Summerlin Benefits Consulting Q&AAnswer
Mar 13, 2025 - 10:02 AM
The Tax Cuts and Jobs Act of 2017 (TCJA) made many changes to U.S. tax laws, and some of those changes included sunset provisions that will cause them to expire at the stroke of midnight on January 1, 2026, unless Congress acts to extend them. Republican leaders are moving to extend the TCJA however it is far from a sure thing. In Jan 2025 the U.S. Treasury released new analysis that is meant to give Congress options. President Trump favors extending all the expiring provisions, while Republicans have committed to bringing down federal spending so its going to be a balancing act.
Should the TCJA sunset at end of 2025, it will impact retirees.
The three key components of the TCJA that will impact retirees in 2026 are going to be the changes pertaining to income-tax, estate taxes, and gift taxing. Here is a breakdown for you: Income tax rates are set to increase, with the current rates of 10%, 12%, 22%, 24%, 32%, 35%, and 37% reverting to higher pre-TCJA rates of 10%, 15%, 25%, 28%, 33%, 35%, and 39.6%. Additionally, estate and gift tax exemptions will be cut nearly in half, which could have a significant impact on retirees. This, combined with mandatory withdrawals from retirement accounts, can increase taxes for many, especially those in retirement. Planning ahead with strategies like Fixed Indexed Universal Life (FIUL) insurance can help mitigate these impacts by offering tax-free growth and income.
