Big tax changes aren’t expected in the short term given the Republican-controlled House and a Democratic Senate and White House. But what tax measures, if any, have a chance—and how should wealthy clients plan for them?

“With the recent passage of the budget bill, there’s little likelihood of any significant tax legislation being proposed until September,” says Andy Bass, chief wealth officer at Telemus in Southfield, Mich. “Between a divided Congress and the lack of a tax increase appetite, there’s low likelihood that there will be a significant tax reform bill in 2023.”

“We expect to see gridlock between the GOP and Dems as well as within the parties themselves, as evidenced by [House Speaker Kevin] McCarthy’s confirmation process,” says Mallon FitzPatrick, managing director and principal at Robertson Stephens Wealth Management in New York.

Yet “tax planning becomes somewhat more straightforward in a political environment like this,” says Erik Preus, head of investment solutions at Envestnet PMC in Minneapolis. “Investors can plan with relative certainty that they know what the tax landscape will be for this tax year and next.”

Planning today revolves around the sunset provisions of the Tax Cuts and Jobs Act, where ordinary rates in 2026 increase to what they were in 2017 and the estate tax exemption is halved. “This will come about unless Congress delays or modifies its implementation,” Bass says, noting that because of the political gridlock, nothing may be done. “Some [advisors and clients] are preparing but holding off implementation until after the 2024 election. The economy will also play a role. If we’re in a recession, there will be a limited appetite for major tax increases.”

Among the tax provisions set to change back in 2026 are the 2017-era individual marginal tax brackets, the standard deduction, the state and local tax deduction and the lifetime exclusion. The SECURE Act 2.0 and the proposed regulations on inherited IRAs, however, could affect people’s tax situation sooner, says Thomas Pontius, financial planner with Kayne Anderson Rudnick in Los Angeles.

The wealthiest clients should consider using their lifetime exclusion ($12.92 million this year) before the 2026 sunset, when it could revert back to its $5 million level before the Tax Cuts and Jobs Act (adjusted for inflation). At the very least, Pontius says, clients “should understand that some vehicles they can use allow them to make gifts intended for specific purposes other than just outright gifts to beneficiaries.”

Clients with consistent ordinary income should understand whether accelerating income now will have any benefit before the marginal tax brackets change back to their 2017 levels, he says. “Roth conversions are a terrific way to accelerate taxable income and fill up all the lower brackets in anticipation of marginal tax bracket changes or increased ordinary income in future years,” he says.

“We should be using the next two years to do proactive planning knowing there will likely be major changes beginning in 2026,” Pontius says.

Some of the measures that both parties might agree on, FitzPatrick says, include the repeal of the cap on state and local tax deductions, the regulation of cryptocurrency and a change allowing banks to accept business money from cannabis in states where the drug has been legalized. Lawmakers might also agree on expanding the earned income tax credit, increasing the child tax credit and creating a new tax credit for businesses.

“Clients can plan their taxes in the face of this uncertainty by proactively keeping track of their income and expenses, taking advantage of any tax credits they may qualify for and consulting with a qualified accountant or financial advisor,” says Chris McMahon, CEO of Aquinas Wealth Advisors in Pittsburgh.

“Republicans will likely attempt to enshrine certain measures such as lower income tax rates into permanent law, but we can’t rely on this,” FitzPatrick says. “We also expect Republicans to make a strong effort to salvage the 20% pass-through deduction from businesses to non-corporate taxpayers, another provision of the TCJA set to expire in 2025.” The GOP has also expressed interest in boosting large businesses through deductions for R&D expenses, interest expenses and bonus depreciation, he says.

“If the U.S. economy slumps further, we could envision a Republican House suggesting a recession income tax cut,” FitzPatrick says, and he reminds taxpayers, “Don’t worry about the circus in D.C. and focus on your long-term objectives and what’s controllable.”