Maximizing tax benefits before the TCJA expiration in 2025
March 18, 2025
 | By Erin Belby |
Adapting charitable giving for TCJA changes
The Tax Cuts and Jobs Act (TCJA) is set to expire at the end of 2025, reverting tax brackets to higher rates, reducing the standard deduction, and lowering the estate tax exemption. These shifts have several implications for the savvy philanthropic tax planner.
With the anticipated increase in tax rates, strategies to accelerate income and defer deductions between 2025 and 2026 could create significant tax benefits. In 2026, more taxpayers will choose to itemize deductions when the standard deduction decreases and restores incentives for charitable giving.
Strategic approaches like “bunching” donations to exceed the standard deduction, using donor-advised funds for lump-sum contributions with flexible disbursements, and donating appreciated assets to maximize tax benefits while avoiding capital gains, may be advantageous. High-net-worth individuals may also consider charitable bequests to reduce estate tax liability, ensuring both financial efficiency and philanthropic impact.
Estate tax planning: How to prepare for the 2026 changes
In 2026, the federal estate tax exemption will drop significantly, potentially increasing tax exposure for many estates. If you’ve built significant wealth, you’ll want to reassess your estate plans to ensure tax efficiency and alignment with your philanthropic goals.
What’s changing?
The Tax Cuts and Jobs Act (TCJA) sunset will reduce the estate tax exemption from $13.99 million per individual ($27.98 million per married couple) in 2025 to approximately $6 million to $7 million per person (adjusted for inflation). Estates exceeding this limit will be subject to a 40% federal tax on amounts above the exemption. This change could impact individuals with $6 million or more in assets who previously were unaffected by estate taxes.
Who will be affected by the estate plan tax limits
If your estate is under $6 million ($12 million for couples), you won’t owe federal estate taxes. However, estates exceeding the new exemption could face tax liability, making early planning essential.
Estate planning strategies to minimize taxes and maximize impact
For donors, strategic charitable giving can reduce your taxable estate values while ensuring wealth supports meaningful causes. Estate plans should remain flexible to adapt to evolving tax laws. Gifts made in 2025 will be grandfathered under existing limits, allowing tax-free transfers to heirs, trusts, or charities.
Check with your tax advisor to learn more about this strategy and coordinating lifetime gifts. Charitable options such as donor-advised funds, charitable remainder trusts, and direct bequests can also help minimize tax exposure while supporting meaningful causes. Planning now ensures greater financial security for your beneficiaries.
With these changes on the horizon, it’s wise to revisit existing estate plans to ensure they align with the changing tax laws. Additionally, married couples can use portability elections to ensure estate tax exemptions apply to both spouses. Portability allows a surviving spouse to inherit any unused portion of their deceased spouse’s exemption. This benefit is not automatic and requires proper documentation at the time of the first spouse’s passing. Make sure to have a portability plan with your estate attorney and tax preparer.
Why updating your estate plan now is critical
The estate tax exemption reduction is set in law, and while Congress could extend it, relying on that outcome is uncertain. Taking action now ensures greater flexibility and control over your estate planning.
Plan now to protect your wealth
Beyond tax implications, estate planning is about protecting your legacy — ensuring your hard-earned wealth benefits your family, community, and cherished causes. By incorporating tax-smart charitable giving strategies, you can reduce tax burdens while making a lasting impact.
Here to help
La Crosse Area Community Foundation is here to help, whether through donor-advised funds, charitable bequests, or other tailored giving options. Now is the time to review your estate plan and explore ways to maximize both financial security and philanthropy.
For more information on how charitable giving can fit into your estate plan, contact us today.
NJ Jariwala contributed to this article.