2025 Tax Legislation Prospects
While the prospects for 2025 tax legislation have popped up in public discourse from time to time this year, the media’s attention to tax issues often has gotten set aside for the ever-changing hot topic of the day. Nonetheless, Members of Congress, their staff, and Treasury Department and White House personnel continue to work away on the Republican Party objective of renewing the 2017 Tax Act’s provisions due to expire at the end of this year.
A significant challenge in extending the 2017 Tax Act’s provisions is the Republican’s narrow majority in the House, which means dissension from a few of them could derail passage of an extension in that chamber. The Republican’s three vote majority in the Senate and the lack of defections from the party line below a simple majority in Senate votes to date suggest that simple majority passage of a tax extension more readily can be obtained in the Senate.
Still, simple Republican majority passage of an extension in the Senate normally would face a Democratic filibuster, thereby precluding passage by the required sixty vote supermajority. Nonetheless, Republicans in both Houses have adopted a tactic to allow simple majority passage in both Houses. That tactic is the employment of the Congressional Budget Act of 1974, which allows simple Senate majority passage of an act affecting federal revenue, like a tax act, once each federal fiscal year (ending on September 30). Even so, a resulting budget reconciliation act must be estimated to be revenue neutral over the law’s duration, subject to a maximum term of ten years.
The Republicans’ 2017 use of the Congressional Budget Act’s filibuster exception is why the 2017 Tax Act’s provisions, which became effective on January 1, 2018, only last through 2025. That eight year period was the estimated revenue neutral period. (Nonetheless, permanent adoption of the 2017 Tax Act’s provisions this year, as in 2017, is highly unlikely, because a Senate 60 vote supermajority would still be required to avoid a filibuster).
Several sources, including House Speaker Johnson, have said that adoption of an extension of the 2017 Tax Act (and any other new tax provisions) likely would last for only five years due to the Congressional Budget Act’s revenue-neutral duration requirement.
As we have discussed many times before, a very concerning aspect of a failure to renew the 2017 Tax Act’s provisions would be a resulting reduction of the lifetime exemption for estate, gift, and generation-skipping transfer taxes (currently an inflation-adjusted $13,990,000) by approximately half, as of January 1, 2026. Nonetheless, that exemption’s renewal alone will not drive the debate because it would not reduce federal revenues substantially. (E.g., for 2022, the most recent year with available statistics, only 3,170 of the 8,130 estate tax returns filed were taxable, generating revenue of only $22.5 billion).
Instead, President Trump’s pledges to exempt tip income, overtime, and Social Security payments from income taxes would be such a large drain on federal revenues that significant offsets would need to be found. Since such new exemptions would change (rather than extend) existing law, adoption of those new exemptions may not happen in 2025 tax legislation.
Not so easily ignored is the 2017 Tax Act’s addition of the current $10,000 cap on the federal income tax deduction for state and local taxes (a/k/a the “SALT” deduction limitation). Members of Congress from both parties from states with high local and state taxes have been complaining about the SALT deduction limitation even before its adoption back in 2017. Nonetheless, the federal tax revenue loss from a full SALT deduction reinstatement would be significant. (Of course, that is why the limitation was put in the 2017 Act in the first place: to offset revenue loss from the Act’s other taxpayer-favorable provisions).
Since Republican Members from states with high state and local taxes have common interests with their Democratic colleagues regarding the SALT deduction limitation, appeasing at least the Republican faction likely will be important to gain passage of major tax legislation this year. Of late, whispers from Washington are that while an increase in the $10,000 deduction limitation is likely, perhaps up to $25,000, its complete repeal is not.
Accordingly, discussions and debates over the content of 2025 tax legislation continue to rage behind the scenes among Congress, the administration, and other interested parties. As the process heats up, certainly media attention will return to it.
