The Tax Cuts and Jobs Act (TCJA) of 2017 was signed into law on December 22, 2017. Some provisions have expired, some are set to expire in 2025, and others will endure through this year, assuming the TCJA is not renewed. An understanding of these provisions will be helpful as you navigate 2025 and do your tax planning.

Currently, TCJA’s corporate income tax rate is 21%. Immediate deductibility for R&D expenses expired on 12/31/2021. R&D expenses are now amortized over a 5-year period.

The following federal tax provisions are scheduled to expire, primarily in 2025:

• 20% deduction for qualified business income (QBI) earned, bypass through partnerships or S corporations.
• Special 37% top marginal income tax rate for individuals, which would increase to 39.6%.
• Increased federal estate and gift tax exemption amounts would be cut, likely by more than 50% by the end of 2025.

President Trump’s proposals would permanently extend TCJA provisions, including these significant ones:

• 20% Qualified Business Income (QBI) deduction
• 37% top individual tax rate
• 100% bonus depreciation
• Immediate deduction of R&D expenses
• Retention of federal estate and gift tax exemptions at 15%
• Lower the top corporate and individual income tax rate to 15% for income from domestic manufacturing
• Ordinary and long-term capital gains tax rate of 15%
• Other proposals not related to the TCJA include the following:
  • Exempting tips, overtime pay and Social Security benefits from the federal income tax
  • Eliminating or materially increasing the limitation on the deductibility of state and local taxes (the “SALT cap”)

It is my opinion that President Trump will wait until late 2025 or early 2026 to push tax changes, to allow time to observe the effects of tariffs. And potential, federal deficit issues abound that must be considered. The estimated cost of TCJA extensions alone has been estimated at $4.6 trillion over a ten-year period. This projection does not include tip/overtime/Social Security benefit exemptions, the elimination of the SALT cap, or any cut in the corporate income tax rate. In response to the deficit concerns, Trump points to new tariffs and a proposal to tax all “carried interests” as ordinary income, rather than potential capital gain. These changes, however, are estimated to raise less than $1.5 trillion over 10 years.

Tax Planning Strategies

A Continuing Resolution was passed by the Senate on March 14, 2025, and signed into law by President Trump on March 15, 2025. It will fund the government until September 30, 2025. In light of this situation, you may want to consider the following tax strategies for your business:

• Convert S corporations and partnerships to C corporations for a 15% corporate tax rate.
• Consider eligibility for the tax-free sale of Qualified Small Business Stock. This option is available only for the sale of C corporation stock that has been held for at least 5 years.
• Defer investing in equipment until new, 100% bonus depreciation is enacted.

I would welcome the opportunity to discuss your tax strategy or other financial issues that may be affected by the evolving economic environment in which we are doing business. Contact me to schedule a complimentary, one-hour consultation.

Bob Zarlengo is a certified exit strategist and CPA. More than four decades of experience in public accounting, expertise in financial reporting, income and estate planning, and tax compliance makes him a valued and trusted advisor to his clients.