By Keiter CPAs
How a Trump presidency may impact business and individual tax obligations
Since Donald Trump has been elected as the 47th president of the United States and will be returning to the White House in January 2025, it is worth reviewing the potential impact of a second Trump presidency and what we might expect to see from a tax perspective.
One of the most significant areas of focus will be on the expiring provisions of the 2017 Tax Cuts & Jobs Act (TCJA). Many of the provisions from the 2017 tax reform legislation impacting individuals and families are set to expire on December 31, 2025. If Congress does not act, these provisions will revert to pre-2017 rates and amounts, though some adjustment for inflation will be included. President-elect Trump has proposed making the 2017 tax breaks permanent impacting the following:
| Current Law | Trump Proposals | ||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Individual income tax rates: |
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The TCJA lowered individual income tax rates and widened the tax brackets. The rates are set to revert to pre-TCJA levels at the end of 2025. The top rate would increase from 37% to 39.6%.
| Make TCJA permanent. The lower individual income tax rates would remain. | ||||||||||||||||||||||||
| Standard Deduction: | |||||||||||||||||||||||||
| Under the TCJA, basic standard deduction amounts in 2018 were nearly doubled to $12,000 for single filers, $18,000 for head of household filers, and $24,000 for married joint filers. These amounts were adjusted annually for inflation after 2018. They are set to revert to pre-TCJA levels adjusted for inflation. | Make TCJA permanent. The higher standard deduction would remain. | ||||||||||||||||||||||||
| State & Local Tax (SALT) Deduction: | |||||||||||||||||||||||||
| The SALT deduction allows taxpayers who itemize their deductions to subtract state and local taxes. These taxes include property taxes, income taxes, and sales taxes. The TCJA imposed a $10,000 cap on the deductibility of state and local taxes from 2018 to 2025. If the provision expires, all state and local income and property taxes will be deductible. | Although President Trump has proposed making the TCJA permanent, he has expressed a willingness to revisit the $10k cap on the state and local tax deduction, following complaints that it unfairly impacts taxpayers in states with high income tax rates. | ||||||||||||||||||||||||
| Mortgage Interest Deduction: | |||||||||||||||||||||||||
| The TCJA limited the deduction for mortgage interest to the first $750k of mortgage debt. The limitation applies to new loans incurred after December 15, 2017. Taxpayers with mortgage debt incurred prior to December 15, 2017, may deduct mortgage interest on the first $1M of mortgage debt. After 2025, the $750,000 limitation will increase to $1 million of acquisition debt regardless of when the debt was incurred. | Make TCJA permanent. The mortgage debt limitation would remain at $750k. | ||||||||||||||||||||||||
| Alternative Minimum Tax (AMT): | |||||||||||||||||||||||||
| The TJCA increased the AMT exemption amount and raised the income levels at which the exemption phases out, resulting in fewer taxpayers being subject to AMT. With the sunset of TCJA in 2026, the pre- 2017 AMT rules will apply, subjecting many more taxpayers to AMT. | Make TCJA permanent. The increased exemption amount and phaseout threshold would remain. | ||||||||||||||||||||||||
| Qualified Business Income (QBI) Deduction: | |||||||||||||||||||||||||
| The 20% deduction for qualified business income from pass-through entities (sole proprietorships, LLCs, and S-Corporations) is set to expire at the end of 2025. Unless extended, this provision will be eliminated causing pass-through income to be taxed at individual income tax rates without a deduction for QBI. | Make TCJA permanent. The pass-through deduction would remain. | ||||||||||||||||||||||||
| Charitable Giving: | |||||||||||||||||||||||||
| The TCJA increased the limit on deductions for cash charitable contributions from 50% to 60% of adjusted gross income (AGI). After 2025, cash contributions to public charities will generally be limited to 50% of the taxpayer’s AGI. | Make TCJA permanent. The higher 60% AGI limitation would remain. | ||||||||||||||||||||||||
| Estate & Gift Tax: | |||||||||||||||||||||||||
| With the passage of the TCJA, the gift and estate tax exemption increased significantly. The current lifetime estate and gift tax exemption level ($13.69 million in 2025; $27.98 million for couples) is temporary and is scheduled to revert to the pre-TCJA level of $5.49 million (adjusted for inflation). | Make TCJA permanent. The increased estate tax and gift exemption would remain. | ||||||||||||||||||||||||
| Corporate tax rate: | |||||||||||||||||||||||||
| Unlike the individual tax provisions, the reduction of the corporate tax rate from 35% to 21% was made permanent. | Trump has proposed lowering the corporate tax rate from 21% to 20% and even further to 15% for companies that make their products in the US. | ||||||||||||||||||||||||
Beyond the provisions of the TCJA, Trump has also floated several other tax ideas on the campaign trail, including:
- Increase the child tax credit to $5,000
- Exempt Social Security benefits from income tax
- Exempt tip income from income tax and payroll tax
- Exempt overtime pay from taxation
- Impose various tariffs
- Excise tax on large private university endowments
- Incentives and credits to help home ownership
- Expense research and development (R&D) immediately
While some or none of these ideas may actually come to pass, it is important to monitor these potential changes as they unfold so you can make informed financial decisions. Keiter’s business and high-net worth tax professionals will continue to update you on new and changing tax policies to assist you with planning and saving opportunities. Questions on how these tax considerations may apply to your unique situation? Contact your Keiter Opportunity Advisor.
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About the Author
Keiter CPAs
Keiter CPAs is a certified public accounting firm serving the audit, tax, accounting and consulting needs of businesses and their owners located in Richmond and across Virginia. We focus on serving emerging growth businesses and companies in the financial services, construction, real estate, manufacturing, retail & distribution industries and nonprofits. We also provide business valuations and forensic accounting services, family office services, and inbound international services.
More Insights from Keiter CPAsThe information contained within this article is provided for informational purposes only and is current as of the date published. Online readers are advised not to act upon this information without seeking the service of a professional accountant, as this article is not a substitute for obtaining accounting, tax, or financial advice from a professional accountant.
