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More clarity on the potential changes coming

Although nothing is final yet, things are firming up on what will likely be included in the "big beautiful bill" that Congress is trying to finalize for President Trump's approval this summer.

It is pretty certain that most provisions of the Tax Cut and Jobs Act (TCJA) that were set to expire will be made permanent. While this is a very positive development for many (it will prevent tax increases on 62% of taxpayers), the biggest challenge is that it will add roughly $4.5 trillion to the deficit. This is why there is so much focus on spending cuts and eliminating waste - Congress has indicated they will only allow the proposed $4.5 trillion deficit increase from tax reforms if $1.7 trillion is cut from government spending.

Did I mention nothing is final yet??....

Disclaimer

As a reminder, my role is not to endorse or criticize these potential changes. My role is to keep you informed so that you understand the potential impact (good or bad) on your small business and/or personal taxes.

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Potential changes impacting Personal Returns

Makes the TCJA tax rate reductions permanent
However, still under consideration is raising the top tax rate (currently at 37%) for those making over $2.5M ($5M if married) although this is one of the more controversial/contested proposals
Makes the TCJA tax bracket changes permanent and increases the inflation adjustment for all brackets except for the 37% bracket
Makes the TCJA child tax credit increase permanent and temporarily increases the maximum credit to $2,500 from 2025 thru 2028
Makes the higher TCJA standard deduction amounts permanent and temporarily increases them by $2,000 for joint filers, $1,500 for head of household and $1,000 for all others.
Temporarily increases the added standard deduction for seniors (those over 65) by $4,000 for years 2025 thru 2028
Increases the SALT (State and Local Tax) limit to $30,000 (from $10,000) but it phases down to $10,000 for MAGI over $200,000 for single filers ($400,000 for joint filers)
Repeals several green tax subsidies such as EV credits and residential energy credits after 2025
Temporarily makes tip income and overtime premium deductible (therefore not taxable) for the years 2025 thru 2028
Potential changes to how much (if any) of social security is taxable
Temporarily makes auto loan interest (up to $10,000) deductible for vehicles with final assembly in the US for years 2025 thru 2028
Makes the TCJA increase in the estate tax exemption permanent and increases it to $15M in 2025 ($30M for married couples) with annual inflation adjustments thereafter

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Potential changes impacting Business Returns

Makes the QBI (Qualified Business Income) deduction permanent and increases it from 20% to 23%
Temporarily restores 100% bonus deprecation from 2025 through 2028
Limits SALT parity workarounds for pass through entities

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IRS Staffing Reductions

As part of the overall focus on reducing government spending, the IRS staff has been impacted as well. Specifically,

There is currently a hiring freeze,
Roughly 24k IRS employees left through the voluntary separation programs,
Additional reductions in force are in process with the overall staffing cut to the IRS expected to be 20%
Although not finalized, the areas of audit and compliance are expected to see more reductions than client services (those that answer phones or process returns)

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BOI - RIP!!

Congress has rescinded the BOI filing requirements for US companies. Foreign entities operating in the US or US companies with foreign individuals as beneficial owners must still file BOI

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We are moving!!

We have finalized the details on our new office and will be moving soon! More to follow in our next newsletter!