How the expiring TCJA could impact your tax bill

The expiration of the Tax Cuts and Jobs Act (TCJA) at the end of 2025 is expected to increase taxes for many, with the average taxpayer potentially owing $2,000 more. However, the impact will vary based on factors such as income, location, and personal circumstances.

For instance, taxpayers in high-tax states may benefit from the removal of the $10,000 cap on state and local tax (SALT) deductions. Hypothetical scenarios illustrate a range of outcomes: a family in Missouri could see a $3,500 increase in taxes, a retired couple in Florida may face a $3,400 increase, while a high-earning individual in New York City could experience a $28,000 tax savings.

Financial advisors should consider tax planning strategies, such as using Roth IRAs, to mitigate the potential for higher future taxes. Consulting with a tax professional is advised to tailor strategies to individual circumstances.