Updates
Key Post-Election Tax Changes Every Taxpayer Should Know
January 7, 2025
Preparing for Corporate, Individual, and Tariff-Related Changes Under the New Administration
By Rich Smith, CPA, MBA, Tax Partner, Bowers CPAs & Advisors
Now that we’re past the political commercials, texts, and robocalls that inundated most of us during this year’s election, some of President-Elect Trump’s agenda is starting to take shape. While it may still be too early to act, it’s important for taxpayers to pay attention to the potential tax law changes President-Elect Trump discussed during his campaign.
Below we will highlight a few of the more significant potential tax policy changes to be mindful of.
Corporate Tax Rate
President-Elect Trump has indicated that he’d lower the current corporate tax rate from 21% to 20%. This is after previously cutting the corporate income tax rate from 35% to 21% during his first term. In addition to the one-percentage point decrease in the overall corporate tax rate, he’s also proposed a 15% corporate tax rate for companies that manufacture their products in the U.S. The early indications are that this would be accomplished by re-instating the previously expired Domestic Production Activities Deduction (“DPAD”) at 28.5%, thus lowering the corporate tax rate for domestic production to 15%.
As was the case the last time the corporate tax rate was lowered, taxpayers structured as S Corporations would be wise to revisit whether moving to a C Corporation would lower their tax burden. This is particularly true if they believe they would qualify for the 15% corporate tax rate.
Tax Cuts and Jobs Act (“TCJA”)
During President-Elect Trump’s first term, the Tax Cuts and Jobs Act (TCJA) was passed, with many of the provisions set forth within it set to expire at the end of 2025. The President-Elect has indicated that as part of his tax policy he’d make many of the provisions set to expire, permanent.
The list below is not all-inclusive but highlights some of the more significant provisions set to expire on December 31, 2025.
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Individual Income Tax Rates and Brackets
The TCJA cut the top marginal rate from 39.6% to its current 37%. -
State and Local Tax Deduction (“SALT”)
The TCJA imposed a $10,000 cap on the deductibility of state and local taxes, severely harming taxpayers in high-tax states. If this provision of the TCJA expires, all state and local property and income taxes would become deductible. -
Qualified Business Income Deduction (“QBI”)
The TCJA provided a 20% deduction for qualified pass-through income for sole proprietorships, partnerships, and S Corporations that met certain requirements. QBI was included in the TCJA as an effort to provide benefits to pass-through entities that saw the tax rate for C Corporations reduced from 35% to 21%. -
Alternative Minimum Tax (“AMT”)
The TCJA increased the Alternative Minimum Tax (AMT) exemption amounts and raised the income levels at which these exemptions phased out, resulting in fewer taxpayers being subject to AMT. -
Bonus Depreciation
The TCJA changed the applicable percentages and qualifying property eligible for bonus. Under the TCJA, used property, except for property purchased from related parties, became eligible for bonus. The TCJA also provided 100% bonus depreciation for property placed in service after September 27, 2017, through December 31, 2022. That percentage has been phasing down each year as follows: 80% in 2023, 60% in 2024, 40% in 2025, 20% in 2026, and ultimately down to 0% after December 31, 2026. Taxpayers can still take advantage of expensing qualifying fixed assets purchased through Section 179, but it remains to be seen if there will be a fix to the bonus provisions under the TCJA.
Additional Potential Tax Policy Changes:
- Exempt Social Security Benefits from Taxation
- Exempt Tip Income from Taxation
- Exempt Overtime Pay from Taxation
- Create a Deduction for Automobile Loan Interest
- Create a Tax Credit for Family Caregivers
And last but not least……TARIFFS!
President-Elect Trump has touted the use of tariffs and has proposed a 10% to 20% baseline tariff on all U.S. imports and a 60% tariff on all U.S. imports from China.
About Bowers CPAs & Advisors
Bowers aims to offer helpful information to our clients and friends. Learn more about how we can help should you or your business need tax services.
Bowers CPAs & Advisors has served private and closely held businesses with strategic financial advice for over 40 years. Whether traditional Tax and Audit, Business Valuation, Accounting/Bookkeeping, Forensic Accounting, or Financial Planning services, our approach is the same:
"Master an in-depth knowledge of our clients and their industry to provide proactive, innovative analysis and recommendations to build and maintain net worth."
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Disclaimer: To ensure compliance with requirements imposed by the Department of Treasury, we inform you any U.S. federal tax advice contained in this document or video is not intended for the purpose of (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing, or recommending to another party any transaction or matter that is contained in this document.
About Rich Smith, Tax Partner at Bowers CPAs & Advisors
Rich Smith is a Tax Partner at Bowers CPAs & Advisors. He received his Bachelor’s Degree in Accounting and MBA from SUNY Oswego.
With more than 22 years of experience in public accounting, including 10 years working with Big 4 accounting firms, Rich brings a broad range of industry experience including partnership, corporate and multistate tax services for public and privately held companies, as well as small business consulting and compliance. His experience also includes specialized expertise in multistate tax consulting for large and small businesses.
