Staying Ahead of Potential Tax Changes
President Donald Trump recently delivered a crucial address to Congress, signaling significant changes in tax policy that could have a major impact on businesses and individuals. One of the most noteworthy takeaways was the possibility of retroactive tax provisions, adding urgency to tax planning as lawmakers shape forthcoming legislation. With over 30 provisions from the 2017 Tax Cuts and Jobs Act (TCJA) set to expire by the end of 2025, staying informed is essential.
Retroactive 100% Expensing: What It Means for Businesses
A major point in Trump’s speech was his commitment to reinstating “100% expensing, “a tax provision allowing businesses to deduct the full cost of certain capital investments immediately. “As part of our tax cuts, we want to cut taxes on domestic production and all manufacturing,” Trump stated. “And just as we did before, we will provide 100% expensing. It will be retroactive to Jan. 20, 2025.”
If enacted, this could be a game-changer for real estate developers and investors. Under current law, bonus depreciation is set to phase down to 40% in 2025, 20% in 2026, and then completely phased out in 2027. A full reinstatement to 100%, especially one that applies retroactively, would provide significant incentives for capital expenditures.
Key Tax Policy Proposals to Watch
Beyond expensing, Trump reiterated several other tax priorities that could reshape financial planning strategies:
- Eliminating taxes on tips, overtime wages, and Social Security benefits.
- Allowing interest payments on loans for American-made vehicles to be tax-deductible.
- Reducing corporate tax rates for domestic manufacturing and production.
While these proposals align with Trump’s previous tax policy initiatives, their implementation will ultimately depend on Congressional negotiations.
Trade Policy and the CHIPS Act
Trump also criticized the CHIPS Act, calling for its repeal and suggesting that leftover funds be redirected toward debt reduction. Given bipartisan support for domestic semiconductor manufacturing, a full repeal seems unlikely, but potential modifications to the legislation could emerge in upcoming debates.
Additionally, Trump reaffirmed his commitment to trade policies that protect American industries. He announced that reciprocal tariffs, including non-monetary tariffs, will take effect on April 2. He also highlighted existing tariffs on foreign aluminum, copper, lumber, and steel as part of his broader economic strategy.
What’s Next: Navigating Uncertain Tax Legislation
The legislative process is still unfolding, with Congress working through budget reconciliation to advance tax legislation. In February, the House and Senate approved budget resolutions, a necessary step before tax policy changes can be enacted.
For businesses and individuals, these developments underscore the importance of proactive tax planning. The possibility of retroactive tax provisions means decisions made today could have future implications. Consulting with tax advisors can help ensure readiness for any new legislation that may affect financial and business strategies.
As tax policy evolves, staying engaged and informed will be crucial. We’ll continue to monitor updates and provide insights to help you navigate these changes effectively.
