United States

Potential US tax reform on the horizon

The new Trump administration and a Republican-controlled Congress are setting the stage for a significant “must-pass” tax bill. Numerous 2017 Tax Cuts and Jobs Act (P.L. 115-97 or so-called TCJA) income, gift, and estate tax provisions are set to expire or change at the end of 2025. A lack of action would result in across-the-board tax increases for individual taxpayers. These include, for example:

• The current income tax rate structure
• Pass-through business income deduction
• Enhanced child tax credit
• Higher standard deductions
• Limits to itemised deductions with respect to states and local income tax and mortgage interest 
• Estate and gift tax exemption
• Expanded alternative minimum tax relief provisions
• Income exclusion on the discharge of indebtedness on principal residences.  

It’s unclear what legislation will be enacted. But the Trump administration would likely aim to make the decreased income tax rates permanent. Setting a new sunset date could also occur. Other Trump proposals include:

• Eliminating taxes on tip income, certain Social Security benefits, overtime pay, and Americans abroad
• Providing a tax credit for unpaid family caregivers
• Allowing a deduction for auto loan interest payments, and
• Restoring federal individual itemised deductions for state and local taxes.