Why January 2026 Is the Perfect Time to Start Planning Your Exit
The beginning of a new year is always a prime moment to rethink goals and set yourself up for long-term success. But January 2026 is especially important, because it marks the first year after the Tax Cuts and Jobs Act (TCJA) sunset.
IRS overview of TCJA changes
Kiplinger – Consumer explanation of the 2025 tax sunset:
This means the tax landscape has already changed. If you’re planning to sell a business, real estate, or another highly appreciated asset in 2026 or 2027, understanding this new environment and building a structured exit strategy now can significantly impact how much of your equity you keep working on your behalf.
The 2025 Tax Sunset And What It Means for Your 2026 Sale
As of January 1, 2026, several major tax provisions officially reverted back to pre-2017 levels. This creates new challenges and opportunities for sellers.
Higher Capital Gains Taxes
Because many of the TCJA reductions expired, you may now see:
- Higher top capital gains tax brackets
- Larger overall tax exposure for high-income sellers
Combined rates (including NIIT) that may be 5–10% higher depending on your income
Lower Estate & Gift Tax Exemptions
In 2026, the exemption dropped from roughly $13M per person to about $6–7M per person (adjusted for inflation). This affects:
- Business succession
- Gifting strategies
- Wealth transfer planning
- How sale proceeds impact your taxable estate
Potential Increases in Ordinary Income Rates
While the focus is often on capital gains, higher ordinary income rates may now impact:
- Installment sale income
- DST income streams
- Retirement planning
- Required minimum distributions
Why Planning in Early 2026 Is Essential
You are now operating in a new tax era and selling without a structured plan could mean losing a significant portion of your equity.
Here’s why early planning matters:
1. You can still shape your 2026 strategy before entering negotiations. The earlier you prepare, the more flexibility you have to:
- Structure the deal
- Evaluate timing
- Implement tax-aware strategies before a buyer is involved
2. DSTs cannot be added after the sale. Because a Deferred Sales Trust must be established before the sale closes, early planning ensures:
- Proper coordination with your CPA and attorney
- Full compliance
- Enough lead time to customize your repayment structure and investment plan
3. You avoid rushed, last-minute decisions. Many sellers begin planning after they receive an offer, which is often too late. Starting now helps you:
- Prepare documentation
- Understand tax exposure
- Make confident investment decisions
- Maximize deferral benefits
4. You preserve more equity in the new tax environment. Higher taxes mean early planning in 2026 is now more valuable than ever.
What Is a Deferred Sales Trust (DST)?
A Deferred Sales Trust is a legal tax-deferral strategy that allows you to sell a highly appreciated asset while deferring capital gains tax through the installment sale method under IRC §453.
How a DST works:
- You transfer your asset to a trust before closing.
- The trust sells the asset to the final buyer.
- You receive repayments over time instead of one taxable lump sum.
- You defer capital gains tax, preserve equity, and your sales proceeds grow more capital.
It’s one of the most effective ways to control tax exposure after this year’s TCJA sunset.
The Benefits of a Deferred Sales Trust
Defer Capital Gains Tax
Rather than a large upfront tax bill, keep more of your sales proceeds working for you.
Preserve More Equity
Earn interest payments on the pre-tax sales proceeds.
Flexible Investments within the Trust
Your promissory note can be secured by real estate, index portfolios, lending, or diversified strategies.
Customized Income
Negotiate predictable payments for retirement or long-term cash flow.
Estate Planning Advantages
Reduce estate tax impact and align wealth transfer goals.
Business Owners Planning to Sell in 2026
Business owners often face the largest taxable events.
A DST allows them to:
- Defer significant capital gains
- Transition out of ownership on their terms
- Unlock liquidity without losing equity
- Have their pre-tax sale proceeds reinvested for retirement
- Offset the impact of higher 2026 tax rates
Business sales do not qualify for 1031 exchanges making the DST one of the only flexible tax-deferral tools available.
Real Estate Investors with Highly Appreciated Properties
Many investors are hesitant to sell because of:
- Low basis
- Large gains
- Depreciation recapture
- Limited 1031 exchange options
A DST gives real estate sellers the ability to:
- Defer capital gains without a 1031
- Have their promissory note secured by real estate or liquid portfolios
- Exit property management
- Reduce concentration risk
- Preserve more equity in the 2026 tax environment
Retiring Professionals with Private Holdings
For professionals near retirement, the DST helps them:
- Defer capital gains when liquidating appreciated stock
- Avoid triggering large taxable events in a single year
- Have your promissory note secured by diversified, income-rich investments
- Reduce tax exposure after the TCJA sunset
- Maintain liquidity while reducing market risk
This is especially powerful for executives, founders, and long-term investors.
Anyone Seeking to Reduce Immediate Tax Exposure and Preserve Wealth
If you have a large taxable gain, generally $500,000or more, a DST is often one of the most effective ways to:
- Reduce your 2026 tax liability
- Increase capital
- Improve retirement income planning
- Delay tax exposure over many years
- Achieve long-term wealth preservation
Your 2026 Exit Plan: How to Get Started Now
1. Schedule a DST Strategy Session with Reef Point.
We’ll review your upcoming sale, valuation, and tax exposure.
2. Coordinate with Your CPA, Attorney & Financial Advisor
Your advisors help integrate the DST into your overall financial plan.
3. Establish the DST Before Entering a Binding Sale Agreement
Early setup ensures eligibility and a smooth closing.
4. Close the Sale, Then the Trust Invests the Pre-Tax Sales Proceeds
Your proceeds move into the trust, allowing strategic, diversified investment.
The TCJA sunset has reshaped the tax landscape. A Deferred Sales Trust allows you to navigate this new environment with confidence and significantly more flexibility.
With a DST, you can:
- Defer capital gains tax
- Preserve more equity in a higher-tax year
- Increase investment power
- Negotiate the timeline and value of the repayments you’ll receive
- Strengthen your long-term wealth and retirement strategy
Ready to Build Your 2026 Exit Plan? Reef Point’s expert team is here to help you explore whether a Deferred Sales Trust is the right solution for you.
Schedule your complimentary DST consultation today.