Tax Cuts 2.0
President Trump recently mentioned at a House Republicans retreat in Baltimore his desire to have a second round of tax cuts aimed at benefiting the middle class. He is quoted as saying, “It will be a very substantial tax cut for middle-income folks who work so hard.” He also is quoted as saying the tax cut would be, “very, very inspirational.” At this time the President has not released any details on his plan other than he would have a proposal in place to Congress by next year.
“Tax Cuts 2.0” is a proposed second round of tax cuts after the initial tax cut bill called the Tax Cuts and Jobs Act (TCJA) passed in December 2017. The TCJA was an overhaul of the tax code that was considered the most impactful change in tax law since the massive change to the tax code in 1986.
President Trump will face a fierce battle passing his tax bill in Congress with Democrats in charge of the tax-writing committee in the House of Representatives and 2020 being a Presidential election year. Also, top republican tax writers, Chuck Grassley in the Senate (Senate Finance Committee Chairman) and Kevin Brady in the House (the main author of the TCJA) have stated that their focus is not on “Tax Cuts 2.0” but on making permanent many of the provisions in the TCJA which will expire in 2025. Brady also said a top priority for him is a bi-partisan overhaul of the tax treatment of retirement savings.
Some of the tax provisions from the TCJA that will expire in 2025 are the lower tax rates for individuals, doubled standard deduction, 100% bonus depreciation (expires after 2022) $10,000 cap on state and local tax deductions, the increased child tax credit, limitation on home mortgage interest and the 20% deduction for Qualified Business Income for pass-through entities (among others).
What, if anything, changes in the tax law in the next two years is anybody’s guess, but you can be sure that your trusted tax advisor is keeping up to date on any changes and you should consult with your tax advisor if you have questions on these rules.