Accountants and their clients are engaged in a balancing act right now, according to Adele Peng, a director at the accounting and advisory firm PKF O’Connor Davies. “Many provisions of the 2017 Tax Cuts and Jobs Act, which was passed under the first Trump administration, are scheduled to sunset, or expire at the end of 2025. In his second term, President [Donald] Trump has proposed making those provisions permanent. Congress may take no action, or extend the TCJA, provisions, or propose new legislation. This uncertainty makes it challenging for CPAs, since we cannot make definite recommendations to clients. We are staying informed about developments and will advise clients as soon as Congress and the president agree on the changes, if any.”

There’s a lot at stake, she added. “Some of the biggest TCJA business provisions include the reduction of the corporate income tax rate to 21%,” Peng noted. “This was a ‘permanent’ provision, but Trump wants to reduce it further, to 20%, with a 15% income tax rate for corporations that make their products in America. He also wants to extend the Qualified Business Income Deduction,” which generally allows eligible sole proprietorships, partnerships, S corporations, and some trusts or estates to shield up to 20% of their income from taxation.

Trump has also talked about reinstating bonus depreciation, Peng said. “Bonus depreciation lets businesses reduce their taxable income by writing off a significant portion of the cost of eligible assets in the year they’re acquired and put to use, instead of depreciating them over a longer period,” she explained. “It started out as a 100% write-off, subject to certain limitations, it will decline to 40% for 2025, 20% for 2026, and 0% for 2027 and beyond. But under a second Trump administration, we may see a move to make the 100% bonus depreciation ‘permanent,’ subject, of course to the actions of future administrations.”

For individuals, “the TCJA reduced the top marginal income tax rate from 39.6% to 37%, while increasing the standard deduction,” she added. “But the TJCA also repealed personal and dependent exemptions, although it did increase the child tax credit and created a new $500 tax credit for dependents not eligible for the child tax credit.”

Peng noted that one aspect of the TCJA generated a lot of controversy in New Jersey: a $10,000 cap on the amount of state and local taxes (SALT) that taxpayers can deduct from their federal income taxes.

Thanks to the state’s relatively high income and property taxes, “42% of Garden State residents claimed a SALT deduction, prior to the TCJA,” said Peng, citing a National Association of Realtors study release in March 2019. “The average SALT deduction in New Jersey was $18,092, and nearly half of New Jersey residents took the SALT deduction, pre-TCJA. The state did devise an IRS-approved workaround that mitigated some of the negative effects of the cap, but one of Trump’s advisors recently floated the possibility of reinstating the full SALT deduction.”

‘Nothing is certain yet’

So, there could be plenty of good news for businesses and individuals, “but nothing is certain yet,” warned Peng. “We cannot advise about planning moves yet, because no tax law changes have been made. We are staying current and will advise clients as soon as it is practical to do so.”

In fact, with more than $4 trillion of tax increases scheduled to take effect at the end of 2025, this year could be the most important year for tax legislation since 2017 — when the TCJA was enacted, according to a report issued [before the November elections] by the audit, tax and advisory firm KPMG US. “The challenge facing policymakers in 2025 is a daunting one and the massive price tag associated with extending 2017’s tax cuts could force Congress to seek new tax increases to offset these costs,” noted the document.

“The over $4 trillion of automatic tax changes that will take place on Jan. 1, 2026, is expected to provide an impetus for a major tax bill in 2025,” said KPMG US Partner-in-Charge, Financial Services Tax David Neuenhaus. “While this tax bill will likely be centered around extending these expiring measures, it is possible that Congress will decide to address other tax items next year as well.”

He added that even though Republicans control both the House and Senate, “the margins of both majorities are slim. It appears that party leaders are in the process of identifying legislative priorities – tax and otherwise – to determine the path forward following the January inauguration of President Trump.”

Trump and the Republicans ran on a platform of extending the TCJA provisions, “but the question becomes to what extent and at what cost will they be extended?” questioned Paula Ferreira, a partner at Forvis Mazars.

“The Congressional Budget Office estimated the cost of permanently extending the TCJA at $4.6 trillion. Add to that the campaign promises like no taxes on tips and a reduction in the corporate tax rate for domestic manufacturers, and you potentially end up with a very expensive set of tax cuts. What we may see is a short-term extension, maybe about four years, pushing the tax cuts beyond the midterm elections and keeping the cost down.”

She added that some of the most consequential proposals for businesses include expanding or revising R&D credits, allowing immediate R&D deductions in the year expenses are incurred; and retaining several provisions, including accelerated, or bonus depreciation, which is set to drop to 40% this year, then fall to 20% for 2026, and disappear for 2027; and the 20% Sec. 199A qualified business income (QBI) deduction for sole proprietors and pass-through entities. Ferreira also highlighted a proposal to make the calculation for deductible business interest expense more favorable for businesses.

“Trump and the incoming Republican Congress have all noted these business provisions are high priorities, and these will factor into the total cost of a tax bill,” she said. “If they can include them all, they will, but some of these may have to give or be altered depending on the total cost of the bill and the amount of additional debt they are willing to add.”

The odds of making those and other cuts permanent “Is not a slam-dunk,” according to Nicole DeRosa, director of tax at firm SKC & Co. CPAs LLC, a full-service accounting firm.

Given the mid-term elections coming up next year, she doesn’t expect much definitive action on federal taxes until late 2025 or even perhaps early 2026, “worst case scenario. Part of the uncertainty is also due to the fact that he has not presented much in the way of details yet — Trump has been pretty general, so far,” DeRosa cautioned. “But remember that, during his first term as U.S. president, he did impose sharp tariff increases in China, which were mostly retained by [President Joe] Biden.”

There is bipartisan precedent for using tariffs; and if tariffs are the “stick” in Trump’s plans to shore up U.S. manufacturing, he also has a “carrot” in the form of planned reductions in the corporate income tax.

“Currently the corporate tax rate sits at 21%, and Trump wants to drop it to 20%; or even maybe to 15% for domestic manufacturing companies to incentivize bringing business back to the U.S.,” noted DeRosa. “There’s bound to be some politics involved, but in the end he will have to make the numbers work.”