Navigating Tax Law Shifts in 2025: Insights for High-Net-Worth Individuals
Staying informed on tax law changes isn’t just beneficial—it’s essential, especially for high-net-worth individuals (HNWIs). As we approach 2025, tax laws are expected to shift, introducing new complexities that could substantially affect financial strategies for HNWIs.
This blog will provide a comprehensive overview of the most significant tax law changes for the 2025 tax year and their potential effects, guiding HNWIs toward informed, proactive planning. Let’s get started!
Overview of Major Tax Law Changes in 2025
With the 2017 Tax Cuts and Jobs Act (TCJA) set to expire after the 2025 tax year, the financial landscape is already shifting.
The changes span multiple areas, affecting everything from basic income tax rates to sophisticated estate planning strategies. The most notable adjustments include:
Revisions to income tax brackets affecting high-income earners
Modifications to capital gains treatment
Significant updates to estate tax exemptions
Changes to deductions and credits
These changes reflect broader economic policy objectives to address fiscal challenges while maintaining economic growth. Legislators are also focusing on measures that could increase tax revenue from higher-income brackets to support broader fiscal objectives.
Impact on Income Taxes
TCJA lowered individual income tax rates across most tax brackets, so with the sunset of TCJA,
HNWIs can expect income taxes to rise.
For the 2025 tax year, experts anticipate individual income tax rates to revert to pre-TCJA amounts, which means that most taxpayers will see a tax rate increase. These changes are likely to impact tax liabilities substantially, especially for those in the highest brackets. For example, the middle tax bracket will jump from 24% to 28%, and the top tax bracket will jump from 37% to 39.6% starting January 1, 2026.
How can you prepare for these shifts? Here are 3 planning tips:
Roth IRA Conversion: A Roth IRA Conversion can help you accelerate income and take advantage of lower tax rates if you anticipate your income to be lower in 2026.
Income Timing: Consider deferring income to later years if possible, particularly if rates are set to decrease. Conversely, accelerating income into the current year may be beneficial if rates are anticipated to rise over the coming years.
Deduction Strategies: Maximize deductions in 2025 by accelerating deductible expenses, potentially reducing taxable income before higher rates take effect.
Capital Gains Tax Changes
Long-term capital gains rates are seeing notable adjustments, particularly affecting high-value investment portfolios. Understanding these changes is crucial for portfolio management and investment timing decisions.
The long-term capital gains tax rates will remain the same at 0%, 15%, and 20%, but the income thresholds have shifted. HNWI that fall into the 15% and 20% rates will see the following shifts for the 2025 tax year:
15% tax rate:
Single filers: $48,351 to $533,400 (compared to $47,026 to $518,900 in 2024)
Married filing jointly: $96,701 to $600,050 (compared to $94,051 to $583,750 in 2024)
20% tax rate:
Single filers: Over $533,400 (compared to $518,901 or more in 2024)
Married filing jointly: Over $600,050 (compared to $583,751 or more in 2024)
Higher capital gains taxes may encourage HNWIs to consider longer holding periods, as selling assets could lead to higher tax liabilities. Some individuals may shift their investment strategy to avoid triggering substantial capital gains taxes. HNWIs may consider tax planning strategies such as:
Tax-Loss Harvesting: Offset gains with losses from underperforming assets, reducing the overall capital gains tax burden.
Tax-Advantaged Accounts: Utilize accounts such as IRAs and 401(k)s to defer capital gains on investment growth, optimizing after-tax returns.
Estate and Gift Tax Revisions
The TCJA increased the lifetime estate and gift tax exemption to the highest it’s ever been at $13.16 million per person in 2024. At the end of 2025, the estate and gift tax exemption is expected to be $7 million per person, nearly half of what it is now.
This drastic estate and gift tax exemption cut could significantly increase the number of estates subject to taxation. To ensure that your legacy remains intact and minimize future tax burdens, HNWIs should consider implementing gifting strategies and trusts.
Gifting Strategies: Donor-advised funds, donating non-cash assets like real estate, or charitable remainder trusts can be a great way to reduce the size of your estate. HNWIs can also utilize annual gift exemptions to transfer wealth incrementally.
Trusts: Establishing trusts, such as irrevocable or generation-skipping trusts, can protect assets and potentially reduce estate taxes by moving wealth efficiently outside the taxable estate.
Changes to Deductions and Credits
The TJCA increased the standard deduction. In 2024, the standard deduction is $29,200 for couples filing jointly and $14,600 for individuals. In 2026, the standard deduction will likely decrease by half, requiring individual taxpayers to itemize their deductions.
These changes could impact various deductions, including:
State and local tax (SALT) deduction modifications
Business expense treatment
The SALT tax deductions have greatly impacted taxpayers in high-tax states like New York. The TCJA imposed a $10,000 cap on the SALT deduction for individual taxpayers, and as this remains in effect, HNWIs with high incomes and property taxes could face higher tax liabilities.
Another deduction set to expire is the Qualified Business Income (QBI) deduction, enacted to reduce taxes for business owners. The deduction applies to ‘pass-through’ businesses reporting income at the individual level, which includes sole proprietors, partnerships, and S-corporations. At this time, it’s unclear whether Congress will extend these tax breaks, so it’s essential for business owners to reevaluate their tax planning and investment strategies.
Prepare For Tax Law Shifts With North Ridge Wealth Advisors
The tax law changes of 2025 present both challenges and opportunities for high-net-worth individuals. From income taxes and capital gains to estate planning and deductions, these changes demand a proactive and informed approach with a financial advisor to protect wealth and support long-term goals.
By preparing tax planning and investment strategies early, HNWIs can safeguard their financial future and position themselves advantageously for the years ahead. Get in touch with our team to see how you can better position your finances for the 2025 tax year and beyond.
Always consult a financial, tax, or legal professional familiar with your unique circumstances before making any financial decisions. This material is intended for educational purposes only. Nothing in this material constitutes a solicitation for the sale or purchase of any securities. Any rates of return are historical or hypothetical in nature and are not a guarantee of future returns, which may be lower or higher. Investments involve risk. Investment values will fluctuate with market conditions and security positions, when sold, may be worth less or more than their original cost. Specific examples shown are not necessarily representative of the experience of North Ridge Wealth Advisors clients.