Every year brings tax complications. This year, given the potential expiring of some provisions of the Tax Cuts and Jobs Act (TCJA) at the end of 2025, may be more confusing than others, advisors say.

“This transition period is leading to a sense of urgency among high-net-worth individuals to optimize their tax strategies. This rush often leads to common mistakes,” said Joshua Hanover, managing director and office lead at CBIZ Marks Paneth’s Boca Raton, Fla., office. 

“We don’t generally say that clients make ‘mistakes,’ but [that] there are missed or lost opportunities,” said Chris Murray, practice leader in tax services and partner at Aspiriant in San Francisco.

Unless Congress decides otherwise, tax brackets will rise and estate tax exemptions will fall, advisors says.

“Many taxpayers neglect long-term planning and just focus on short-term gains,” Hanover said. “This can lead to significant tax liabilities when TCJA provisions expire, as the current lower tax rates and higher estate tax exemptions might revert to pre-TCJA levels.”

For example, Hanover said, traditional tax planning involves the acceleration of deductions and the deferral of income to push tax into future years. “In a situation where tax rates may very well rise, taxpayers adopting that form of tax planning are just deferring their tax to a higher taxed year,” he said.

Mistakes in gifting and bequeathing are two other common mistakes now, said Todd Neal, client management partner with Callan Family Office in West Palm Beach, Fla. These include failing to make tax-free gifts up to $18,000 per individual per recipient (under the current federal annual exclusion) or making payments directly to medical and educational institutions free of gift tax or without using a portion of a client’s gifting exemption.

Currently, an individual can transfer up to $13.61 million to heirs tax-free. After this TCJA provision expires at the end of 2025, “any amount transferred over this limit is subject to a 40% federal estate or the gift tax rate,” said Sam Petrucci, head of advice, planning and fiduciary Services at Neuberger Berman Private Wealth in New York.

“Taxpayers who wait in hopes that Congress decides to maintain the higher exemption beyond 2025 may find themselves rushing to implement strategies at the last minute—when attorneys are bombarded,” Neal said. Ways clients can use an exemption amount, he added, include forgiving an outstanding note; gifting liquid or illiquid assets outright or to an existing trust for beneficiaries; and establishing and gifting to a new type of irrevocable trust for named beneficiaries.

The key questions do remain: What should clients do? Will the TCJA go away at all or completely or will it just change? “The current environment seems to be leaning towards the notion of tax the rich by letting the Trump-era tax cuts sunset,” said James N. Mohs, associate professor of accounting at the University of New Haven in West Haven, Conn.

“Another big challenge is that it feels fairly unlikely that we’ll just see a pure expiration of TCJA,” said Jamie Hopkins, CEO of Bryn Mawr Capital Management. “We’ll likely see a new tax bill or an extension of the TCJA if Congress can't pass a new bill. I don't see either side of the political aisle benefiting from a lapse of TCJA. I recommend people start to plan this year and early next but [try] to implement closer to the end of 2025.”

Also, not all looming deadlines stem from the TCJA. Neal said wealthy clients and their advisors should review portfolios to harvest capital losses; make trust distributions to beneficiaries who are in lower tax brackets; and transition out of tax-inefficient mutual funds into more tax-efficient exchange traded funds and separately managed accounts. “Try to do this before capital gain distribution activity begins in earnest at year-end,” he added.

Still, advisors and their clients need to catch up now for this big tax change. “Advisors,” Hopkins said, “are still months behind really starting to understand what the changes would mean.”