With April 15th now behind us, it’s time to turn our attention to what lies ahead. There’s growing momentum in Washington around a new tax reform proposal that could bring some of the most significant changes since the Tax Cuts and Jobs Act of 2017.
While the details are still being finalized, the early framework gives us a good idea of where things might be heading and how it could impact individuals, families, and business owners alike.
Here are some of the highlights worth keeping an eye on:
- Extension of the 2017 Tax Cuts and Jobs Act (TCJA): There’s strong support among Republican lawmakers for extending the 2017 tax cuts, which are currently scheduled to expire at the end of this year. This includes lower individual income tax rates, the expanded standard deduction, and the doubled estate tax exemption.
- Elimination of Federal Taxes on Social Security Benefits: One proposal gaining traction is to phase out federal income tax on Social Security benefits. This would offer meaningful tax relief to retirees currently paying tax on up to 85% of their benefits.
- No Federal Income Tax on Tips and Overtime Pay: The plan may also include tax-free treatment for tip income and overtime pay, potentially benefitting millions of workers in industries like hospitality, food service, retail, and healthcare.
- Removal of the $10,000 SALT Deduction Cap: Lawmakers are revisiting the cap on State and Local Tax (SALT) deductions, which has had a disproportionate impact on taxpayers in higher-tax states like New York and New Jersey. The proposed plan calls for eliminating this cap altogether.
- Business-Focused Tax Incentives: Several pro-business measures are under discussion, including full expensing of capital investments in the year of purchase and immediate deduction of research and development (R&D) expenses. These provisions would support continued growth and reinvestment, particularly for small and mid-sized businesses.
- Expanded Child Tax Credit: There’s also talk of increasing the refundable portion of the Child Tax Credit over time, providing additional support to families with children.
- Incentives for Affordable Housing: To encourage development in underserved areas, the plan includes an expansion of low-income housing tax credits, aimed at boosting the availability of affordable housing.
- Tariffs as a Revenue Offset: To help pay for these tax cuts, the plan suggests using increased tariffs on certain imports. Specifics are still being worked out.
Although nothing is finalized, Congress has taken steps that could allow a tax package to move forward later this year through the budget reconciliation process. If that happens, changes could come quickly.
We’re keeping a close eye on all developments and will continue to update you as things progress. In the meantime, this is a great opportunity to get ahead of any potential changes and start thinking strategically.
As always, we’re here to help you stay informed and ready for whatever may come next.
Very truly yours,
John Vento Jr., CPA
Vice President
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