### Financial Advisors Brace for 2025 Tax Cliff as Key Provisions Set to Expire

With 2025 fast approaching, leading financial advisors are gearing up for the expiration of tax breaks worth trillions of dollars, initially introduced under the Tax Cuts and Jobs Act (TCJA) during former President Donald Trump’s administration. This transformative act, implemented in 2017, brought in several critical changes to tax laws for individuals that are set to lapse post-2025 unless Congress intervenes.

One of the most crucial aspects of the TCJA was the introduction of lower federal income tax brackets, increased standard deductions, and a more significant estate and gift tax exemption. For instance, the lifetime estate and gift tax exemption in 2024 will be $13.61 million for individuals and $27.22 million for married couples. Once these provisions expire, these figures are expected to halve, imposing a 40% maximum tax rate on transfers exceeding the threshold.

Financial advisors have shifted their focus toward strategies to mitigate the impact of these potential changes. They are actively engaging in estate planning techniques to maximize the current exemptions. "That’s really been a large focus for us," said Peter Traphagen Jr., a certified financial planner and managing director of Traphagen Financial Group, which ranks No. 9 on CNBC’s 2024 FA 100 list.

The strategies employed by advisors vary significantly based on a family's financial situation, goals, and life expectancy, involving methods such as trusts, direct gifts, or funding educational plans like 529 college savings plans. Shea Abernethy, chief compliance officer for Salem Investment Counselors, stresses the importance of removing assets from estates in time to avoid interest or compounding, especially under the current favorable conditions. Abernethy's firm is listed as No. 8 on the FA 100 list.

Additionally, advisors are carefully considering the imminent rise in federal income tax brackets, set to revert to 10%, 15%, 25%, 28%, 33%, 35%, and 39.6% from 2026 if no legislative action is taken. "We are looking at strategies to accelerate income into the lower brackets now," remarked Samantha Pahlow, wealth management chair for Ferguson Wellman Capital Management. Her firm holds the No. 10 position on CNBC’s FA 100 list.

Pass-through businesses, including sole proprietors and S corporations, are being advised to accelerate income to take full advantage of the 20% qualified business income deduction, which could also sunset post-2025. Tax filers are being encouraged to strategize around itemized deductions and consider deferring them, given the expected reduction in standard deduction amounts after 2025.

As uncertainty looms over which provisions, if any, Congress may extend, advisors are diligently preparing their clients to navigate the potential tax cliff, ensuring they are well-positioned for any upcoming changes.