The 2024 Election’s Potential Impact on Tax Policy–Post-Election Version

With the election behind us, and Republican control in the White House, Senate, and House of Representatives ensured, the direction that anticipated 2025 tax reform will take is starting to take shape.

While the picture is still not clear, below outlines some initial thoughts.

Background on the Tax Cuts and Jobs Act (TCJA) and the Sunsetting Provisions

The TCJA was passed during the Trump administration under a process known as reconciliation and, as a result, had many provisions that were “temporary” and scheduled to expire (sunset) after 2025. Some of the most notable provisions are as follows.

Changes scheduled to expire at the end of 2025:

• Reduced top income tax rate from 39.6% to 37%
• IRC 199A which allows a 20% deduction on certain pass-through business income
• Limitations on the state and local tax deduction
• Increase of the lifetime federal estate and gift tax exemption

Changes that have already started to take place (revenue raisers):

• The required capitalization and amortization of research and experimental expenditures
• Phaseout of 100% bonus depreciation
• Change in the interest expense limitation calculation

Tax Reform

Early signs suggest that the Republican-controlled Congress will prioritize tax policy in 2025, focusing on both the sunsetting provisions of the TCJA and broader tax reforms. This approach may capitalize on Republican momentum from the election while avoiding complex bipartisan negotiations.

As a result, many of the tax policies outlined earlier are expected to be considered. Because these provisions were enacted during Trump’s first term, it’s likely that several will be extended, and some may even become permanent, depending on budget constraints. In addition to the above items from the TCJA, Republicans may pursue other campaign promises, such as exempting social security and overtime pay from taxes.

Revenue-raising measures may also be considered. Discussions may include reinstating tariffs, eliminating certain credits and incentives from the Inflation Reduction Act, reducing IRS funding, and addressing potential abuses of the Employee Retention Credit. 

What to Expect Moving Forward

Early signs show that Republicans will attempt tax reform in 2025. Republican control should make the process easier, however, the specifics remain to be unseen. Redpath and Company will continue to monitor the situation and provide updates as things move forward.