Economists and tax strategists are speculating about changes to the tax code after the Presidential election. With the landmark Tax Cuts and Jobs Act (TCJA) of 2017 set to expire at the end of 2025, Congress will need to approve extension of certain provisions or make them permanent. If Congress takes no action, certain provisions for individuals, corporations, estates, not-for-profits and international operations will revert to 2016 (pre-TCJA) tax law.
Besides making the TCJA tax provisions permanent, President-Elect Donald Trump has suggested changing some of the provisions:
- Reducing the corporate tax rate from a flat 21% to 20% (or even 15%)
- Removing the SALT deduction cap
- Eliminating Inflation Reduction Act energy-related credits
Tariffs on Imported Goods
President-Elect Trump has proposed paying for these retained tax breaks by adding import tariffs of 10%-20%, possibly more for imports from China and Mexico. The Tax Foundation has stated that tariffs have historically led to economic downturns as demand decreases and therefore productivity, which leads to layoffs. In addition, the U.S. may face retaliatory tariffs on its exports.
Some global companies have already announced price increases in response to import tariffs, which ultimately leads to higher prices for retailers and consumers.
Not-for-Profit Concerns
The impact of new tax policies and import tariffs on not-for-profit developers and agencies will continue a trend since 2018 ¾ decreased charitable giving by individuals and higher costs for a broad range of construction materials.
A higher standard deduction means that individuals and married couples are not itemizing deductions such as charitable gifts, at least not for federal tax purposes…leading to less financial incentive for giving. Higher costs for construction materials can significantly delay project starts for affordable housing projects as developers seek additional funding.
Plan for Tax Law Changes
With several unknowns leading up to the new presidency and a majority in Congress, it may seem difficult to plan for tax law changes and any economic shifts. Here are a few items that make sense regardless of what happens in 2025.
1. Make use of data and key performance indicators
Set up basic data points to track your budget and financial outputs compared to the previous year. It will help leaders rein in spending, adjust tax estimates or invest in more efficient tools.
For individual investing, speak to your financial advisors about diversification or a change in asset allocation as you move closer to a big life change or retirement. They can monitor market trends affected by economic or policy changes in the coming year.
2. Maintain transparency
Share success stories while also focusing on top line growth needs in business or not-for-profit organizations. Increase marketing and outreach to build up interest and new support for your mission.
If you are doing estate planning, communicate your goals with family members to ensure that they are on the same page about wealth transfer plans and timing. This is particularly important for you and them based on any changing tax law. Update your wills and trusts as necessary.
3. Monitor tax bracket and/or tax-exempt status legislation
Changes to tax rates can seriously affect a small business with unexpected tax bills starting in 2026. Monitor the approach to TCJA rates becoming permanent or reverting to 2016 rates, and plan your estimated payments accordingly.
For a small business, consider accelerating income or expenses in 2025 if necessary. If you are concerned about individual taxes or capital gains, consider bunching charitable giving or accelerating individual gifting.
For not-for-profits, legislation is in play that may impact their tax-exempt status. In addition, President-Elect Trump has discussed the idea of taxing endowments of colleges and universities and other not-for-profits.
If you have concerns about how emerging tax policies or changing tax law could affect you, your small business or not-for-profit, contact us at LvHJ to guide your next steps.
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