Table of Contents
- The TCJA Extension Reality Check
- Move 1: Reassess Your Tax Efficient Investing Strategy
- Move 2: Maximize Your Section 199A Deduction
- Move 3: Optimize Your Estate Planning Before Future Changes
- Move 4: Rethink Your SALT Deduction Strategy
- Move 5: Accelerate Retirement Planning Services
- Move 6: Review Your Business Entity Structure
- Move 7: Plan for Future Tax Policy Uncertainty
The TCJA Extension Reality Check
While the Tax Cuts and Jobs Act (TCJA) provisions were originally scheduled to expire at the end of 2025, Congress passed the One Big Beautiful Bill Act in July 2025, extending most individual tax provisions and making the seven federal tax rates (10%, 12%, 22%, 24%, 32%, 35%, and 37%) permanent. This development fundamentally changed the tax planning landscape, but it doesn't eliminate the need for strategic action.
The extension means your standard deduction remains elevated, the $10,000 SALT cap continues, and the enhanced Child Tax Credit stays at $2,000. However, smart wealth management requires adapting to this new reality and positioning yourself for long-term success.
Move 1: Reassess Your Tax Efficient Investing Strategy
With tax rates now permanent, you can build a more confident long-term investment strategy. The certainty around the 0%, 15%, and 20% capital gains rates allows for better planning around asset location and tax-loss harvesting.
Focus on maximizing tax-advantaged accounts first. The extended provisions mean your traditional and Roth IRA contribution limits remain stable, making it easier to project long-term retirement planning services needs. Consider accelerating contributions to employer-sponsored plans, especially if you're in the 22% or 24% tax brackets that were preserved through the extension.
Municipal bonds become more attractive for high earners facing the permanent 37% top rate. The after-tax equivalent yield calculation now has stable inputs, making it easier to compare taxable versus tax-free investments. For investors in high-tax states still dealing with the SALT cap, munis from your home state provide additional value.
According to IRS guidance on investment income, proper asset allocation between taxable and tax-advantaged accounts can significantly impact your long-term wealth accumulation.
Move 2: Maximize Your Section 199A Deduction
The 20% qualified business income deduction for pass-through entities has been extended, creating ongoing opportunities for business owners and high-income professionals. This deduction can reduce your effective tax rate significantly if structured properly.
Review your business entity structure with your financial planning team. S-corporations, partnerships, and sole proprietorships can benefit from this deduction, but the rules around reasonable compensation for S-corp owners and the limitations based on W-2 wages require careful navigation.
Consider whether you're maximizing the deduction through proper income timing and business expense management. The deduction phases out for high earners, so income smoothing strategies become crucial for maintaining eligibility.
Move 3: Optimize Your Estate Planning Before Future Changes
The doubled estate tax exemption (approximately $28.6 million for married couples in 2025) has been extended, but this doesn't mean your estate planning is complete. Political winds can change, and future administrations might reverse these provisions.
Implement gifting strategies while exemptions remain high. Annual exclusion gifts ($18,000 per recipient in 2024, indexed for inflation) continue without interruption, but lifetime exemption amounts could face future pressure.
Review your trust structures and consider whether irrevocable life insurance trusts (ILITs) make sense in the current environment. The extended exemptions provide a window for more aggressive wealth transfer strategies that might not be available if future legislation reduces these thresholds.
For more comprehensive guidance on wealth management strategies, explore our services at tdwealth.net.
Move 4: Rethink Your SALT Deduction Strategy
The $10,000 state and local tax deduction cap remains in effect through the extension. If you're in a high-tax state, this limitation continues to impact your federal tax liability significantly.
Consider tax-efficient relocation strategies if your situation allows. Moving to states like Florida or Texas can provide substantial tax savings that compound over time. However, this decision involves more than taxes – factor in cost of living, business opportunities, and quality of life considerations.
For those staying in high-tax states, maximize the available deduction through careful timing of property tax payments and state estimated tax payments. Some taxpayers benefit from prepaying property taxes in December rather than waiting for the following year's due date.
Explore state-specific workarounds that have survived IRS scrutiny. Some states offer charitable contribution programs that provide state tax credits while preserving federal deductions.
Move 5: Accelerate Retirement Planning Services
With tax rate certainty, you can make more confident decisions about traditional versus Roth retirement accounts. The extended provisions create a stable framework for long-term retirement planning services that weren't possible during the uncertainty period.
Evaluate Roth conversion opportunities in the current rate environment. If you expect to be in similar or higher tax brackets during retirement, converting traditional IRA assets to Roth accounts at today's rates could provide significant long-term benefits.
Review your retirement planning strategy in light of the preserved contribution limits and catch-up contributions for those 50 and older. The certainty around required minimum distribution rules also allows for better distribution planning.
Consider the impact of Social Security taxation rules, which weren't affected by the TCJA extension. Strategic withdrawal sequencing from different account types can help minimize the taxation of your Social Security benefits.
Move 6: Review Your Business Entity Structure
The permanent 21% corporate tax rate, combined with the extended Section 199A deduction for pass-through entities, creates planning opportunities for business owners. Evaluate whether your current entity structure optimizes your tax situation under the extended rules.
C-corporations benefit from the permanent 21% rate, but consider the double taxation on distributions. S-corporations can access the Section 199A deduction while providing payroll tax savings through reasonable salary structures.
LLCs and partnerships offer flexibility in profit and loss allocation while maintaining access to the pass-through deduction. However, they typically don't provide the same payroll tax advantages as S-corporations.
Review your compensation strategies. The extended provisions affect how salary, distributions, and benefits are taxed, potentially changing the optimal mix for your situation.
For complex business situations, our business advice services can help navigate the intersection of entity choice and tax optimization.
Move 7: Plan for Future Tax Policy Uncertainty
While the TCJA extension provides near-term certainty, long-term tax policy remains subject to political changes. Build flexibility into your financial planning to adapt to potential future modifications.
Diversify your tax exposure through a mix of traditional and Roth retirement accounts, tax-efficient investments, and strategic asset location. This approach provides options regardless of future tax rate changes.
Stay informed about potential policy shifts that could affect high earners, business owners, and investors. Subscribe to reliable sources like the 1715 TCF podcast for ongoing insights into tax and financial planning developments.
Consider acceleration strategies for income or deductions if future policy changes seem likely. While you can't predict political outcomes, you can position yourself to respond quickly when opportunities arise.
Maintain adequate liquidity to take advantage of policy changes or market opportunities. The extended TCJA provisions provide stability, but having cash available allows you to capitalize on unexpected developments.
The TCJA extension eliminated immediate crisis planning but doesn't reduce the importance of proactive tax strategy. These seven moves help you optimize your current situation while building flexibility for future changes. Working with experienced financial planning professionals ensures you're maximizing opportunities while minimizing risks in an evolving tax landscape.
Tax planning remains a year-round activity that requires regular review and adjustment. The extended TCJA provisions provide a stable foundation, but individual circumstances change, and new opportunities emerge regularly. Stay engaged with your planning process to ensure your strategy evolves with your goals and the broader policy environment.
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