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Election results set the stage for extension of Trump tax cuts

November 8, 2024 / 16 min read

With significant portions of the Tax Cuts and Jobs Act (TCJA) expiring at the end of 2025, the future of tax legislation has been uncertain. However, the direction tax policy will take becomes clearer with the results of the 2024 election.

Editor’s note: As of publication, Republicans are projected to gain a majority in the House of Representatives even though 25 races remain uncalled.

The results of the 2024 election are mostly in, and Donald Trump will return to the White House for a second term. While a few House and Senate races are still up in the air, it’s expected that Republicans will have a majority in both chambers. In the case of a Republican sweep, the direction that tax policy will take over the next several years becomes much clearer. Significant portions of the Tax Cuts and Jobs Act (TCJA) expire at the end of 2025, and Republicans generally support a broad extension of those expiring provisions. Still, there will continue to be uncertainty on the details until the new Congress begins its deliberations in January. Here are the key items that we know about the future of federal tax legislation.

How we got here: The expiring TCJA

The origin of the looming tax policy debate can be traced back to the enactment of the TCJA in December 2017. That bill advanced in Congress through a procedural mechanism known as budget reconciliation. The reconciliation process allowed for streamlined passage via a simple majority in the Senate but came with significant limitations. The content of a reconciliation bill is limited to spending, revenue, and the federal debt — nothing more. In addition, reconciliation bills can’t increase the federal deficit beyond a 10-year budget window. Since the TCJA was designed to be a net tax cut, this meant that many of the tax changes were enacted on a temporary basis, with Dec. 31, 2025, being the predominant expiration date. If nothing is done, some of the tax changes that would occur in 2026 include:

Individual tax

Estate and gift tax

Business tax (domestic)

Business tax (international)

The TCJA also included several business tax provisions that were set to increase taxes on a delayed basis, which have already started to take effect. These include: a decrease in bonus depreciation (phase-out began in 2023 at 20% per year until it fully expires in 2027); the tightening of the interest expense limitation by no longer adding back amortization and depreciation to the base that the 30% limit is applied to (began in 2022); and a requirement to amortize research expenditures rather than immediately expensing them (began in 2022). These changes aren’t set to expire.

Many other TCJA provisions aren’t set to change or expire in 2026. Therefore, items such as the decrease in corporate tax rate to 21%, the 80% limit on the utilization of net operating losses, repeal of the alternative minimum tax as applied to corporations, and the small taxpayer methods of accounting for inventory and the cash method of accounting would all continue to exist under current law.

The election sets the cast of characters

The first question related to tax legislation is who will be involved in the deliberations over the coming months or even years. With the completion of the 2024 election, we now know most of the cast of characters that will be involved. 

The tax proposals so far

Neither President-elect Trump nor other Republican leaders in Congress have published comprehensive tax plans, but various proposals have been communicated in a variety of manners. Some of these have been expressed with specific details while others have been discussed at a very high level. Therefore, there is a lack of specifics on many proposals, but items that have been discussed include:

TCJA extension items

New proposals

Key issues at play

While the exact parameters of future tax legislation are unknown, we do know key issues that will shape the negotiations. Those include:

Timeline on tax legislation

A unified government will result in general alignment over tax policy among the White House and Republican members of Congress. However, the path for tax legislation is often complicated by many different factors, several of which are noted above. The Tax Code has implications for social policy, employment, specific industries, the broader economy, and international trade, among others. Accordingly, the negotiations over specific legislative text could require an extended period of deliberation. As of now, there appear to be two potential paths for the timing of tax legislation during 2025.

Irrespective of whether tax legislation moves along the expedited path or slower path, it seems likely that Republicans in Congress will be highly motivated by the expiration of many TCJA provisions on Dec. 31, 2025, and that a tax bill will be completed during 2025.

What to do now

The general direction of tax policy has become clearer, but the precise details are still up in the air. That uncertainty makes it harder to take many specific actions just yet, but that doesn’t mean that there are no steps to take in the meantime: 

Keep an eye on developments in the coming months

Staying informed of developments is the best way to begin to prepare for the upcoming changes, particularly as tax policy ideas begin to be converted into actual legislative proposals. Keep an eye on our tax policy outlook and our financial/economic outlook to make sure you’re seeing all of the developments as they occur.

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