Navigating tax policy changes can be tricky, especially with key and significant changes occurring in Washington these first few weeks of the Trump administration. The new administration has placed a spotlight on several pivotal tax issues that could have a direct impact on your business. We’re summarizing ten tax topics being prioritized so you can stay ahead of the curve and plan strategically. Though some of these issues have not yet been put forth in a formal proposal, these are issues that President Trump has highlighted as key considerations for this upcoming year.
Corporate Tax Rate Reduction
One of the most significant focuses is on reducing the corporate tax rate to a proposed 20% or even 15%, which was previously slashed under the first Trump presidency from 35% to 21% under the Tax Cuts and Jobs Act (TCJA). The administration aims to utilize this tax rate reduction to spur business growth and investment by making the United States an even more attractive destination for global businesses and workforce expansion.
Making the TCJA Cuts Permanent
While many provisions of the TCJA are set to expire in 2025, the administration is pushing to make these cuts permanent. According to the House Ways and Means Committee on January 14, 2025, these tax cuts propelled small business growth as businesses were able to reinvest these funds into their own operations. This extension of the TCJA cuts would provide businesses with long-term tax stability, making it easier to strategize for growth and also allowing businesses to continue to invest in their future.
Extending Bonus Depreciation
One of the areas on the table for permanent extension is 100% bonus depreciation. Bonus depreciation, originally enacted in 2002 and revised in 2018, allowed businesses to deduct 100% of the cost of qualifying assets in the year they were placed in service from 2018-2022, with the total permitted percentage decreasing twenty percentage points annually from 2023 to 2026 until it would reach 0%. This exceeded the regular depreciation schedule set forth in the U.S. tax code and incentivized businesses to invest in large assets, such as machinery that would enhance business productivity or growth, by lowering taxable income the year of purchase, as well as preventing organizations from paying taxes on income not actually incurred based on an extended depreciation schedule.
Pass-Through Deduction Extension
The 20% deduction for pass-through entities like sole proprietorships, LLCs and S-Corps is another TCJA provision set to expire at the end of 2025. Trump has advocated for making the 20% pass-through deduction permanent, as it lowers taxable income for business owners and is a key tax relief issue for small- to mid-sized businesses. Its extension would mean encouraged business growth, investment, and job creation. This stance, along with many of his other policy proposals, reflects a broader policy of fostering a business-friendly tax environment.
Revisions to International Taxation
Trump's administration is considering changes to the Global Intangible Low-Taxed Income (GILTI) and Base Erosion and Anti-Abuse Tax (BEAT) provisions. These adjustments aim to reduce the effective tax rates on foreign earnings for multinational businesses. By lowering these rates, the policy could make foreign operations more profitable for U.S. companies, potentially encouraging global expansion. This could enhance the competitiveness of U.S. multinationals, possibly leading to increased international business activities. However, reducing taxes on foreign earnings might decrease domestic tax revenue, impacting U.S. fiscal policy. The policy seeks to balance global competitiveness with domestic economic considerations.
Incentives for Domestic Manufacturing
Key proposals under the Trump Administration include expanding business tax credits and deductions to encourage the return of manufacturing to the U.S. This includes increasing deductions for capital investments, allowing full expensing of new equipment, and offering tax credits for domestic production. These aim to reduce the cost of manufacturing in America, making it more competitive against overseas production. By lowering the effective tax rate on manufacturing profits, these policies could stimulate investment in U.S. factories, potentially leading to job creation and economic growth in manufacturing sectors.
Tariff Proposals
President Trump has proposed reciprocal tariffs, aiming to match the tariffs other countries impose on U.S. exports. This could lead to higher costs for U.S. businesses importing goods from countries with high tariffs. Business owners might face increased expenses, necessitating supply chain adjustments, price changes, or shifts towards domestic production. While this introduces uncertainty and potential for international retaliation, it could also provide leverage in trade negotiations and encourage local manufacturing. Companies will need to navigate these changes carefully, considering both the immediate cost implications and long-term strategic adjustments.
Changes to State and Local Tax Deduction Cap
The State and Local Tax (SALT) deduction cap, set at $10,000 under the TCJA, is set to expire at the end of 2025. If Congress does not extend the cap, high-earning pass-through businesses—sole proprietorships, partnerships, and S corporations—could benefit. The expiration would restore the full SALT deduction (which did not have a cap), reducing total taxable income for these business owners in states that have not developed SALT cap workarounds. A final decision on the deduction cap remains unclear but is on the table to be addressed this year.
Capital Gains Tax Adjustments
A capital gain is the increase in value between when an asset is purchased and when it is sold. Currently, the upper rate on capital gains taxes is 20%. There’s discussion around reducing capital gains tax rates or indexing them to inflation. This could benefit businesses and investors by lowering the tax burden on asset sales, such as stocks or NFTs.
Whether you’re a small business owner or running a large corporation, these potential tax changes could significantly affect your bottom line. Lower corporate rates and extended deductions mean more money for reinvestment, while changes to international taxation could shift your global strategy. Staying informed is key to leveraging these opportunities and minimizing risks. With the tax landscape rapidly changing, and with a number of changes providing additional opportunities for business owners to thrive, now is the time to strategize financially, operationally, and legally for accelerated growth in 2025.
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