Tax changes are coming in 2025, with key updates to the TCJA and other proposed reforms. President Trump’s election and Republican control of both the House and Senate, extending the Tax Cuts and Jobs Act (TCJA) in 2025 is expected to face fewer obstacles. Trump has outlined a series of proposed tax changes, including making key TCJA provisions permanent, lowering the corporate tax rate further, and loosening restrictions on interest expense deductions.
Additionally, he aims to repeal certain measures from the Inflation Reduction Act, such as the corporate minimum tax and the excise tax on stock buybacks. Other ideas floated include reducing taxes on Social Security income and tips, allowing auto loan interest deductions, and eliminating the $10,000 cap on state and local tax (SALT) deductions.
For a deeper dive into tax planning, check out our previous blog on key tax considerations on starting a business
Carried Interest Tax Reforms: Impacts and 2025 Tax Strategy Alternatives
The Congressional Budget Office (CBO) estimated that taxing carried interest as ordinary income could raise $12 billion over the next decade according to the report on 2022. Congressional Research Service (CRS) outlined three approaches to reducing the carried interest benefit:
-Tax a portion of the carried interest as ordinary income and the remainder as long-term capital gains. However, CRS notes that determining how much should be taxed at each rate could be challenging.
-Increase the holding period required to qualify for the preferential capital gains rate.
-A longer holding period could result in more carried interest being taxed as short-term capital gains. While a five-year holding period was initially included in the Inflation Reduction Act, it was removed before passage.
Stay ahead of tax reforms—reach out for tailored tax planning and compliance support for your fund.