Navigating Tax Changes in 2025: Key Updates and Strategic Considerations

As we progress through 2025, several significant tax changes are on the horizon that could impact both individuals and businesses. Staying informed about these developments is crucial for effective financial planning and ensuring compliance. Below are the key updates to be aware of:

1. Expiration of Tax Cuts and Jobs Act (TCJA) Provisions

Many provisions from the TCJA of 2017 are set to expire at the end of 2025, unless extended by Congress. Notable expirations include:​

• Individual Tax Rates: The top marginal tax rate is scheduled to revert from 37% back to 39.6%.​

• Standard Deduction: The standard deduction will decrease, potentially affecting taxpayers’ filing choices.

• Child Tax Credit: The enhanced child tax credit is set to reduce, impacting families with children.​

• State and Local Tax (SALT) Deduction Cap: The $10,000 cap on SALT deductions may be lifted, altering tax liabilities for residents in high-tax states.​

• Estate Tax Exemption: The exemption amount is expected to decrease from $13.99 million to approximately $7 million, which could affect estate planning strategies.

2. Introduction of New Tariffs and Trade Policies

On April 2, 2025, President Trump announced a two-tier tariff structure aimed at addressing the U.S. trade deficit:​

• Baseline Tariff: A 10% tariff has been applied to imports from all countries, excluding Canada and Mexico, effective April 5, 2025.​

• Country-Specific Tariffs: Additional tariffs targeting approximately 60 countries, including significant rates for nations like China, Vietnam, and India, commenced on April 9, 2025.​

These measures are part of a broader strategy to encourage domestic production and reduce reliance on foreign imports.

3. Changes Affecting Businesses

Businesses should be particularly attentive to the following changes:

• Qualified Business Income (QBI) Deduction: The 20% QBI deduction for pass-through entities is set to expire at the end of 2025, unless extended. This deduction has been beneficial for sole proprietors, partnerships, and S corporations.

• Bonus Depreciation: The provision allowing businesses to deduct 100% of qualified property costs in the year of purchase is scheduled to phase down starting in 2023, potentially affecting capital expenditure planning.

Strategic Recommendations

Given these forthcoming changes, individuals and businesses should consider the following actions:

• Review Financial Plans: Assess how the expiration of certain tax provisions may affect your overall tax strategy and make necessary adjustments.

• Consult Tax Professionals: Engage with tax advisors to understand the implications of new tariffs and trade policies on your business operations.

• Stay Informed: Monitor legislative developments closely, as tax laws are subject to change based on new legislation.

For personalized guidance tailored to your specific situation, contact us at:

• Phone: 323-902-1000​

• Website: www.losangelescpa.org​

• Email: dmitriy@losangelescpa.org​

Staying proactive and informed will help you navigate the evolving tax landscape effectively.