The potential return of Donald Trump to the White House in 2025 heralds a new season of tax implications, with a united Republican congress hot on his heels ready to initiate early legislative tax successes. The extended and broadened Tax Cuts and Jobs Act (TCJA) holds high chances of being his first major win.
The absence of concrete tax policies from Trump’s campaign didn’t slow down his proposal of several measures that could be incorporated into an updated TCJA or another law. Noteworthy, is a look at the impact on business and individual taxpayers in 2025 and beyond.
The TCJA, which significantly transformed federal tax proceedings, is set to experience several expiring provisions at the end of 2025. Included in these provisions are individual taxes as well as the doubled gift and estate tax exemption. Trump remains a steadfast supporter of extending these tax breaks, with the nonpartisan Congressional Budget Office approximating a $4.6 trillion cost of a permanent extension.
Trump’s campaign also brought up several pro-business tax amendments. Leading the pack is a further reduction of the corporate tax rate to 15% for US-based manufacturers. Bipartisan support is expected for his proposal to allow immediate expensing of research and experimentation costs and a return to 100% first-year bonus depreciation for qualifying capital investments.
Furthermore, he has floated the idea of doubling the limit on Sec. 179 expensing deduction for small businesses’ eligible investments in equipment. On the individual tax front, he has suggested the elimination of taxes on tips for restaurant and hospitality employees, tax exemption for overtime pay and Social Security payments, a new deduction for US-manufactured car loan interest, and tax reduction for Americans living overseas. A social media post from Trump also hinted at the potential for hurricane victims to deduct the cost of home generators, retroactive to September 1, 2024.
He remains consistent in his pledge to impose tariffs on imported goods, threatening higher consumer prices. Despite his position that the exporting countries will bear the cost, historical evidence points towards a likelihood of American companies passing the tariff costs to their consumers.
A possible rollback of the Inflation Reduction Act (IRA), particularly its tax incentives for clean energy projects, appears to be on Trump’s agenda. But with many such projects planned or already in progress in Republican districts, he may advocate for some restriction rather than absolute elimination.
While it’s risky to bank on candidates’ wide-reaching campaign promises, it’s undeniable that 2025 will be an influential year for tax legislation. We will keep track and update you on the developments that could impact your tax liability.
DISCLAIMER:
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. The services of an appropriate professional should be sought regarding your individual situation.
