What Will the New President Try to Enact When it Comes to New Tax Laws?

As President-elect Donald Trump prepares to assume office in January 2025, several proposed tax changes are under consideration, building upon the Tax Cuts and Jobs Act (TCJA) of 2017.

Proposed Tax Changes Under the New Trump Administration

1. Extension and Expansion of the TCJA Provisions: Many individual tax cuts from the 2017 TCJA are set to expire after 2025. The Trump administration has said publicly that it aims to make these cuts permanent and introduce additional reductions, including lowering the corporate tax rate from 21% to 15%.

   
   

2. Elimination of Taxes on Tips and Overtime Pay: Proposals include making income from tips and overtime pay tax-free, aiming to increase take-home pay for workers in industries like hospitality and retail.

   
   

3. Repeal (or increase) of the State and Local Tax (SALT) Deduction Cap: The current $10,000 cap on SALT deductions, introduced by the TCJA, may be repealed or adjusted, potentially doubling the cap to $20,000, which would benefit taxpayers in high-tax states.

   
   

4. Tax Relief on Social Security Income: Plans are underway to eliminate federal income taxes on Social Security payments, reducing the tax burden on retirees.

   
   

5. Universal Tariffs: A proposal for a universal baseline tariff on all imports is being considered, with the aim of protecting domestic industries and potentially replacing certain tax revenues.

   
   

6. Bonus Depreciation: The administration may push to enhance bonus depreciation rules, allowing businesses to immediately write off 100% of the cost of qualified property investments for a longer period or permanently. This change would encourage business investment and reduce taxable income.

   
   

7. Excess Business Loss Limitations: The Trump administration is considering repealing or relaxing the excess business loss limitations under §461(l), which currently put a cap on the ability of non-corporate taxpayers to use business losses to offset other income. Removing this limitation would provide significant tax relief for high-income individuals with substantial business losses.

   
   

8. 163(j) Interest Expense Limitations: The administration may revisit the interest expense limitations introduced by the TCJA under §163(j). These rules currently cap the deduction for business interest to 30% of adjusted taxable income (ATI), with modifications for small businesses. Potential changes could include raising the ATI threshold or exempting more businesses from the limitation altogether, enhancing cash flow for debt-financed businesses.

   
   

Key Provisions from the last Trump presidency: (2017 Tax Cuts and Jobs Act)

• Individual Tax Rates: The TCJA reduced tax rates across income brackets and adjusted the thresholds, aiming to provide tax relief to individuals and families.

  
  

• Standard Deduction and Personal Exemptions: The standard deduction was nearly doubled, simplifying the tax filing process for many. However, personal exemptions were eliminated, which had varying impacts depending on individual circumstances. Many people ended up paying more taxes overall.

  
  

• State and Local Tax (SALT) Deduction: A $10,000 cap was placed on the SALT deduction, limiting the amount taxpayers could deduct for state and local taxes, which particularly affected those in high-tax states.

  
  

• Corporate Tax Rate: The corporate tax rate was reduced from 35% to 21%, aiming to enhance the global competitiveness of U.S. businesses. This was paid for by shifts in the tax code.

  
  

• Estate Tax: The estate tax exemption was doubled, allowing individuals to pass on a greater portion of their estate without incurring federal estate taxes.

  
  

• Bonus Depreciation: The TCJA introduced 100% bonus depreciation for qualified property placed in service after September 27, 2017, and before January 1, 2023. This allowed businesses to immediately deduct the full cost of many types of property investments, boosting cash flow and encouraging capital spending.

  
  

As the new administration takes office, these proposed tax changes will be subject to legislative processes and negotiations. Taxpayers should stay informed and consult with tax professionals to understand how potential changes may impact their financial situations. AS with many of the recent tax law changes, there may be more "slight of hand" than actual tax savings.