Financial Planning | May 2025 Tax efficiency in the second half of the 2020s

The Republican administration in the White House and Republican-controlled Congress have already discussed legislative and regulatory changes to the tax code in the first few months since Inauguration Day. But over the next half-decade, any tax alterations passed into law will have to navigate some difficult budgetary terrain. With the U.S. national debt surpassing $36 trillion and annual deficits running over $2 trillion, there’s growing pressure to raise federal revenue that could directly conflict with tentative proposals to cut, or even repeal, certain taxes.^{Disclosure 1}

How could all this affect your long-term tax and estate planning? To help answer that question, Truist wealth strategist Mike Frost is here to provide an overview of some of the proposed tax code changes, a rundown of possible alterations to wealth transfer and preservation vehicles, and insights to help you maintain your strategic balance regardless of what happens. But also keep in mind three important things:

1. Taxes shouldn’t be the sole reason for your investment decisions, but tax strategies can be taken into account as part of your overall strategy.
2. The landscape can change very quickly as various bills get rewritten and legislators compromise to get changes passed, so check with your Truist Wealth advisor regularly for the most recent updates.
3. Truist Wealth does not provide tax advice, so always check with your tax professional for how certain policies may impact you.

In addition to potential high-impact tax code changes, legislative changes are being considered for some of the most tried-and-true tactics wealth strategists and advisors use to optimize wealth plans.

“There’s talk about altering a handful of time-tested wealth preservation vehicles and tactics that my teammates and I use regularly,” says Frost. “Having a grasp of what’s being proposed will help you work with us to make fast, informed decisions that conform to shifts in the financial landscape if and when changes or reversals in the tax code occur.”

• “Tax-exempt municipal bonds have historically enabled you to sidestep federal and, in some cases, state income taxes if you’re buying the bond from your resident state,” says Frost. “But President Trump has publicly entertained the idea of removing the tax-exempt advantage for municipal bonds when they’re used for nonessential services like the financing of a sports stadium.”
• “The home mortgage interest deduction currently allows for deductions after the first $750,000 of indebtedness—but with average home mortgages being substantially less than that amount, there are calls to recalibrate downward to $500,000 or $400,000 to align with middle-class purchasing habits,” says Frost. “If that happens, it will be important to pay attention to whether that change is extended to or excluded from high-net-worth tax brackets and work with your wealth team to adjust your strategy accordingly.”
• “State and Local Tax (SALT) deduction caps are currently set at $10,000 per individual, but reductions and repeals are being openly discussed—both of which would produce a significant rebound in tax relief for high-net-worth individuals,” says Frost—especially for those in high-tax states. “But even if that happens, you’ll need to plan dynamically and consider your course of action for a possible cap increase based on individual income levels or for an increase or repeal applied evenly across income brackets.”
• “The excise tax on endowments presently sits at a 1.4% rate on investment income for interest, dividends, and capital gains—a big advantage for tax-deferred wealth accumulation and the mitigation of tax burdens for your estate’s heirs,” says Frost. “But if proposals for an increase of as much as 10% to 15% over the next few years make it into law, you could see a drastic reduction in the efficiency of strategies like preserving family wealth through the use of private foundations to manage charitable giving to universities.”

While changes to these and other wealth preservation tactics and vehicles could be consequential to your overall strategy, they aren’t an indicator that your wealth plan requires a total overhaul. Instead, they signal the need for vigilance and cooperation with your wealth team, which empowers you to make fast, adaptive adjustments that align your financial road map with the legal and regulatory terrain.

“It’s the first 20 months of phase one where the potential for tax law changes to cascade is the highest and when maintaining strategic balance is the most important,” says Frost. “While achieving and maintaining that balance requires monitoring all these potential tax policy changes and working with your Wealth advisor, it also hinges on using the foundational aspects of your plan as the starting point for any adjustments.”

Any comments or references to taxes herein are informational only. Truist and its representatives do not provide tax or legal advice. You should consult your individual tax or legal professional before taking any action that may have tax or legal consequences.