With the 2024 presidential election now concluded and Donald Trump securing a second term, discussions surrounding tax policy are heating up. Many of the tax provisions from the 2017 Tax Cuts and Jobs Act (TCJA), which is set to expire at the end of 2025, are likely to be addressed and potentially extended, particularly those that impact individuals and businesses.
As a trusted advisor to the Central Valley for over 80 years, DeMera DeMera Cameron is committed to helping you navigate these changes. Here’s a breakdown of the tax adjustments expected under the new administration, based on Trump’s campaign promises and proposals for the next four years.
Implications for individuals
The TCJA introduced significant tax cuts, and discussions on the campaign trail hint at potentially preserving several of these benefits, especially those for individuals. Here are some of the notable provisions under consideration:
- Federal Tax Rates:
- The TCJA reduced individual tax rates, with a maximum federal tax rate of 37%. Current discussions lean toward maintaining this rate, keeping more income in taxpayers’ pockets.
- State and Local Tax (SALT) Deduction Cap:
- The $10,000 cap on SALT deductions, introduced in the TCJA, could expire, allowing high-tax states’ residents to deduct more of their state and local taxes on federal returns.
- Capital Gains Tax Rates:
- Keeping capital gains tax rates tiered at 0%, 15%, and a maximum of 20% is another potential priority, which would continue to benefit investors with lower long-term capital gains taxes.
- Enhanced Child Tax Credits:
- Proposals include raising the current $2,000 Child Tax Credit to $5,000, with discussions around making it partially refundable or removing income eligibility caps, potentially allowing more families to benefit.
- Alternative Minimum Tax (AMT) Exemption:
- Making the current AMT exemption and phase-out thresholds permanent would continue to shield a larger number of taxpayers from this additional tax.
- Additional Proposals:
- Other ideas include introducing a deduction for interest on loans for American-built vehicles, a deduction for home generators in states impacted by natural disasters, reducing or eliminating Social Security tax, and providing a family caregiver tax credit. These measures would ease tax burdens in practical, targeted areas.
Business tax implications
The TCJA also introduced significant changes for businesses, and future policies may enhance or make these changes permanent. Some proposals include:
- Lower Corporate Tax Rate:
- Reducing the corporate tax rate further, potentially down to 20% or even 15%, could encourage investment and provide additional capital for business growth, particularly for small to mid-sized businesses in Fresno.
- Qualified Business Income Deduction (Section 199A):
- This deduction, currently providing a 20% deduction on qualified business income for eligible pass-through entities, may be made permanent, extending a crucial benefit to partnerships, S-corporations, and sole proprietorships.
Estate and gift tax
Estate tax considerations are another area of discussion. Currently, the TCJA offers an estate and gift tax exemption of $13,610,000 per individual, adjusted for inflation. There are proposals to make this higher exemption permanent, providing additional flexibility for estate planning. For families and estate planners, this would mean increased opportunities to transfer wealth with minimized tax liabilities.
Energy-related tax policies
Finally, there is a campaign focused on energy tax incentives, particularly related to oil, gas and coal production. Repealing these incentives could shift the focus towards renewable energy and clean energy initiatives. While these changes may impact the traditional energy sectors, they also hint at potential growth opportunities in green energy and sustainable development.
What this means for you
At DeMera DeMera Cameron, we advise individuals, businesses, and estates to stay informed and adaptable as tax policy evolves. With the potential for sweeping changes, advance planning can help mitigate tax impacts and capitalize on emerging opportunities. From income tax strategies to estate planning, our team is here to provide tailored guidance in a time of uncertainty.
