The 2024 election results are in, and Donald Trump will return to the White House for a second term. Republicans have gained control of both chambers of Congress, setting the stage for major legislative initiatives, including tax reform. As significant portions of the TCJA approach their expiration date, a Republican-controlled government is likely to push for an extension of these provisions. While the overall direction is clearer, specific details of potential changes won't emerge until the new Congress begins its deliberations in January 2025.
The TCJA, passed in December 2017, brought sweeping changes to both individual and business tax codes. However, many of these changes were temporary due to budget reconciliation rules, which limited the bill’s impact on the federal deficit to within a 10-year budget window. If Congress takes no action, the following major changes will take effect in 2026:
President-elect Trump and Republican leaders have indicated they will seek to extend many of the TCJA’s provisions, including retaining the lower individual tax rates and extending the QBID. Additionally, they have floated several new proposals, such as:
However, the legislative process will not be without challenges. With narrow majorities in both chambers, Republicans will need to create consensus within their ranks to pass any significant tax legislation, especially since budget reconciliation may be the only feasible path to avoid a filibuster in the Senate.
While the general direction for tax policy is clear, the timeline for implementing these changes remains uncertain. Republican leaders have suggested they aim to advance tax legislation within the first 100 days of Trump’s new term, which means that tax discussions could start as early as February 2025. However, as seen with the original TCJA, negotiations can take months, meaning new legislation may not be finalized until late 2025.
Though the specifics of upcoming tax changes remain in flux, taxpayers can take a few preparatory steps:
1. Identify Priorities: Evaluate which aspects of tax policy will have the biggest impact on your personal or business finances, whether it's tariffs, deductions or specific tax credits.
2. Engage with Lawmakers: Consider engaging with trade organizations or industry associations to help advocate for policies that will benefit your business.
3. Model Potential Impacts: Conduct modeling exercises to see how potential tax changes might affect your finances. Even rough calculations can provide a helpful starting point for planning and budgeting.
As tax policy evolves, staying informed will be key to understanding how changes will impact your financial situation. We'll continue to monitor developments and provide updates on what taxpayers need to know.
If you need assistance understanding how these potential changes might impact you or your business, feel free to reach out to our team for tailored advice and guidance.