Post-Election Tax Outlook By Sam Brandt, Tax Senior Manager, Forvis Mazars With Republicans winning control of the White House and Congress, we now have a clearer picture of the tax policies that will be pursued in 2025 and beyond. Priorities under consideration include the expiration of the 2017 Tax Cuts and Jobs Act (TCJA) provisions, proposals made by President Trump during the campaign, and bipartisan legislation that passed in the House earlier in 2024 but did not pass in the Senate. Although achieving these aims will likely be easier under a Republican trifecta, there remains uncertainty about how such legislation will be enacted, given the party’s slim majorities, constraints of using budget reconciliation, choice of funding mechanisms and concerns regarding the impact of tax cuts on the national debt. Without congressional action, many of the TCJA provisions will expire at the end of 2025. Republicans have expressed interest in extending or making many of these provisions permanent. While banks organized as C corporations benefited from having the tax rate permanently lowered to 21%, a majority of the expiring TCJA provisions would impact individuals and shareholders of banks organized as S corporations. For example, without action by Congress, individual tax rates would increase to pre-TCJA levels with a top rate of 39.6%. The individual Alternative Minimum Tax (AMT) exemption and threshold would be greatly reduced, with the Congressional Budget Office (CBO) estimating 7.22 million taxpayers being subject to AMT from a current level of around 200,000. The standard deduction and child tax credit would be reduced, but the personal exemption would return. The 199A Qualified Business Income deduction, which provides up to a 20% deduction for qualified income, is also set to sunset after 2025, significantly impacting shareholders of banks organized as S corporations. The estate and gift tax exemption threshold would be approximately halved from the current level of $13.6 million per individual. The sunsetting of the SALT cap, which limits an individual’s itemized state and local tax deductions to $10,000, would provide relief to some individual taxpayers. However, this benefit is likely to be reduced without simultaneous increases to the AMT threshold and because the Pease limitation is currently set to be reinstated in 2026. The original passage of the TCJA included several revenue raisers that Congress has subsequently sought to modify. These proposals include a more favorable calculation to the Section 163(j) business interest expense limitation, allowing full expensing again of domestic §174 research and development and restoring 100% bonus depreciation. These changes were packaged into the 2024 Tax Relief for American Families and Workers Act, which passed in the House with bipartisan support but failed to advance in the Senate. Given the support many of these items garnered, they will likely be considered in future legislation. While much of the energy in Washington is expected to be directed at the expiring TCJA provisions, a variety of other proposals were 12 Illinois Automobile Dealer News
RkJQdWJsaXNoZXIy MTg3NDExNQ==