Election Results: A Look Forward to the Potential Tax Changes
The November 5th election results indicate that former President Donald J. Trump will return to the White House as the 47th President of the United States. At the same time, Republicans are poised to gain control in the US Senate and the US House. The election results will provide an opportunity for President-elect Trump to pursue many of the tax policies he proposed during the campaign. The expiring 2017 Tax Cuts and Jobs Act (TCJA) provisions along with several significant business tax provisions will certainly be forefront in the 2025 legislative agenda for Republicans.
Observation: While Republicans have gained control of Congress, budget reconciliation will be required to advance any tax policies. This process could put pressure on what provisions get adjusted because of the restrictions within the reconciliation process.
Select Provisions Proposed During the Trump Campaign:
On the campaign trail the former president has called for making permanent expiring TCJA provisions as well as pursuing additional tax cuts. Some of the notable provisions set to expire at the end of 2025 are the current income tax rates for individuals, changes to standard deductions, exemption amounts, alternative minimum tax, estate and gift tax, child tax credit, and the 20% deduction for permanent passthrough business income. Additionally, restoring the business tax provisions that expired earlier from TCJA for 100% bonus depreciation and the return to expensing of expenditures for research and experimentation (R&E) were proposed by the campaign.
Observation: Both sides of the aisle have supported the return to expensing R&E costs and 100 percent bonus depreciation.
Taxpayers should consider their current positions and be prepared to take advantage of changes that could be enacted in 2025.
While former President Trump has proposed provisions to increase tax deductions with extending provisions of TCJA, what is unclear is how the incentives under the Inflation Reduction Act (IRA) will prevail in the new administration. The former president has been critical of the IRA and the campaign has called for terminating spending for green initiatives. The tax initiatives under the IRA are popular however; for example, House Republicans wrote a letter stating they wouldn’t support a full repeal because of the benefits created in their districts.
Observation: The IRA includes popular deductions such as 179D and energy tax credits for energy efficient home improvements, energy investments, and many others that are currently in the Code. Taxpayers should review current energy efficiency projects to take advantage of the current law if future legislation looks to unwind portions of the IRA as funding for the extension of expiring TCJA provisions.
