Cardinal Point Wealth Management is raising awareness among Canadian living in the U.S. about significant tax changes that may impact their financial planning in 2025. Key provisions from the 2017 Tax Cuts and Jobs Act (TCJA) expire at the end of 2025, and individual and corporate taxpayers are expected to face substantial tax rates, deductions, and credit adjustments.
Key Changes Expected in 2025
The upcoming expiration of the TCJA provisions will bring several critical changes:
1. Reversion to Pre-TCJA Tax Rates: Individual income tax rates will revert to their 2017 levels, which are higher than the current rates. For instance, the top rate will increase from 37% to 39.6% (Tax Policy Center).
2. Standard Deduction and Personal Exemption: The standard deduction will be roughly halved, and the personal exemption, eliminated by the TCJA, will be reinstated. This change will significantly reduce the standard deduction for single filers from its current levels.
3. Child Tax Credit: The child tax credit will decrease from $2,000 per child to $1,000 per child, and the $500 credit for non-child dependents will be eliminated (Tax Policy Center).
4. Estate and Gift Tax: The estate tax exemption will be reduced from its current level, potentially subjecting more estates to taxation. Similarly, the annual gift tax exclusion will be adjusted accordingly.
5. Qualified Business Income Deduction: The 20% deduction for qualified business income for pass-through entities will expire, affecting many self-employed individuals and small business owners.
6. Foreign Earned Income Exclusion (FEIE): The FEIE amount adjusted annually for inflation will be $126,500 for the 2024 tax year (filed in 2025). This helps expats exclude a portion of their foreign income from U.S. taxation.
7. Impact on Deductions: The cap on the state and local tax (SALT) deduction will be removed, benefiting taxpayers in high-tax states. However, other itemized deductions limited or eliminated under the TCJA may return.
Kris Rossignoli, Cross-Border Tax and Financial Planner at Cardinal Point, emphasizes the importance of proactive tax planning in light of these changes. “Canadian expats in the U.S. need to be aware of how the expiration of the TCJA provisions could affect their financial situation,” Rossignoli explains. “With potential increases in tax rates and reductions in deductions and credits, it’s crucial to review and adjust financial strategies accordingly.”
Navigating the Changes
Understanding these upcoming tax changes is essential for effective financial planning for Canadian expatriates residing in the U.S. The expiration of the TCJA provisions will alter tax rates and impact various deductions and credits that many expatriates have come to rely on. For example, the reduction in the standard deduction and the reinstatement of the personal exemption will necessitate adjustments in tax filing strategies.
Additionally, the changes to the child tax credit and the potential increase in estate and gift taxes require careful consideration, particularly for those with significant family and estate planning needs. Self-employed individuals and small business owners must also prepare for the expiration of the qualified business income deduction, which could result in higher taxable income.
Rossignoli advises expats to stay informed and consult with tax professionals to navigate these changes effectively. “Proactive planning is key,” Rossignoli notes. By understanding the implications of these tax changes and taking steps to adjust financial strategies, Canadian expats can mitigate potential tax liabilities and make informed decisions about their financial future.”
Key Takeaways
As 2025 approaches, Canadian expats in the United States should be vigilant about the upcoming tax changes and how they may impact their financial planning. With the expiration of the TCJA provisions, significant adjustments in tax rates, deductions, and credits are on the horizon. Cardinal Point Wealth Management continues to monitor these developments and is committed to providing valuable insights and guidance to help expats navigate the evolving tax landscape.
About Cardinal Point Wealth Management
Cardinal Point Wealth Management specializes in cross-border financial planning, investment management, and tax services for individuals, families, and businesses in Canada and the U.S. With a team of experienced specialists, they provide personalized solutions for cross-border clients. The firm mitigates tax exposure and reduces tax liabilities through strategic planning. Cardinal Point’s holistic approach integrates cross-border tax planning, investment advisory, and retirement planning to offer coordinated, efficient financial strategies. They aim to minimize tax burdens, preserve wealth, and help clients achieve their financial objectives effectively.
Media Contact
Company Name: Cardinal Point Wealth Management
Contact Person: Kris Rossignoli
Email: Send Email
Phone: 8662132036
Address:2255 Glades Road, Suite 324A
City: Boca Raton
State: FL 33431
Country: United States
Website: https://cardinalpointwealth.com/