The sunset of the 2017 Tax Cuts and Jobs Act (TCJA) is swiftly approaching. In the absence of action by Congress the TCJA is set to expire on December 31, 2025. There are numerous considerations for families engaged in charitable giving to be aware of as we prepare for a reversion in the Tax Code to pre-2017 “levels.” Two areas of immediate impact will be the lowering of the ceiling for charitable contribution deductions, as well as the significant reduction in the lifetime estate and gift tax exemption.
The TCJA raised the ceiling for charitable contribution deductions from 50% to 60% of adjusted gross income (AGI). If the act sunsets, those deductions may again be capped at 50% of AGI. The TCJA roughly doubled the lifetime estate and gift tax exemption. If the act sunsets in 2025, the 2026 exemption may return to 2017 levels, adjusted for inflation. The current exemption for individuals in 2024 is $13.61 million, or for married couples, $27.22 million. This historically high rate is set to effectively be cut in half, with experts predicting that individual exemption will revert to $7M per person and $14M per couple.
Planning for these changes by appropriate tax and estate professionals is critical to preserve wealth for your family and provide unique and exciting opportunities to engage in legacy giving to your favorite charitable organizations. Be sure to consult with your tax and estate professionals regarding solutions to ensure you take advantage of the current rates before they expire.