The US tax system is facing potential sweeping changes. As major provisions of the 2017 Tax Cuts and Jobs Act (TCJA) approach their expiration dates, the Trump administration and Congress are weighing not just which policies to extend, but also dozens of new proposals. Combined with possible new tariffs and modifications to international tax rules, these changes could significantly impact corporate strategy and investment decisions for years to come.
Extending the TCJA
The Trump administration will have the opportunity to extend several provisions of the TCJA that are due to expire in the next four years. The earliest of these are scheduled to expire at the end of 2025, including:
- Lower individual marginal tax rates
- Larger exclusion amounts from estate and gift taxes
- A $10,000 limit on state and local tax deductions
- The 199A deduction, which allows up to 20% of pass-through business income to be deducted
In 2026, tax benefits for “opportunity zone” investments are set to expire, and in 2028, the limit on excess business loss deductions for taxpayers other than C corporations will expire.
If the administration attempts to extend these provisions, it will need nearly unanimous Republican support in Congress. Through the process of budget reconciliation, Congress can modify tax law using expedited legislative rules that avoid filibusters and therefore require only majority votes in each chamber. Notably, Congress has the opportunity to pass two budget reconciliation bills in 2025, instead of the usual one, because a budget reconciliation bill did not pass in 2024. This may provide the new administration with two separate opportunities to enact its taxation policies using the budget reconciliation process.
New Proposals Under Consideration
Beyond extending existing TCJA provisions, the administration is considering a broader array of tax reforms. Some of these proposals would reduce taxes, and others would increase taxes.
The House Ways and Means Committee recently prepared a list of tax cut options contained in various bills pending before the Committee. Proposals applicable to corporations and businesses include:
- Reinstating the deduction for research and development (R&D) expenditures
- Reducing the corporate income tax rate
- Repealing the corporate alternative minimum tax
- Repealing the 1% stock buyback tax
- Repealing the deduction for state and local taxes
- Repealing clean-energy tax credits
- Repealing the employee retention tax credit
- Permitting indexing of cost recovery deductions for buildings and structures
The proposals applicable to individuals include:
- Increasing the cap on state and local tax (SALT) deductions, providing an unlimited deduction for property taxes only, and eliminating the SALT deduction entirely
- Eliminating taxes on tips and overtime pay
- Eliminating the estate tax
- Increasing the exclusion for Americans living abroad or exempting them from income tax on their foreign earnings
- Eliminating the exclusion for interest on municipal bonds and preferences for certain other tax-favored bonds
- Eliminating or reducing the home mortgage interest deduction
- Allowing a deduction for interest on auto loans
- Eliminating the exclusion for employer-provided meals and lodging, transportation, and on-site gyms
- Eliminating the deduction for charitable contributions to certain health organizations
- Repealing credits for clean-energy vehicles and residential improvements
- Imposing a tax on electric vehicles
- Eliminating the exclusion for scholarship and fellowship income
- Replacing Health Savings Accounts (HSAs) with a Roth-style savings account
Proposals applicable to tax-exempt organizations include:
- Increasing the endowment tax to 14%
- Eliminating not-for-profit status for hospitals
- Subjecting credit unions to income tax
There has also been discussion of the imposition of tariffs, which would include codifying and increasing the current tariffs on goods from China and imposing a 10% across-the-board tariff on all imported goods.
While extending TCJA provisions has broad Republican support, the fate of new proposals — from R&D deductions to tariff changes — remains less certain as Congress weighs competing priorities and economic impacts.
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