One of the key elements of the TCJA was a reduction in the corporate tax rate from 35% to 21%. However, the tax cuts for individuals (such as the lower individual tax brackets) are set to expire after 2025. Also at stake for expiration in 2025 is the section 199A pass-through business deduction. Pass-through businesses – sole proprietorships, partnerships, and S-corporations – will no longer be able to deduct up to 20% of qualified business income (QBI) when calculating annual taxes. A new Trump administration could push for making these cuts permanent, ensuring long-term benefits for both individuals and businesses. On the campaign trail, Trump voiced his support for additional tax breaks for individuals and cutting the corporate tax rate from 21% to as low 15% - although that lower rate would apply “solely for companies that make their products in America.”

On the horizon could be possible revisions to unfavorable TCJA items, including the return of 100% depreciation and expansion of Research and Development (R&D) tax credits. Currently, under TCJA, bonus depreciation has been phasing down in annual increments of 20% since 2023. The TCJA also provides that R&D expenditures paid or incurred in taxable years beginning after December 31, 2021, are subject to capitalization over five years for research conducted within the United States and 15 years for research conducted outside the United States.

The TCJA also included numerous tax cuts geared towards individuals, including lower tax brackets, higher standard deductions, and the child tax credit. In addition to making the expiring TCJA tax cuts permanent, Trump pledged his support for eliminating federal taxes on certain types of income, such as capital gains or possibly income derived from retirement savings. He also proposed to exclude tips from income tax and payroll tax as well as overtime pay, although it is unclear whether this applies solely to income tax or to both income tax and payroll tax. Below are some additional tax proposals from the Trump campaign:

• Allow the TCJA limit on the deduction for state and local taxes to expire (SALT)
• Allow a deduction for interest on loans to purchase automobiles made in the U.S.
• Allow a deduction for the cost of home generators in states hit by natural disasters
• Expand qualifying tuition programs to cover homeschooling
• Eliminate income tax on Social Security benefits
• Eliminate double taxation for U.S. citizens overseas

The Trump administration’s tax proposals, including the extension or expansion of the TCJA provisions, would likely have immediate economic benefits, such as increased investment, corporate growth, and potential job creation. However, they also carry significant risks, particularly related to the federal budget. It is important to remember that nothing is certain as of right now and as these proposals move forward, it’s critical for taxpayers to keep a close eye on the legislative process. The decisions made in the coming months and years could shape the business landscape for years to come, so proactive planning and strategic tax management will be essential to navigating the changing tax environment.