As to timing, House Speaker Johnson initially projected April adoption of tax legislation, but Senate Majority Leader Thune recently projected Senate adoption not happening until June or July. Even so, anticipation of mid-summer passage by both chambers may be overly optimistic since Members then likely will be distracted by anticipation of their August recess. That may delay voting on the legislation until at least early fall. Such a delay in extending the 2017 Tax Act’s features, even if ultimately passed, likely would roil the economy and markets in the interim. It also would heighten anxiety of wealthy taxpayers about the scheduled year end expiration of the current $13,990,000 exemption.
Lastly, it would not be surprising for proponents of one tax “break” or another to suggest using some of the budget savings wrought by the efforts of the Department of Government Efficiency (“DOGE”) to help satisfy the 2025 tax act’s revenue neutral requirement.
No ifs, ands, or buts: Strict Compliance is Required to Create Florida Testamentary Documents
To leave certain property to specific beneficiaries upon death, testamentary documents, such as a will or trust, must prepared carefully to avoid intestacy (the Florida statutory default for disposition of property for one who dies without a will). At least as important as document preparation and content is that such documents must follow stringent formalities.
The Strict Formalities for Florida Wills
In Florida, a will functions to transfer property at death through a court-supervised probate process and must be created in compliance with the following requirements:
- It must be in writing;
- Either
- The “testator” (the will’s creator) must sign the document at the end or
- The testator’s name must be written at the end by another individual in the testator’s presence and at the testator’s direction (an “acknowledgment”);
- The testator’s signing or acknowledgment must be done in the presence of at least two attesting witnesses (adults who confirm the signing or acknowledgment); and
- Those same two attesting witnesses must sign the will in the presence of the testator and each other. (Thus, all three of them, plus a notary public if one is used as is recommended, must be present and observe all of the signings).
If the testator wants to amend or change the will, any change must be executed in the same manner as set forth above. For instance, if the testator decides to increase a $10,000 gift to a grandson to $20,000, mere handwritten revision and initialing will not be effective. Instead, a new will should be prepared and executed or, if just one or a few changes are to be made to an existing will, a “codicil” could be executed making only those changes and leaving the rest of the will intact.
Florida courts will not enforce what are called “holographic wills” (handwritten wills) or “nuncupative wills” (oral wills) even if the testator made the wills in a state that does allow them.
A revocable trust that is testamentary in nature (meaning its terms govern the distribution of assets upon or after death) also must strictly follow the foregoing requirements.
Revocation of Wills
To revoke the terms of an existing will, the testator can use any of three alternative ways to do so.
First, the testator can execute another will that is inconsistent with the terms of the original will. For instance, if the first will leaves $1,000,000 to a specific friend, but in a subsequent will, the testator leaves $500,000 to that friend and $500,000 to another friend, the second will controls disposition and the first will effectively has been revoked. (For the avoidance of doubt, the later will should state that it revokes the earlier will (or as a mere codicil, only selected provisions of the earlier will)).
Second, the testator simply can declare that the original will is revoked in a subsequent writing that also complies with the foregoing formalities (e.g., “I revoke my will dated [date] in its entirety.”). Nonetheless, if the testator does not have another will, the testator’s assets would pass by intestacy.
Third, the testator physically can destroy the will by, for example, burning, tearing, defacing, or shredding the document. The document must be destroyed in its entirety. Simply crossing out words and eliminating certain provisions does not revoke a will. Furthermore, the testator must intend to revoke the will at the time of the physical act, so, for example, accidentally burning a will does not revoke it. Note, however, that leaving no intact copy of a will may lead to more questions than answers. Thus, it is best to consult an estate planning attorney when deciding to revoke a will by destruction so that there will be no question of the intent to revoke.
Beneficiary Designations
Strict compliance also is necessary in designating beneficiaries of a bank account, investment account, insurance policy, annuity, or retirement plan. Assets that provide for survivor beneficiary designations require strict compliance with the requirements of the assets’ governing documents. A Florida appellate court recently held that this rule also applies to individual retirement accounts (“IRAs”). Thus, to designate someone as the beneficiary upon death, owners must be sure to understand and precisely follow the terms of the governing documents.
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This publication is for general information only. It is not legal advice, and legal counsel should be contacted before any action is taken that might be influenced by this publication.
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