While it isn’t over until it’s over, we are now reasonably assured that our Personal Income Tax Rates will not increase at the end of 2025. Under the Tax Cuts and Jobs Act of 2017 (TCJA), tax rates were cut sharply and tax brackets were expanded, resulting in significant savings for most taxpayers. TCJA tax rates were scheduled to expire at the end of 2025, at which time a return to higher rates would cause taxpayers a great deal of pain.

Even worse is what a major tax increase would do to our national economy. Removing so much individual purchasing power would likely result in a recession of consequence. Had Trump been able to serve consecutive terms, TCJA would probably have been addressed years ago. Circumstances delayed the fix until this year, and our current Legislative Branch, with very narrow majorities in both the House and Senate, make passing almost anything difficult.

As financial advisors, we need reliable information in order to make effective plans for our clients and ourselves. Congress generally makes planning nearly impossible when they won’t tell us until the last minute what to expect. By far the biggest unknown is which tax rates would apply next year. While the law has not been inked yet, current progress in Congress is indicating a comfortable assumption regarding the steadiness of future tax rates.

In coming days, a framework should pass through the House of Representatives, but it will differ from the Senate version. During a process of Budget Reconciliation, the versions will come together in a grand compromise, with TCJA tax rates becoming the permanent law of the land.

In whatever final version of the Annual Budget, a variety of other changes will occur. In all likelihood, there will be a few provisions we don’t like, but the fundamentals should be conducive to planning for next year.

Last week, we discussed habits of Americans regarding taxes, and how most taxpayers will forget about the topic until next spring. We can’t be so flippant and serve our clients and radio listeners well. One of our goals is to keep people thinking and talking about taxes, with an eye toward making smart decisions.

With turmoil in the markets right now, we look for opportunities. Potentially profitable elements of a 2026 Plan include tax loss harvesting, whereby taxpayers can sell a security at a loss, which is “banked” until needed. The loss carry-forward can be used to offset other capital gains, or used to directly reduce tax liability in 2026 and beyond, up to $3,000 annually. Sellers need to be aware of “Wash Sale” rules, requiring a minimum of 31 days before repurchasing the same security.

In any market, being pro-active can produce future benefits.