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Regardless of whether the presidential candidates' campaign tax proposals come to fruition — and history shows the possibility of that happening — there is one tax issue the next president and our new Congress must address: the expiration at the end of next year of the tax cuts. and the Labor Act of 2017.

Since the law was passed through reconciliation, it has a sunset provision, meaning that unless new legislation is signed into law, after the end of 2025, key provisions of our federal individual income tax code will revert to what was in force before. For example, the top marginal tax rate could rise from the current 37% to the previous 39.6% and start at a lower income level. The alternative minimum tax is likely to apply to more taxpayers. The standard deduction would be reduced, but limitations on deductions for state and local income and property taxes would disappear, as would limitations on deductions for mortgage interest. A concern for many high-net-worth clients would be the halving of the estate tax exemption, which started at $10 million for the 2018 tax year and now stands at $13.61 million for individuals adjusted for inflation over the years. The exemption would automatically reset to $5 million, or roughly $7 million when adjusted for inflation.

Advisers and their clients have been clearly aware that major tax legislation would be needed in 2025 and have been reading the political tea leaves carefully in recent years to gauge who would control Capitol Hill and the White House when it was time to create the country's future. tax regime or to leave the current one in force. This year's race is so close that making confident predictions about the results seems foolhardy. Instead, since any legislation passed in 2025 won't take effect until the 2026 tax year, it's probably best to wait for the final election results before taking significant steps to reposition clients' portfolios. Here are some suggestions in the meantime:

• Consider a proactive stance now and in 2025. Even if the current tax law is extended or tax cuts are enacted, it makes sense to review clients' financial and tax plans before the end of 2024 to prepare for possibly higher taxes. For some clients, it may be possible to bring income forward this year. This would be a storm-ready move of sorts if it makes sense in the context of the client's total financial plan, because bringing income forward would allow clients to take advantage of current tax rates and allow for similar moves in 2025 .Next year, it may also make sense to take some capital gains if the political environment in 2025 indicates that an increase in the capital gains tax rate is likely.
• Be prepared for a lot of small talk and conceit. Unless one side makes a clean sweep of both chambers of Congress and the White House, any clear action on taxes will likely take time to unfold. Until then, there will be a lot of noise and name-calling from both sides of the street. However, if we see a closely divided government after the election, it is important to be clear about the likely outcome from an income tax perspective. And that is that some, if not most, of the 2017 provisions will expire and many investors will see their taxes increase. Since Democrats vetoed almost every provision of the 2017 tax law, if they only hold one branch of government, they will be in a strong negotiating position to let the sunset happen and return to the 2017 tax code— is.
• Tap on external resources. Considering the tax implications of complex portfolios can be daunting. Doing so in an environment of policy uncertainty is even more difficult. Many counselors have found this Envestnet Tax Overlay Service for managed accounts it can be a very useful tool to help them better manage the tax-related aspects of client portfolios. By enabling investors to set specific capital gains budgets through a patented risk optimization engine, the service brings clarity and peace of mind to end investors. It also underscores the value of their advisor by demonstrating real dollar savings through active tax management.

_{The information, analysis and opinions expressed herein are for informational purposes only and do not necessarily reflect the views of Envestnet. These views reflect the judgment of the author as of the date of writing and are subject to change at any time without notice. Nothing contained in this section is intended to constitute legal, tax, accounting, securities or investment advice, nor an opinion regarding the suitability of any investment, nor a solicitation of any kind. Intended for investment professionals only. Past performance is not indicative of future results.}

Neither Envestnet nor its representatives provide tax, accounting or legal advice. Any tax returns contained herein are not intended or written to be used and may not be used for the purpose of evading US federal, state or local tax penalties. Taxpayers should always seek advice based on their particular circumstances from an independent tax advisor.

Envestnet is not a law firm and, as such, does not provide legal or regulatory advice or opinions to any party or client. You should always consult the relevant regulatory authorities or legal counsel as appropriate.