Whether you voted for him or not, the reality is that Donald Trump will again become President of the United States when he is inaugurated as the 47th president on January 20, 2025.

There will be many differences between the administration of President Joe Biden and the administration of President-elect Trump. One area in which the administrations will differ is tax policy. This article discusses President-elect Trump’s tax proposals.

Perhaps the most significant element in President-elect Trump’s tax proposals concerns his approach to the provisions of the Tax Cuts and Jobs Act of 2017 (the “TCJA”). As you may recall, as enacted during President-elect Trump’s first administration, the TCJA generally reduced individual and business income taxes and estate and gift taxes. Among its specific provisions were a reduction in the maximum individual income tax rate from 39.6% to 37%, an increase in the standard deduction, an increase in the child tax credit, an increase in the exemption amount with respect to the individual alternative minimum tax, the creation of a “pass-through” deduction based on 20% of “qualified business income” from certain “pass-through” businesses, and an increase in the exemptions from estate tax and gift tax liability. However, these and other provisions of the TCJA currently are scheduled to “sunset” and expire on December 31, 2025. President-elect Trump generally would reverse this “sunsetting” and expiration and make these provisions of the TCJA permanent. With respect to the child tax credit, President-elect Trump actually has supported a proposal by Vice President-elect J.D. Vance to increase the child tax credit to $5,000 per child from its current TCJA amount of $2,000 per child.

One provision of the TCJA that President-elect Trump does not want to continue concerns its treatment of the itemized deduction for state and local taxes. Under the TCJA, this deduction for state and local taxes generally was limited to $10,000 per year. President-elect Trump would eliminate this so-called “SALT deduction cap”.

President-elect Trump has proposed various new specific exemptions from income tax liability. First, he would exempt tips from income tax liability. Second, he would exempt overtime pay from income tax liability. Third, he would exempt Social Security benefits from income tax liability. More generally, President-elect Trump has stated that he opposes the current potential “double taxation” (taxed both in the United States on worldwide income and in a foreign country on income sourced to such foreign country) of U.S. citizens who live abroad. In addition, President-elect Trump would create an itemized deduction for auto loan interest.

With respect to business taxpayers, President-elect Trump would reduce the current 21% corporate income tax rate (a) generally, to 20%, and (b) for certain corporations that make their products in the United States, to 15%. President-elect Trump also is in support of 100% “first year bonus” depreciation and accelerated expensing of research and development tax deductions.

In reviewing President-elect Trump’s tax proposals, three important points need to be made. First, the above discussion is of proposals, and not enacted laws. Even with the apparent “Republican trifecta” (Republican president, Republican Senate, and Republican House of Representatives), there is no guarantee that some or any of President-elect Trump’s tax proposals will be enacted into law. This point does not only mean that the tax provisions ultimately enacted into law may result in lower tax reductions than contemplated by President-elect Trump’s tax proposals. It is also possible that the tax provisions ultimately enacted into law may result in higher tax reductions than contemplated by President-elect Trump’s tax proposals. For example, in “Project 2025”, the policy recommendation document published by the conservative “think tank”, the Heritage Foundation (and while not expressly supported by President-elect Trump, likely supported by certain persons in his administration and in Congress), among the tax proposals that go beyond President-elect Trump’s proposals are the modification of income tax rate brackets to include only a 15% rate and a 30% rate, a 15% maximum long-term capital gains tax rate, repeal of the 3.8% net investment income tax, and unlimited expensing of business assets. It will be important to monitor the progress of tax legislation in 2025 as it proceeds through Congress to see what tax provisions are ultimately enacted into law.

Second, while the above-described proposals evidence a significant reduction in income, estate, and gift taxation from current law (including from current law pursuant to the “sunsetting” and expiration of the TCJA), President-elect Trump is in support of a different tax increase – a significant increase in tariffs. He has proposed a 60% tariff on goods imported from China and a 20% tariff on goods imported from other foreign countries. Economists differ on the potential impact of these tariffs, but it is certainly possible that these tariffs would result in an increase in consumer prices, thereby negating to some or full extent the tax savings from President-elect Trump’s income tax, estate tax, and gift tax proposals.

Third, in terms of general tax planning before the end of 2024, several considerations should be reviewed. Typically, it is beneficial to defer income to a subsequent taxable year and accelerate deductions in the current taxable year; you want to defer something that increases an income tax liability, and you want to accelerate something that reduces an income tax liability. These planning points are only enhanced if income tax reductions are enacted for 2025, such that income deferred to 2025 will be subject to lower income tax liability and deductions accelerated in 2024 will generate a higher tax benefit (as there would be a higher “effective” tax rate in 2024 before income tax reductions have been enacted). An exception here could apply to state and local taxes, as their deduction would be subject to the “SALT deduction cap” in 2024, but it may not be subject to the “SALT deduction cap” in 2025. It also should be considered that it is possible for income tax reductions that are enacted in 2025 to not be effective until taxable year 2026. In addition, in terms of estate tax planning, there may be a lower incentive to engage in gifting in 2024 if one expects “TCJA-type” estate tax exemption amounts (currently, for 2024, $13,610,000) to continue for 2025, 2026, and subsequent years.

If you have any questions concerning President-elect Trump’s tax proposals, please discuss them with your advisers.

Note On The January 1, 2025 “BOIR/FinCEN” Deadline

One issue that Donald Trump’s election will not affect is the upcoming January 1, 2025 deadline for entities (“reporting companies”) to file a “Beneficial Ownership Information Report” (“BOIR”) with the United States Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”). Reporting companies that were formed or registered to do business in the United States on or before December 31, 2023 are required to comply with applicable “FinCEN” reporting by January 1, 2025. As President-elect Trump will not take office until January 20, 2025, his election will not affect the January 1, 2025 “BOIR/FinCEN” deadline. Thus, if you have a reporting company that is required to file a BOIR with the FinCEN by January 1, 2025, but have not yet done so, now is the time to act. Failure to comply with applicable “BOIR/FinCEN” requirements can subject both a reporting company and individuals related to the reporting company to civil and criminal penalties.

If you have any questions concerning the January 1, 2025 “BOIR/FinCEN” deadline, or any other issue with respect to “BOIR/FinCEN” requirements, please discuss them with your advisers.

If you wish to discuss any of the above, find Pen Pal Gary’s contact info here.

Disclaimer: please note that nothing in this article is intended to be, or should be relied on as, legal advice of any kind. Neither LHBR Consulting, LLC nor Gary Stern provides legal services of any kind.