The recent electoral victory on November 5th is predicted to have a profound influence on tax regulations. Many facets of President-elect Donald Trump’s prominent tax legislation, the Tax Cuts and Jobs Act (TCJA), from his initial term, are set to terminate by the close of 2025. However, there is a stronger possibility that most clauses will receive extension.
The above is particularly viable as the Republicans have regained majority in the U.S Senate. As it stands, the Republicans hold 52 seats, with some still in contest, thus the majority could potentially expand. The distribution of power in the U.S. House Representatives is still uncertain with several seats yet to be declared.
Alongside the TCJA, President-elect Trump has implied a series of tax modifications throughout his campaign. Below is a summary of potential tax legislation alterations:
TCJA expiring clauses. Trump plans to extend the lower individual tax rates, enhanced standard deduction, and increased gift and estate tax exemption, which are currently set to lapse. Moreover, he has shown willingness to reconsider the TCJA’s $10,000 cap on the state and local tax deduction.
Business taxation. Trump has proposed a reduction in corporate tax from the existing 21% to 20% (or even lower for domestic product manufacturing companies). Trump also aims to expand the Section 174 deduction for R&D spending.
Individual taxable income. Trump has suggested the abolition of income and payroll taxes on gratuities for workers in the restaurant and hospitality sector, and exclusion of overtime pay and Social Security benefits from taxation.
Housing incentives. Trump has hinted at potential tax incentives for first-time homeowners, although details remain unclear. The Republican manifesto advocates for reduced mortgage rates through various measures.
Tariffs. Trump has suggested increased tariffs on imports, proposing a minimum tariff of 10%, with a 60% tariff on Chinese imports. He has even suggested a 100% tariff on certain imported vehicles in his speeches.
Which of these proposals become law will be influenced by multiple factors, including the requirement of Congressional approval before Presidential signing. If you have concerns about how these potential changes may influence your tax situation, we welcome you to contact us.
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.
