With the contentious 2024 elections concluded, attention now turns to President-elect Donald Trump’s economic and tax agenda. With Republicans controlling both the Senate and House, the administration is positioned to expedite significant tax reforms using budget reconciliation, a legislative tool that allows bills to pass with a simple majority.

The cornerstone of Trump’s tax agenda remains the Tax Cuts and Jobs Act (TCJA) of 2017, which faces major expirations in 2026. Key provisions include individual and corporate tax rates, bonus depreciation, and gift and estate tax exclusions. Trump’s administration aims to extend and expand these measures while introducing new reforms, creating both opportunities and challenges for taxpayers.

Key Tax Proposals and Their Impacts:

1. Individual Tax Provisions: Making TCJA’s individual tax measures permanent, including repealing the $10,000 SALT deduction cap, could save upper-income taxpayers significant amounts, particularly in high-tax states. This change may eliminate the need for SALT cap workarounds.

2. Gift and Estate Taxes: Permanently extending the expanded lifetime gift and estate tax exclusion, set to revert in 2026, would simplify wealth transfers and save high-net-worth families substantial amounts in estate planning.

3. Business Tax Provisions: Restoring full bonus depreciation and other TCJA business measures could incentivize investment. This would benefit businesses relying on significant capital expenditures while stimulating job creation.

4. Opportunity Zones (OZs): Extending the OZ program would encourage investments in underserved communities, offering tax deferral opportunities for investors and boosting local economies.

5. Encouraging Domestic Production: Reinstating the Domestic Production Activities Deduction (DPAD) at 28.5% would reduce corporate tax rates for domestic manufacturers, fostering innovation and enhancing supply chain resilience.

6. Exempting Tips and Overtime Pay: Removing federal income taxes on tips and overtime pay could increase disposable income for service and hourly workers, encouraging workforce participation in these sectors.

7. Social Security Tax Exemption: Eliminating federal taxes on Social Security benefits could benefit retirees by increasing their disposable income, encouraging earlier benefit collection.

8. Repealing Green Energy Subsidies: Rolling back green energy tax credits could reduce incentives for clean energy adoption but generate significant federal revenue, impacting investments in solar panels and electric vehicles.

9. Tariffs on Imports: Raising tariffs on foreign imports, particularly Chinese goods, aims to bolster domestic production. However, higher costs may be passed on to consumers, potentially straining household budgets.

Preparing for 2025:

Trump’s proposed reforms are projected to create nearly 600,000 new jobs and increase GDP by 0.8% over the next decade but could cost the government over $3 trillion in lost revenue. Clients should assess potential impacts on their financial plans, including tax strategies, estate planning, and investment portfolios.

For business owners, diversifying revenue streams, preparing for higher tariffs, and leveraging incentives for domestic production are crucial steps. High-net-worth families should review gifting strategies and estate plans to maximize benefits from the current exclusion before potential changes in 2026. With economic uncertainties and complex legislative changes ahead, staying informed and proactive is essential. By understanding these reforms, taxpayers can position themselves to capitalize on opportunities while mitigating risks.

Talley's team of tax professionals provide comprehensive tax compliance and consulting services so you can preserve, enhance, and pass on your assets and wealth to the next generation. We welcome the opportunity to discuss the current options available for you. For more information, contact us today.