PROPOSED CHANGE

IMPACT

WHAT IT MEANS FOR YOU*

Permanence of TCJA provisions associated with individual income taxes (effective January 1, 2026), with the exception of repealing the $10,000 cap on deductions for State & Local Taxes (SALT).

Tax Foundation projects this provision to result in a 1.4% increase in Gross National Product (GNP), an increase of over 1.3 million jobs and a $4.4 trillion reduction in tax revenue over 10 years.

This would provide upper-income taxpayers with significant tax savings, particularly those who live in high-tax states.

It may also eliminate the need for SALT cap workarounds, which often require costly analysis.

Permanence of TCJA provisions associated with gift & estate taxes (effective January 1, 2026).

Tax Foundation projects this provision to result in a 0.1% increase in GNP, an 8,000 increase in jobs, and a $205.6 billion reduction in tax revenue over 10 years.

This would potentially provide increased simplicity, flexibility, and significant savings for high-net-worth families in terms of passing on wealth to younger generations through the continuance of the expanded lifetime gift & estate tax exclusion (currently $13.99 million per spouse) beginning January 1, 2025.

Restoring the TCJA business tax provisions (effective January 1, 2026), which would include 100% bonus depreciation, Research & Development (R&D) expensing, and the IRC 163(j) interest limitation.

Federal bonus depreciation is currently 60% for the 2024 calendar year and set to drop to 40% in 2025. Tax Foundation projects these restorations will result in a 0.5% increase in GNP, a 119,000 increase in jobs, and a $643 billion reduction in tax revenue over 10 years.

This would provide accelerated deductions to businesses that regularly purchase equipment and/or make improvements to property, as well as to businesses that deploy resources into research & development of its products. These deductions can also be passed through to business owners depending on the entity’s tax classification.

Opportunity Zone program extension. President Trump and the bi-partisan supporters of the pending Opportunity Zones Transparency, Extension & Improvement Act will likely be fast-tracking passage of the bill.

OZ is a key tool for increasing investment in underserved communities and encourage various projects including: Housing, infrastructure and business formation and expansion that will help those living in underserved areas

Investing in OZ funds can be very advantageous if you have capital gains to defer. The OZ program also offers potential tax-free returns on investment in OZ businesses.

For more, see our HCVT Alert: Opportunity Zone Program

Bringing back the Domestic Production Activities Deduction (DPAD) at 28.5%, encouraging domestic production by lowering the effective corporate tax rate to 15% on such activities. Corporations taking advantage of domestic production would experience a reduction from the current 21% corporate tax rate.

Tax Foundation projects the 28.5% DPAD to result in a 0.2% increase in GNP, a 38,000 increase in jobs, and a $361.4 billion reduction in tax revenue over 10 years.

The DPAD would be highly impactful for businesses across a variety of industries that currently rely on domestic production. Analysis of entity classification & business structuring could reveal additional tax savings.

Shareholders of U.S. corporations may also experience greater returns on their investment due to lower taxes.

Exempting tips from income taxes (employment taxes will likely still apply).

Tip income exemption/deduction is not projected to have any material economic impacts. Tax Foundation projects a tip exemption will result in less than a 0.05% increase in GNP and approximately 21,000 new jobs over the next 10 years, while the exemption would cut tax revenues by $118 billion over that time.

This would benefit workers and families who rely on income from the service industry, but only if those people are generating enough income to be subject to taxes.

Exempting taxes on tips increases cash in the pockets of employees, which could also benefit business owners in the service industry through lower wages.

Federal income tax exemption for Social Security benefits.

Tax Foundation projects this provision to result in a 0.1% increase in Gross National Product (GNP), a 55,000 increase in jobs, and a nearly $1.2 trillion reduction in tax revenue over 10 years.

Older taxpayers are often encouraged to delay Social Security benefits to maximize the value over time. An exemption for Social Security benefits could encourage people to draw Social Security earlier. Despite the timing of benefits, high-net-worth individuals in higher tax brackets are likely to see the greatest tax savings.

Federal income tax exemption for overtime pay.

Tax Foundation projects this provision to result in a 0.3% increase in Gross National Product (GNP), a 405,000 increase in jobs, and a $747.6 billion reduction in tax revenue over 10 years.

This would create tax savings for hourly employees eligible for overtime pay (generally blue-collar workers) who often work extended hours. It could also attract employees into industries that typically require overtime hours.

A proposed Schedule A deduction for interest paid on personal automobile loans.

Tax Foundation projects this deduction to result in a 0.1% increase in Gross National Product (GNP), a 50,000 increase in jobs, and a $61 billion reduction in tax revenue over 10 years.

Taxpayers financing vehicles would be able to claim an itemized deduction for interest paid on their vehicle loans. This will mostly benefit taxpayers who already have other itemized deductions (state/local taxes, mortgage interest, charitable donations, etc.) in excess of their standard deduction. For those able to itemize, this would encourage financing over putting more cash down on vehicle purchases.

Repeal of green energy subsidies granted by the Inflation Reduction Act (IRA), including credits for expenditures related to clean energy home improvement and clean energy automobiles.

Due to the temporary nature of the IRA, an elimination of green energy initiatives is not expected to have any long-run economic impact. However, Tax Foundation projects that the repeal would generate over $920 billion in tax revenue over 10 years. 

Green energy investments would be less desirable, as taxpayers would lose tax savings on solar installation, EVs, and other green energy products.

Raise tariffs to 20% on all U.S. imports, including a special 60% tariff on all Chinese goods.

Factoring in estimated foreign retaliation, Tax Foundation projects that Trump’s tariffs would result in a 1.9% decrease in GNP, a 1,435,000 decrease in jobs primarily lower- and middle-income households, and a $3.8 trillion increase in tax revenue over 10 years.

Trump intends for higher tariffs to level the playing field between domestic and foreign production, hopefully resulting in more purchases of U.S.-made products, less dependence on foreign products, and more U.S. production activity. However, many economists believe that U.S. companies will simply pass the cost of the tariffs on to U.S. consumers through higher prices of goods.