Tax Changes Are Coming in 2025

Even with Trump returning as president, the expiring Trump tax cuts will mean lots of uncertainty. Gene Marks has some suggestions (including preparing to pay your accountant).

Good Morning!

Here are today’s highlights:

• Restaurant prices keep rising, and restaurant margins keep thinning.

• These American manufacturers are skeptical that increased tariffs will revive American manufacturing.

• Latino workers in a thriving resort town consider a one-day strike: “I think that would be like one of those zombie movies.”

• LinkedIn is rewarding posters who publish TikTok-style videos.

TAXES

Gene Marks has some advice for businesses that want to prepare for possible tax changes in 2025: “It’s a strong probability that the qualified business income tax deduction will be made permanent. This deduction allows the owners of eligible ‘pass-through’ entities — partnerships, S-corporations, etc. — to take a 20-percent deduction on their business income before it passes through to their individual returns. If made permanent, then it would be time to seriously reconsider your business entity and determine whether it makes more sense to keep it as a ‘C’ corporation (even with lower rates) or convert to a pass-through, as doing this could reap huge long-term tax savings.”

• “I hate to let tax policy drive business decisions. Still, in 2025, you’re going to be able to deduct only 40 percent of your capital equipment purchases as ‘bonus depreciation’ before amortizing the remaining cost over the asset’s life. If extended or made permanent, however, that amount would likely go back up to a full 100 percent in 2026. Would the potential tax savings be enough to encourage you to hold off on big purchases until then?”

• “When you ‘save pre-tax’ money in a 401(k), you are merely deferring your tax bill to some day in the future when the government forces you to withdraw those funds and pay taxes at that time. If the tax overhaul is extended or made permanent, individual rates will stay low. In the likely event that the government can’t figure out a way to reduce deficits, however, there’s a good chance that tax rates will increase in the future, which means you could be paying less taxes now if you don’t defer those wages. If you think this will happen (I do), a better bet is to pay the taxes today and save as much as you eligibly can in a Roth IRA ...”

• “Lots of tax changes are about to happen, and I haven’t even mentioned the potential complications that will arise if Congress actually approves Mr. Trump’s proposal not to tax tips, overtime, or Social Security income. These changes will create a greater demand for tax experts, which is great news for my profession. As for you, get ready to budget more for accounting fees next year.” READ MORE