The results of the election have brought tax policy back into the spotlight, with significant changes potentially on the way. While it’s too early to predict the exact outcomes, here’s what’s being discussed in Washington and what it could mean for individuals and businesses.
Renewing Key Tax Cuts
House Majority Leader Steve Scalise recently highlighted the push to renew certain provisions from the 2017 Tax Cuts and Jobs Act (TCJA):
“I’ve already talked to President Trump about [the number one bill we will pass], a bill called budget reconciliation. There are a lot of things you could put in that. We laid it out as a first 100-day agenda. And we would put things like renewing the Trump tax cuts, many of those which expired that we passed in 2017. We want to renew those cuts so that families don’t see a tax increase.”
What Is Budget Reconciliation?
Budget reconciliation is a legislative process that allows certain bills to pass with a simple majority vote in the Senate, bypassing the typical 60-vote requirement. However, there’s a catch: the process cannot be used to expand the federal deficit beyond the budget window.
Extending all of the TCJA provisions is estimated to cost $4.6 trillion, which means Congress will face tough decisions about which provisions to prioritize.
Provisions Set to Expire in 2025
Here’s a summary of the key tax provisions scheduled to sunset by the end of 2025:
- Higher standard deductions and child tax credits
- 20% Qualified Business Income (QBI) deduction for small businesses
- Higher estate tax exemption thresholds
- Lower individual tax rates
- SALT deduction cap of $10,000
- Higher Alternative Minimum Tax (AMT) exemption
- Opportunity Zone incentives
Additionally, bonus depreciation, which has been phasing out since 2023, will drop to 40% in 2025 and 20% in 2026.
What to Expect Next
While many details remain uncertain, certain provisions like bonus depreciation and R&D expensing are likely to gain bipartisan support due to their pro-growth focus. Over the coming months, lawmakers will negotiate which elements to prioritize.
How Does This Affect You?
These potential changes underscore the importance of staying informed and working with a qualified tax professional. Every situation is unique, and proactive planning will be key to navigating the evolving tax landscape.
As always, we encourage you to consult with your tax professional to understand how these potential changes might impact your personal or business finances.
We’ll continue to monitor developments and provide updates to keep you informed.
