5 Strategic Moves to Future-Proof Your Portfolio Under Trump’s Tax Reforms

The anticipated tax reforms under President Trump’s 2025 plan pose both risks and opportunities for middle-class investors. With income tax rates, retirement contribution limits, and capital gains thresholds in flux, now is the time to restructure portfolios with tax efficiency as a top priority. Below are five actionable strategies to mitigate risks and maximize after-tax returns.

1. Maximize Contributions to Tax-Advantaged Accounts – Act Now or Regret Later

The TCJA’s expiring provisions mean that current tax rates and contribution limits for retirement accounts like Roth IRAs and 401(k)s could vanish by 2026. For 2025, contribution limits have already risen:
- 401(k)s: $23,500 annually, with a $7,500 catch-up for those 50+ (totaling $31,000 for eligible individuals).
- Roth IRAs: $7,000 annually, with a $1,000 catch-up for those 50+ (income phase-outs apply).

Action Step: Increase contributions to the maximum allowable limits before year-end 2025. If your employer offers a Roth 401(k), prioritize it to lock in today’s lower tax rates.

2. Rothify Your Portfolio – Convert Traditional Accounts Before Tax Rates Rise

Trump’s plan extends TCJA provisions, keeping today’s tax rates intact—but if Congress fails to act, rates could revert. A Roth conversion allows you to pay taxes now at current rates and enjoy tax-free growth thereafter.

Action Step: Convert a portion of traditional IRA/401(k) balances to Roth accounts in 2025, especially if you’re in a lower tax bracket this year. Use tax-loss harvesting (see below) to offset any conversion income.

3. Leverage Tax-Loss Harvesting to Offset Capital Gains – Don’t Leave Dollars on the Table

Capital gains tax brackets remain unchanged in 2025, but with the 20% rate kicking in for high earners, tax-loss harvesting (selling losing investments to offset gains or income) is critical. For example:
- If you have $10,000 in capital gains and $5,000 in losses, the net gain is $5,000—reducing taxable income by $5,000.

Action Step: Rebalance your taxable account by selling underperforming stocks or ETFs. Use proceeds to invest in similar but distinct assets to maintain exposure while claiming losses.

4. Shift to Tax-Efficient Investments – Municipal Bonds and ETFs Are Your Allies

Tax reforms may not directly raise capital gains rates, but higher income taxes could shrink your net returns. Municipal bonds (munis) offer federal tax-exempt income, while ETFs with low turnover (e.g., index funds) minimize capital gains distributions.

Action Step: Allocate 10–20% of your taxable portfolio to high-quality municipal bonds. For equities, favor ETFs like SPY or VOO, which have historically low turnover ratios.

5. Diversify into Tax-Advantaged Asset Classes – Real Estate and Tax-Free ETFs

Consider REITs (Real Estate Investment Trusts) for dividend income taxed at ordinary rates—still preferable to higher marginal brackets—or tax-free municipal bond ETFs like MUB.

Action Step: Allocate 5–10% to a REIT ETF (e.g., VNQ) and 5–10% to a muni bond ETF. These provide steady income with tax advantages.

Final Call to Action: Act Before the Clock Runs Out

The TCJA’s expiration in 2026 is a ticking clock. By maximizing tax-advantaged accounts, converting to Roth, harvesting losses, and shifting to tax-efficient assets, you can shield your portfolio from uncertainty.

Remember: Inaction is the riskiest move. Start restructuring today.

This article is for informational purposes only. Consult a tax advisor before making significant financial decisions.