Investing in Your Future: Smart Investment Strategies for Business Owners

The upcoming expiration of key provisions from the Tax Cuts and Jobs Act (TCJA) in 2026 could significantly impact your financial situation. With current tax rates still lower, there are key opportunities to consider today before these changes take effect. For those who prefer quick takeaways, here are some immediate recommendations: Key Recommendations: Consider Roth Conversions Now: Lower tax rates today, due to the TCJA, make Roth conversions attractive. However, your personal circumstances, such as age and whether you plan to move to a lower-tax state, should influence your decision. Plan for Changes to Mortgage Interest Deduction: The current $750,000 limit on mortgage interest deduction will revert to $1 million in 2026 when the TCJA provisions sunset, and home equity loan interest up to $100,000 will become deductible again. Take Advantage of SALT Deduction Expiration: The $10,000 cap on state and local tax (SALT) deductions will expire in 2026, potentially allowing individuals in high-tax states to deduct more of their taxes. Prepare for Miscellaneous Deductions: Deductions for unreimbursed employee expenses and tax prep fees, which the TCJA eliminated, will return in 2026 if they exceed 2% of your adjusted gross income. Review Estate Tax Planning: The estate tax exemption will revert to pre-TCJA levels in 2026. The exemption amount is expected to decrease from its current level of $12.92 million for individuals and $25.84 million for couples to approximately $5 million for individuals and $10 million for couples, adjusted for inflation. As we approach 2026, the expiration of certain provisions from the Tax Cuts and Jobs Act (TCJA) could bring significant tax changes. By acting early, you can take advantage of today’s lower tax rates while preparing for what’s ahead. One key area to consider is Roth conversions. Under the TCJA, tax rates are currently lower, making it an ideal time to convert traditional IRA funds into a Roth IRA. This strategy could be beneficial if you anticipate a higher tax bracket in the future. However, your personal circumstances matter. If you currently live in a high-tax state but plan to move to a lower-tax state in retirement, delaying the conversion might be a better option. Age also plays a role in deciding the best time to convert. Mortgage Interest Deduction Another major change tied to the TCJA is the mortgage interest deduction. At present, taxpayers who itemize deductions can deduct interest paid on the first $750,000 of mortgage debt, a limit set by the TCJA for debt incurred after December 15, 2017. However, when these provisions expire in 2026, the limit will revert to $1 million. Additionally, interest on home equity loans of up to $100,000—regardless of the loan’s purpose—will once again be deductible. If you have a large mortgage or home equity loan, these changes could increase your deductions, offering valuable tax savings. It’s important to review your mortgage situation and plan for these upcoming adjustments. SALT and Miscellaneous Deductions The state and local tax (SALT) deduction cap, which was a hallmark of the TCJA, is another significant change set to sunset in 2026. Currently, the deduction is capped at $10,000, limiting the benefits for individuals in high-tax states. Once the cap expires, you’ll be able to fully deduct state and local taxes if you itemize your deductions. Additionally, miscellaneous deductions, including unreimbursed employee expenses and tax preparation fees, were eliminated by the TCJA. These deductions will return in 2026, allowing those whose expenses exceed 2% of their adjusted gross income to claim these deductions once more. Estate Tax Changes Another significant change on the horizon is the estate tax exemption. Under the TCJA, the estate tax exemption was doubled, allowing individuals to pass on up to $12.92 million and couples up to $25.84 million without incurring federal estate taxes. However, when the TCJA sunsets in 2026, this exemption will revert to pre-TCJA levels, approximately $5 million for individuals and $10 million for couples, adjusted for inflation. This reduction in the exemption amount could affect your estate planning, especially for those with significant assets. Take Action Now With the expiration of the TCJA provisions on the horizon, now is the time to start planning. Whether you’re considering a Roth conversion or want to understand how these changes to deductions could impact you, it’s essential to consult with your financial advisor. Once November’s election is over and we have added clarity about potential tax policies, we will be prepared to execute a proper plan for you. If you’re already a client, reach out to your advisor today to discuss your options. If you’re not yet a client of Meritrust, don’t wait—call to speak with one of our advisors or schedule a meeting today. Together, we can review your current financial plan and ensure you’re maximizing the opportunities available before the TCJA sunsets in 2026. These potential tax changes could have a lasting impact on your financial future, and being prepared to take action quickly could help you secure greater financial stability for the years ahead.

Watch as your Meritrust Team discusses the basics of Social Security and Medicare while covering some of the ways in which financial planning can help you make the right choice for you and your goals.