2024 Post-Election Tax Forecast: Key Changes and Insights

Here’s what we’ll cover:

• Major Themes in the Anticipated Tax Shift
  
  • Key Proposed Changes for Individuals, Families and Businesses
  • Individual Tax Changes and Incentives
  • Corporate Tax and Business Incentives
  • Enhanced Business Deductions and Expensing
  • International Taxation and Tariffs
• Strategic Takeaways for Taxpayers
• Final Thoughts

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Major Themes in the Anticipated Tax Shift

Renewal and Expansion of the Tax Cuts and Jobs Act (TCJA)

The TCJA of 2017, a hallmark of Trump’s earlier administration, permanently reduced corporate tax rates and temporarily lowered individual rates. The current administration aims to make many of these provisions permanent before they expire in 2025, especially popular measures like reduced tax brackets and expanded deductions.

Higher Tariffs as a Revenue Sources

In recent statements, Trump suggested increased tariffs on imports from China and other countries. These tariffs, aimed at boosting American production, could also serve as a revenue source. While the impact of tariffs is a topic of debate, a simple takeaway is that increased tariffs might lead to cost shifts for consumers, depending on how they are structured and applied.

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Key Proposed Changes for Individuals, Families and Businesses

Several potential changes could impact individuals and families. Here are some to keep on your radar:

Individual Tax Changes and Incentives

• Income Tax Rate Extensions
  ‍The TCJA temporarily reduced individual income tax brackets, set to expire in 2025. Trump’s plan proposes extending these lower brackets permanently, allowing taxpayers in multiple income ranges to keep more of their earnings, including retaining the top tax bracket at 37% instead of reverting to 39.6%.
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• State and Local Tax (SALT) Deduction Cap Adjustments
  ‍The current $10,000 cap on SALT deductions has been a contentious issue, particularly in high-tax states. Some lawmakers are advocating for adjustments or elimination of the current cap, which would increase deductions for taxpayers paying significant state income taxes.

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Actionable Insight: You might consider postponing state and local tax payments above $10,000 to next year, to maximize benefits if higher deduction limits become available.

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• Exemptions on Tips and Overtime Income
  ‍Trump’s proposals include removing income tax on tips and overtime earnings, which could reduce tax burdens for workers in industries like hospitality, retail, and hourly jobs. If enacted, this would effectively boost take-home pay for many workers without increasing wages.
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• Social Security Income Exemption
  ‍Another proposed change is removing income tax on Social Security benefits, which could reduce taxes for retirees and older taxpayers. This measure would provide significant relief for those relying on Social Security as a primary income source.
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• Increased Child Tax Credit and First-Time Homebuyer Support
  ‍There is support within the GOP to increase the child tax credit and provide additional relief for families. Party discussions also include reviving incentives for first-time homebuyers, which could make homeownership more accessible, especially for young families.
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Corporate Tax and Business Incentives

Enhanced Business Deductions and Expensing

Expect a push to extend provisions that allow for bonus depreciation and small business expensing. These deductions make it easier for businesses to reinvest in their operations by deducting a larger portion of equipment purchases and other investments upfront.

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International Taxation and Tariffs

Continuation of International Tax Rules

The TCJA introduced international tax rules designed to increase U.S. competitiveness, like the base-erosion and anti-abuse tax (BEAT). Making these rules permanent could strengthen protections against tax avoidance by multinationals while fostering a favorable environment for domestic businesses.

High Tariff Proposals

Proposed tariffs on imports from countries such as China are expected to be a central theme in Trump’s tax strategy. These tariffs could protect U.S. industries but might also lead to higher prices on affected products.

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Strategic Takeaways for Taxpayers

Given these potential shifts, it’s wise to prepare for new opportunities and challenges. Here’s how to make the most of potential changes:

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1. Monitor TCJA Expirations and Extensions: Many popular TCJA provisions are set to expire in 2025, so it’s worth watching for updates on income tax rate changes and other deductions. Planning now could help you adjust as new rules take shape.
2. Optimize Credits and Deductions: Reviewing your current credits and deductions, such as SALT deduction, may help you take full advantage of existing and potential laws. For example, you may want to postpone some state and local tax payments in excess of $10,000 until January 1, in case there is a policy change that will expand your deductible amount next year,
3. Business Owners—Plan Investments Thoughtfully: If bonus depreciation and expensing are extended, they could open opportunities for business reinvestment. Timing capital investments carefully could maximize deductions.

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Final Thoughts

The 2024 post-election tax landscape signals possible changes across the tax spectrum. While policy specifics are still being refined, staying informed about likely shifts can help you navigate new rules confidently and make the most of any benefits. By planning ahead and understanding potential impacts, you can better align your strategies with a changing tax landscape and ensure they’re well-prepared for the years to come.