Looking Ahead, Not Over Your Shoulder
It’s the start of a new year, and for many executives and high earners, January brings more than a refreshed calendar. It offers a window of clarity before the momentum of the year takes over. With major federal tax changes scheduled to arrive in 2026, this is a pivotal moment to reassess strategy and ask a critical question: Am I positioned for what's coming?
No one can predict market returns or interest rates with perfect accuracy, but when it comes to the tax code, we do have some visibility. The individual tax cuts under the Tax Cuts and Jobs Act (TCJA) are set to sunset at the end of 2025. Unless Congress acts to extend them, the top marginal tax rate is expected to rise from 37% to 39.6%, and several deductions and exemptions could be rolled back to pre-2018 levels.
For high earners, especially those with equity compensation or deferred income, the implications are far-reaching. That makes 2026 not just another year, but a transition point. Planning now can help create more flexibility later.
The Brackets Are Changing: What That Means in Practice
For professionals in the top tax bracket, the potential increase to 39.6% may feel incremental on paper, but the real impact depends on how income is layered. Bonuses, RSU vests, stock option exercises, and deferred compensation distributions often land in the same tax year, creating income spikes that aren’t easily smoothed without forethought.
What looked like a smart strategy in 2023 or 2024 could produce an unexpected liability in 2026 if it isn't revisited. Now is the time to model those projections, identify potential bottlenecks, and coordinate with tax professionals to explore whether any income acceleration in 2025 makes sense.
Roth Conversions: Windows Worth Watching
One of the clearest planning opportunities right now is the Roth conversion. If you hold significant assets in traditional IRAs or 401(k) accounts, converting a portion to Roth in 2025 could lock in today's lower tax rates. This strategy won't be appropriate for everyone, and it shouldn't be rushed, but it deserves serious attention.
Partial conversions are often more effective than all-or-nothing moves. The key is modeling how much additional income your tax bracket can absorb without triggering unintended consequences like Medicare IRMAA surcharges or the Net Investment Income Tax.
Many executives are also in a phase of life where career shifts, consulting roles, or semi-retirement are in play. If income is expected to dip temporarily in 2025 before ramping back up in 2026, that creates a prime moment for Roth conversion strategy.
Deferred Compensation and Timing Traps
Deferred compensation plans often seem like a set-it-and-forget-it solution. The problem is that elections made years ago may no longer align with current needs or future tax realities.
If your deferred comp distributions are set to begin in 2026 or 2027, it's worth revisiting the schedule now. Some plans allow limited flexibility to modify future payouts if the changes are made early enough. Even if changes aren't permitted, understanding what income is coming and when can help shape decisions about other forms of compensation.
It’s also important to coordinate deferred distributions with equity compensation events. Vesting schedules, option windows, and long-term incentive plans can all overlap with deferred income, creating peaks that are expensive to flatten.
Capital Gains Strategy in a Shifting Landscape
Capital gains taxes are also likely to rise for high-income earners. Planning around gains and losses takes on new urgency as these changes approach. If you hold concentrated stock positions, especially in company equity, now may be the right time to review diversification strategies.
Tax-loss harvesting remains a useful tool in volatile markets, but don’t overlook the opportunity to realize gains in 2025 while rates are lower. A careful step-up in basis strategy may also benefit your estate planning objectives.
This is not about making impulsive moves. It’s about understanding which levers can be pulled deliberately now to avoid compression in the years ahead.
Estate Planning and Lifetime Exemptions
Current estate tax exemptions are set to be cut roughly in half at the end of 2025. For those with significant net worth, this should trigger a review of gifting strategies, trust structures, and long-term legacy planning.
Lifetime gifting may allow individuals and couples to lock in today’s higher exemption amounts before the threshold drops. Coordinating with legal and tax professionals on irrevocable trusts or spousal lifetime access trusts (SLATs) could be one of the most effective long-term strategies in 2025.
Again, this isn’t about urgency. It’s about readiness. The window is open, and waiting until it closes removes options that may not return.
Your Strategy Deserves Fresh Eyes
The best financial plans are rarely static. Even the most carefully built strategy can drift out of alignment when new legislation, compensation changes, or life transitions arrive.
January is a natural checkpoint. The calendar is fresh, and the year is still yours to shape. Take the time now to sit down with your advisory team. Revisit old assumptions. Model new possibilities. Make sure your plan still reflects your goals, your risks, and the world as it stands — not just the one you planned for five years ago.
This material is provided by Christopher Braccia and written by Social Advisors, a non-affiliate of Cetera Advisors LLC. Registered Representative offering securities through Cetera Advisors LLC, member FINRA/SIPC, a broker/dealer. Advisory services offered through Cetera Investment Advisers LLC, a Registered Investment Adviser. Cetera is under separate ownership from any other named entity. Located at: 1460 Broadway, New York, NY 10036.
Cetera Advisors LLC exclusively provides investment products and services through its representatives. Although Cetera does not provide tax or legal advice, or supervise tax, accounting or legal services, Cetera representatives may offer these services through their independent outside business. This information is not intended as tax or legal advice.