During recent meetings with business leaders and lawmakers, Trump mentioned a 20% corporate tax rate, a new idea to exempt hospitality workers’ tips from taxes, and suggested a sweeping proposal to replace income taxes with tariffs (an unlikely but very interesting scenario since this was the historic method for funding the government until the adoption of the income tax in 1909).

As many provisions from the 2017 Trump tax cuts expire at the end of 2025, there’s a lot at stake for taxes in the next election. Extending all these provisions would cost the Federal government over $4 trillion in revenues. That makes politicians nervous because it could force them to make tough decisions on the budget—and we all know how much politicians love making tough decisions.  Perhaps most notably, the 2017 Tax Cuts and Jobs Act (“TCJA”) cut the corporate tax rate from 35% to 21%.  While this change was made permanent, many other provisions had a sunset date or a phase-down to help limit TCJA’s impact on federal government revenue.

Three important TCJA provisions have already started to sunset or phase down:

(i) allowing businesses to immediately deduct the cost of research and experimentation (R&E) (Phase Down: starting in 2022 businesses must spread the costs over five years).

(ii) capping the business interest deduction at 30% of EBITDA (Phase Down:starting in 2022 this was tightened to 30% of EBIT).

(iii) allowed businesses to expense 100% of the costs of certain investments in the form of “bonus depreciation” (Phase Down:  this percentage began to phase down starting in 2023 and it is set to reach zero in 2027).

More TCJA provisions that expire at the end of 2025 include:

(i)  Reduced individual income tax rates and adjusted brackets.

(ii)  The higher standard deduction and suspension of personal exemptions.

(iii)  The $2,000 Child Tax Credit established in TCJA (and temporarily increased further under Biden in 2021) reverts to a $1,000 credit, with tighter household income limits for eligibility.

(iv)  The $10,000 limit on deductibility of state and local taxes (SALT),

(v)  the limit on the home mortgage interest deduction ($750,000 in principal) reverts to the pre-TCJA limit of $1M.

(vi)  Alternative Minimum Tax (AMT) changes to reduce the number of households impacted, including a higher AMT exemption.

(vii)  20% deduction for pass-throughs (“199A”).

(viii)  Higher lifetime estate and gift tax exemption.

(ix)  the international tax regime for multinational corporations established in TCJA becomes less taxpayer-favorable with changes to the rates on the “Base Erosion and Anti-Abuse Tax” (BEAT), “Global Intangible Low Taxed Income” (GILTI), and “Foreign-Derived International Income” (FDII).