2025 Tax Updates in Progress

As of January 2025, under President Trump's administration, several tax policies have been proposed or enacted that may impact deductions, the Qualified Business Income (QBI) deduction, and other relevant tax provisions. Here's an overview of the current landscape:

Standard Deductions:

For the 2025 tax year, the standard deduction amounts have been adjusted for inflation:

Married Filing Jointly: Increased to $30,000, up from $29,200 in 2024.

Heads of Household: Increased to $22,500, up from $21,900 in 2024.

Single Filers and Married Filing Separately: Increased to $15,000, up from $14,600 in 2024.

These adjustments aim to account for inflation and provide taxpayers with higher standard deductions.

State and Local Tax (SALT) Deduction Cap:

The 2017 Tax Cuts and Jobs Act (TCJA) introduced a $10,000 cap on the SALT deduction. Recent discussions indicate that President Trump now supports repealing this cap, which could benefit taxpayers in high-tax states like New York, New Jersey, and California. However, the potential revenue loss from such a repeal is a significant consideration in ongoing legislative negotiations.

Qualified Business Income (QBI) Deduction:

The QBI deduction, allowing eligible business owners to deduct up to 20% of their qualified business income, is scheduled to expire at the end of 2025. The current administration has expressed intentions to extend or make this deduction permanent, aiming to continue providing tax relief to pass-through entities such as S-corporations, partnerships, and sole proprietorships.

Bonus Depreciation:

The TCJA introduced 100% bonus depreciation, permitting businesses to immediately write off the full cost of eligible property. This provision is currently phasing out, with the bonus percentage decreasing by 20% each year (60% in 2025) and set to fully phase out by January 1, 2027. The administration has proposed reinstating and making permanent the 100% bonus depreciation to encourage business investment.

Estate and Gift Tax Exemptions:

The TCJA significantly increased estate and gift tax exemptions, which are also set to expire at the end of 2025. There is a possibility that the current administration will seek to extend these higher exemptions. Taxpayers may consider utilizing the increased exemptions through strategic estate planning, such as making gifts or establishing trusts, before any potential changes occur.

Corporate Tax Rate:

The administration has proposed reducing the corporate income tax rate from the current 21% to 20%, with potential further reductions to as low as 15% for corporations that manufacture products within the United States. This initiative aims to stimulate domestic production and investment.

Universal Tariff on Imports:

A proposed universal tariff includes a 20% levy on all imported goods, with an increased rate of 60% specifically for imports from China. While intended to protect U.S. manufacturing, this policy could lead to higher prices for imported goods and potential trade tensions.

Conclusion:

As tax policies continue to evolve under the current administration, it's crucial for taxpayers to stay informed about these changes. Consulting with tax professionals can provide personalized guidance to navigate the shifting tax landscape effectively.