Key Takeaways:
- The upcoming US election could significantly alter the tax landscape, particularly with provisions of the Tax Cuts and Jobs Act (TCJA) set to expire.
- Democrats are seeking to extend provisions to prevent tax increases for individuals with incomes under $400,000 and small businesses, while Republicans are supporting the continuation of the doubled standard deduction.
- The uncertainty about the impact of the election on tax policy is compounded by the 2025 “fiscal cliff,” making predictions difficult.
- Decisions about which provisions to extend or modify will affect federal income limits, estate taxes, and business income deductions, making it crucial to monitor developments in tax policy.
November brings the elections and with it, the much-needed fiscal measures currently stuck in the Senate: according to legislative experts, tax professionals, and consultants, changes to the Tax Cut and Jobs Act (TCJA) are expected as the expiration date of the provisions draws ever closer. As such, there’s no shortage of insight from different legislative experts into the policies at stake:
“Once there’s a tax title moving, then everybody wants to throw their thing at the wall and see if it sticks,” Said Mary Burke Baker, a government affairs advisor in K&L Gates and a former veteran IRS staff member, in an interview for Accounting Today “And, as we also all know, for better or worse, the tax code is seen as the solution by both parties for everything — whether it’s U.S. competitiveness, jobs, supply chain or social policies. So that’s going to put a lot of pressure on tax legislation next year.”
What’s in store for the future?
The future trajectory of the Tax Cuts and Jobs Act (TCJA) presents a range of potential scenarios, shaped by contrasting approaches proposed by the Democrats and Republicans. This legislative landscape reflects the divergent perspectives and policy priorities that each side advocates for different paths in the ongoing discussions surrounding TCJA.
Democrats
Democrats and the Harris campaign support extending the sunset provisions to ensure that individuals earning less than $400,000 per year and small businesses would not face a tax increase, which, according to a projection from the Congressional Budget Office, will cost $4.6 trillion.
Republicans
On the other hand, Republicans consider the TCJA a key achievement of the Trump administration’s tax policy and aim to make the doubled standard deduction permanent, being uncertain whether they only want to extend the positive provisions and not the negative ones.
A temporary extension is also a significant third option, although it’s unclear whether either side will consider it. The potential impact of this decision is far-reaching, affecting federal income brackets, estate taxes, and the deduction for qualified business income.
While the outcome of the election is eagerly awaited, the end-of-2025 fiscal cliff is creating uncertainly and making it challenging to predict how the process will play out, and questions about the potential impact of tax changes on various sectors of the economy and the implications for businesses and individuals are likely to persist until there’s more clarity on the direction of tax policy.
FI Group is here to help
Changes in the innovation landscape and its tax implications are common, especially amid government modifications. Therefore, it’s important to remain vigilant to continue ensuring the best choices for your company: for this reason, FI Group is here to help. With a team of more than 1,400 qualified employees, including experts from various fields, we are dedicated to assisting companies of all sizes and sectors in financing innovation for their R&D activities through the comprehensive management of R&D Tax Credits, maximizing their potential.
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November’s election is shaping up to be critical to tax planning
How the election — and Senate procedure — will decide tax policies