Despite President Trump’s reelection and his administration’s anticipated push to extend the TCJA provisions, the possibility of a bipartisan agreement remains uncertain. This uncertainty creates both challenges and opportunities for retirees.

If no legislative action is taken, several tax benefits that have been in place since 2017 will expire on December 31, 2025, potentially resulting in higher tax bills for many Americans in 2026 and beyond.

Three Key Areas Retirees Should Watch

1. Tax Bracket Shifts

For retirees carefully managing their income to stay within certain tax brackets, these potential changes are significant:

• The 12% tax bracket would increase to 15%
• The 22% tax bracket would increase to 25%
• The 24% tax bracket would increase to 28%

What this means for you: With the same retirement income, you could find yourself paying more in taxes starting in 2026. This makes 2025 a critical planning year for income strategies.

2. Standard Deduction Reduction

The TCJA nearly doubled the standard deduction, simplifying tax filing for millions of Americans who previously itemized. If these provisions expire:

• The standard deduction would decrease significantly
• More retirees would need to track and itemize deductions
• Tax preparation could become more complex

What this means for you: If you’ve been taking the standard deduction, you might need to revisit itemizing strategies and keep more detailed records of deductible expenses.

3. Estate Tax Exemption Reduction

Perhaps the most significant concern for many retirees is the scheduled reduction in the estate tax exemption:

• Current exemption (2025): $13.99 million per individual
• Projected exemption after sunset: Approximately $7 million per individual

What this means for you: If your estate is valued between $7 million and $14 million, your heirs could face estate taxes that wouldn’t apply under current law. Even with estates below these thresholds, the reduced exemption makes proper estate planning more important than ever.

The Cost of Doing Nothing: Why Smart Tax Planning Strategies Start Now

Many retirees make a common mistake: waiting until tax season to think about tax planning. By then, most opportunities to legally reduce your tax burden have already passed. Here’s why proactive planning makes a difference:

Time is Your Greatest Advantage

Some of the most effective tax-saving strategies require implementation well before year-end. For instance, Roth IRA conversion decisions, capital gain or loss harvesting, and strategic retirement account distributions need careful planning that simply can’t be done effectively in December.

Today’s Tax Environment May Be More Favorable

With tax rates potentially increasing after 2025, many retirees are working with their advisors to:

• Consider Roth conversions at today’s lower tax rates
• Evaluate the timing of major income events
• Review estate planning documents and gifting strategies

Peace of Mind Through Preparedness

While there’s always a possibility that some TCJA provisions may be extended, creating a flexible tax plan now gives you protection against various scenarios. Working with a knowledgeable financial advisor who understands tax management can help you develop strategies that work regardless of what happens politically.

Start Managing Taxes as Part of Your Comprehensive Plan

Our PCA advisors can help you navigate these tax uncertainties as part of a comprehensive wealth management approach. Unlike tax preparers who focus solely on annual returns, our advisors develop strategies that optimize your tax situation over your lifetime. We stay ahead of tax law developments so you don’t have to, ensuring your entire financial plan is prepared for whatever tax changes may come.

Experience the peace of mind that comes with having a holistic financial team looking after every aspect of your financial well-being, including minimizing your tax burden over your lifetime. Find Your Local PCA Advisor today to schedule a comprehensive wealth management review that includes tax optimization strategies.