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The Tax Sunset Was Averted—Now It’s Time to Refocus Your Strategy
It’s December 5, 2025. For years, taxpayers and advisors have been preparing for the dreaded “Tax Sunset”—the scheduled expiration of key provisions from the 2017 Tax Cuts and Jobs Act (TCJA). The anxiety was justified, and much of this year’s planning revolved around bracing for higher tax rates and a drastically lower estate exemption.
But now the landscape has shifted. With the passage of the new legislation—often referred to as the New Tax Act—those cliffs have been avoided. Individual tax brackets remain intact, the higher standard deduction stays in place, and the enhanced estate exemption has been secured for the long term.
There’s noticeable relief across the planning world, but our work isn’t finished. The final weeks of 2025 still offer important opportunities to strengthen your tax position before January 1 brings us into a new, more stable—but still evolving—environment.
Below is your streamlined Year-End Tax Planning Checklist to help you prioritize what matters most right now.
1. Your Future Retirement Paycheck: Roth Conversions Still Matter
Even though tax brackets are no longer set to spring upward in 2026, Roth conversions remain a powerful planning tool. The top marginal rate stays at 37% rather than reverting to 39.6%, offering clarity as you weigh the cost of converting now versus later.
Why It Still Works
If you expect your income to rise in the future—through Required Minimum Distributions, business growth, inheritance, or a major asset sale—converting in a year with a known tax rate can still be a smart long-term move. A Roth IRA offers tax-free growth and tax-free withdrawals in retirement, which can be a cornerstone of income planning.
Action Step: Ask your advisor to calculate the exact conversion amount that fills up your current bracket without pushing you into the next one. This helps you lock in today’s rate while creating a more tax-efficient income stream later.
2. Estate Planning: A Permanently Higher Exemption Creates New Opportunities
Here’s the standout headline: the estate tax exemption is not falling back to roughly $7.25 million. In fact, it’s scheduled to increase to about $15 million per individual in 2026, indexed for inflation. For families focused on long-term wealth preservation, this is a major advantage.
How to Use the Stability to Your Advantage
You no longer have to rush planning out of fear, but you should use this moment of clarity to finalize strategies that benefit from today’s known rules.
Key Actions:
-
Work with your estate attorney to complete trust transfers using the current $13.99 million exemption amount.
-
Take comfort in the IRS’s anti-clawback rule, which protects gifts made under today’s higher exemption—even if future laws change.
This period offers rare certainty in estate planning. Use it.
3. Fine-Tuning Your Portfolio Before December 31
The end of the year is your last chance to adjust your taxable investment accounts and make strategic decisions around deductions and gains.
What to Prioritize
Tax-Loss Harvesting:
Selling positions at a loss can offset realized capital gains and reduce up to $3,000 of ordinary income—a straightforward, reliable year-end technique.
Deduction Timing:
The standard deduction for Married Filing Jointly remains high at $31,500, which means many households won’t itemize this year.
A Key Note on Charitable Giving
With new charitable deduction rules expected in 2026—potentially including higher AGI limits or enhanced incentives—you may benefit from deferring larger gifts into January instead of contributing everything in December.
A Donor Advised Fund remains a strong vehicle for “bunching” contributions, but timing now depends heavily on your 2026 income picture. Coordinate with your tax professional before finalizing your gifts.
4. Business Owners: The QBI Deduction Lives On
For owners of S-Corps, LLCs, and sole proprietorships, one of the biggest fears of 2025 has officially been put to rest: the 20% Qualified Business Income (QBI) Deduction is now permanent.
What That Means for You
While the deduction is no longer on the chopping block, you still need to manage your taxable business income to maximize the benefit.
Action Step: Before year-end, consider paying bonuses or accelerating deductible expenses to stay within the income thresholds that allow you to claim the full 20% deduction.
Your 2025 Year-End Tax Planning Checklist
|
Deadline |
Item |
Action |
|---|---|---|
|
Dec 31, 2025 |
Roth Conversions |
Convert strategically to lock in today’s known tax rates. |
|
Dec 31, 2025 |
Tax-Loss Harvesting |
Use losses to offset gains and reduce 2025 taxable income. |
|
Dec 31, 2025 |
Charitable Giving |
Complete gifts—or decide whether to defer for 2026 planning advantages. |
|
Dec 31, 2025 |
Estate & Gift Planning |
Finalize trust strategies using your current $13.99 million exemption. |
|
Tax Filing Deadline |
Retirement Contributions |
Fund IRAs, SEPs, or Solo 401(k)s for the 2025 tax year. |
Your Next Step
While the “Sunset” anxiety has lifted, the new rules introduce fresh planning opportunities—and the window to take action before December 31 is narrow.
If you want a clear, personalized strategy for your 2025 tax decisions, now is the moment.
Let’s review your plan together and make sure you’re fully prepared for the year ahead.
