Wealth Insights
The financial impact of 2025 IRS tax changes

Article 11 min read

Updated March 17, 2025

The election may be in the rearview mirror, but uncertainty lingers around the state of the IRS tax laws as we adjust our sights beyond 2025.

“We don’t want to assume that because we have a Republican President and Republican Congressional majority that the current tax laws will definitely be extended,” says Cindy Campbell, Regions Senior Wealth Strategist in Florida. “As we look beyond 2025, we are advising our clients to prepare for two different scenarios.”

Scenario one: The Tax Cuts and Jobs Act of 2017 (TCJA) is extended, meaning not much will change from a planning perspective.

Scenario two: The Tax Cuts and Jobs Act of 2017 expires as scheduled and reverts back to the prior levels where marginal rates return to their permanent pre-TCJA levels, adjusted for inflation.

“If we don’t know what will happen, we are recommending that clients, who have a draft estate plan in place with their attorney, prepare for potential changes in advance,” shares Campbell. “You don’t want to try to connect with your attorney late in the year to start making changes. Prepare for the uncertainty by getting documents in place, but consider holding off on implementing a plan until there is more clarity on what’s next.”

Changes in 2025 at a glance

For the 2025 tax year, the standard deduction increases to:

$15,000 for single filers (an increase of $400)
$22,500 for head of household filers (an increase of $600)
$30,000 for married couples filing jointly (an increase of $800)

The IRS also increased a number of exclusions and specialty circumstances, which could create a notable tax opportunity for those who fall into certain categories.

The annual exclusion for gifts increases to $19,000 for individuals and $38,000 for married couples.
The annual exclusion for gifts to a non-U.S. citizen spouse increases to $190,000.
The estate tax exemption for inheritances increases to $13,990,000.

“Clients should begin thinking about what they may want to accomplish financially,” said Campbell. “On the estate side, the annual gifting exclusion increase to $19,000 in 2025 provides additional gifting opportunities for smaller gifts that can be made for life’s needs today. Anything from the purchase of a car for a child, expenses to pay for college or graduate school, or opening an investment account for a child.” That can be an important step for the road ahead and has the potential to help build a better financial future.

The increase in the lifetime gift and estate tax exemption of $380,000 is notable, Campbell says. “That $13.99 million lifetime gift tax exemption, up $380,000 from 2024, will become a significant part of the narrative for high-net worth clients,” said Campbell. “We expect to engage in more conversations around generational legacy planning, which often involves the transition of businesses, movement of other assets such as real estate and liquid investments to hedge the impact of future tax legislation – which remains uncertain beyond 2025.

An extension of the TCJA would allow for the next generation to enjoy such assets in the future while removing them from the current generation’s taxable estate, but until there is clarity around the fate of the current tax laws, which are set to sunset at the end of this year, it may be beneficial to consider making those moves now.”

The rise of Generation X

While headlines tend to focus on Baby Boomers and Millennials, recent data by KPMG International notes that Generation X, with an average net worth of $1.88 million, has more than double the average of their younger generation who have an average net worth of $757,000. Generation X isn’t too far behind their elder Baby Boomers who lead with an average net worth of $2.31 million.

According to recent Fed data, Generation X has grown steadily. Baby Boomers continue to hold the majority of the country’s wealth, at approximately $82 trillion in late 2024. Over the next few decades, that will shift with the great wealth transfer to Generation X and Millennials as the primary beneficiaries.

“Generation X has begun to evolve into a role many Baby Boomers have had over the past decades as the sandwich generation,” notes Campbell. “They are finding themselves taking care of their parents and children all while at or approaching their largest income earning years. In turn, they have also begun to inherit in greater frequency from inheritance and gifts. Generation X’s thumbprint for both wealth creation and receipt will create new rules of engagement from which the Millennials and future generations will build from.”

Speaking of Generation X and building wealth, there are additional provisions for contributing to retirement accounts that allow for catch-up contributions in 2025 starting at both age 50 where savers can set aside an additional $7,500 in a 401(k), 403(b) and governmental 457(b) plans and for those age 60-63 where that catch up amount goes up to $11,500.

Planning makes perfect

“We consider ourselves to be in the Golden Age of Estate Planning right now,” said Campbell. “And absent clarity from the new Administration on what will happen beyond 2025, this year’s tax laws remain favorable for impactful, generational legacy planning.”

No matter what generation you belong to, Campbell notes the current federal gift and estate tax rules are scheduled to sunset at the end of 2025 to pre-Tax Cuts and Jobs Act levels of 2017, adjusted for inflation.

“Wealth planning with a strategic focus will likely be more methodical, deliberate and thoughtful,” explains Campbell. “Depending on your financial picture, looking at your strategic wealth plan should be done sooner rather than later. A major purpose of planning is to prepare for scenarios and take advantage of new opportunities which may prove pivotal in strengthening your financial position during the ongoing generational wealth transfer. Testing financial goals and aspirations with financial science provides the best forecasting possible in strategy selection.”

Implementing a succession plan?

For business owners considering a sale or succession, Campbell suggests not letting the tax tail wag the dog.

“If income tax rates are going to change and some of the provisions may change, a client selling a business could end up paying more in taxes in the future.”

If you know you are ready to sell, now may be the time as the 2025 rates are locked through year-end, but beyond that, there are still many unknowns.

“If you’re still on the fence about selling your business, don’t push yourself over the fence just because you are worried about income taxes going forward, but if you are ready, it may be worth closing that sale in 2025.”

Common considerations

Equity of assets: With a married couple, often one spouse owns more assets than the other. This can potentially become an issue with estate taxes when the first spouse passes away. Campbell suggests married couples may want to look at equally dividing their assets as part of their estate planning. There are no tax consequences for passing assets between spouses.

“When titling doesn’t match estate tax planning that can lead to complications when one spouse passes away,” says Campbell. “This is something I recommend in cases where one spouse owns significantly more assets, regardless of the changes in tax laws as it will ultimately be advantageous to their estate planning.”
Appreciating assets: If a client has assets that are likely to appreciate significantly over their lifetime, such as income-producing real estate that they don’t need for their personal expenses, gifting can create a tax advantage.

“Gifting part of that real estate to their children takes the current value out of the parents’ estate and the appreciation is to the benefit of the children while not increasing the parents’ potential estate tax liability.”

Campbell often recommends transferring the appreciable asset into a trust rather than giving it outright to the kids. “If the trust is structured properly, the trust assets can be protected from estate tax when the parents pass away and when the children pass away.”