Republican tax policies traditionally center on tax cuts to spur economic growth. Given the party’s strong stance on reducing taxes to stimulate the economy, the likely result of President-elect Donald Trump’s second term will be a variety of tax-related shifts. What follows is a partial list that we at PCO Bookkeepers and M&A Specialists believe will be affected.
The Tax Cuts and Jobs Act of 2017 (passed by the last Trump administration) contained many provisions that are set to expire at the end of 2025, essentially rolling back to the rules prior to the passage of the act. Some significant items that are set to expire but have gathered enough steam to either be extended or made permanent include:
Individual tax changes
▶ Lower income tax rates. Most individual income tax brackets were lowered, decreasing tax amounts for many. These lower rates will most likely become permanent.
▶ Increased standard deduction. The standard deduction nearly doubled, simplifying tax filing for many, which also reduced taxes. This most likely will become permanent.
▶ Increased child tax credit. The child tax credit was increased, providing tax relief for families with children. As this has bi-partisan support, it almost certainly will be made permanent.
▶ Limited state and local tax (SALT) deduction. The SALT deduction — including property and income taxes — was capped at $10,000, affecting taxpayers in high-tax states. President-elect Trump has argued for either removing the SALT cap or significantly increasing it.
Business tax changes
▶ Lower corporate tax rate. The corporate tax rate was permanently reduced from 35 percent to 21 percent. This significant change was intended to boost business investment and competitiveness. While this was a bold move, and many argued it provided less revenue to the government, those in business benefited greatly. Because the Trump administration sees itself as very pro-business, we expect the rate to remain constant or be lowered.
▶ Pass-through business deduction. A new 20 percent deduction (Section 199A) was created for income from pass-through businesses, such as partnerships and S corporations. This provides tax relief to many small business owners. We believe this will be a no-brainer to keep because most small businesses are set up as pass-throughs.
▶ Bonus depreciation. This provision allows businesses to immediately deduct a large percentage of the cost of new equipment. While it has stimulated investment, its high cost and potential for abuse might make it a target for modification or elimination. We believe this provision will stay intact or even be extended, however.
Estate tax changes
The estate tax exemption was significantly increased. Before 2017, the estate tax basic exclusion amount was $5.49 million per individual. The Tax Cuts and Jobs Act of 2017 doubled the basic exclusion amount to $11.18 million per individual.
The estate tax exemption has continued to increase because of inflation adjustments. For 2024, it stands at $13.61 million per individual. At press time, however, this is scheduled to roll back to
$7 million at the end of 2025.
The estate tax exemption was a hot issue during the election season. The Trump administration is likely to preserve and even extend it. At a minimum, this means an individual can leave an estate worth up to $13.61 million to their heirs without incurring federal estate tax. For married couples, this amount is effectively doubled to $27.22 million.
As a result of the recent Republican victory, tax policy is likely to undergo significant changes, with notable implications for individual, business and estate taxpayers. For higher-income earners, reduced tax rates and potential simplifications in the tax code could lead to lower overall tax burdens.
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About the Author
Dan Gordon, CPA, owns PCO Bookkeepers & M&A Specialists, an accounting and exit planning firm that caters to pest management professionals throughout the United States. He can be reached at dan@pcobookkeepers.com.
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