Legislation on the Move: Tax Watch for Advisors

Keeping up with an ever-evolving landscape of tax legislation can be a full-time job. Many advisors leverage the Community Foundation to help stay on top of potential tax changes, especially those that might impact charitable planning in 2025 like the TCJA expiration, introduction of a universal deduction, and a tax code rewrite.

Here’s a quick rundown of three tax changes to follow: 

1. Sunsetting Provisions of the Tax Cuts and Jobs Act of 2017 

The Tax Cuts and Jobs Act (TCJA)’s scheduled expiration at the end of 2025 will revert key tax policies to pre-2017 levels, potentially affecting charitable giving incentives.  

For example, the top individual tax rate is scheduled for a bump from 37% to 39.6%, potentially increasing the benefits of charitable tax deductions for your high-income clients. At the same time, the limit for cash donations to public charities is slated to drop from 60% of AGI to 50%, reducing the deduction for some of your clients. Finally, the estate tax exemption is scheduled to drop to approximately $7 million per individual.

Because the exemption would nearly be cut in half, and therefore more estates would be subject to tax, a larger subset of your clients could benefit from charitable bequests to avoid estate tax. All of this assumes, of course, that intervening legislation won’t prevent the sunset.  

2. Potential Expansion of Charitable Deduction

Proposals like the Charitable Act aim to introduce a universal deduction for non-itemizers, broadening tax incentives for your clients across income levels: It would set the cap at approximately $4,500 for individuals or $9,000 for joint filers.  

3. Tax Code Rewrite on the Horizon?

Above all, the 2025 TCJA expiration may trigger the first major tax code rewrite in decades, which would have a ripple effect in many areas of your clients’ lives, including how tax changes may influence their charitable giving and, in turn, the nonprofits they care about. Post-TCJA, charitable giving dropped by as much as $20 billion, with an estimated 23 million households switching to standard deductions in the wake of reduced tax benefits, according to one study.  

Keeping An Eye on Tax Changes

While we’re not tax experts, the Community Foundation team keeps an eye on developments where tax policy and charitable giving intersect. We make it a point to stay informed and welcome conversations with you and your clients as changes emerge that may impact charitable plans.

If you have questions or simply want to have a conversation with someone who cares, reach out to Kayleigh Rae Stampfler at kstampfler@racf.org or 585.341.4409.