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Tax policy changes
A Trump administration will likely bring significant tax changes to the tax code, many of which would continue or expand upon those enacted during his previous term. Here are a few policy changes he floated on the campaign trail.
- Extending Tax Cuts and Jobs Act (TCJA) provisions. Trump may extend several provisions from the TCJA that are set to expire after 2025. While most of these provisions apply to individual income taxes, one notable exception is the qualified business income (QBI) deduction, which allows owners of pass-through businesses to deduct up to 20 percent of their business income.
- Corporate tax cuts for domestic production. Trump proposed lowering the effective corporate income tax rate by reinstating the domestic production activities deduction (DPAD) at 28.5%. This change would reduce tax liabilities for businesses that manufacture products domestically.
- Permanent expensing of machinery, equipment, research and development (R&D). Making bonus depreciation, Section 179 expensing, and expensing for R&D costs permanent would allow businesses to write off the cost of these investments immediately, offering potential cash flow benefits.
- Repeal of green energy tax credits. Trump's plan to eliminate green energy tax credits implemented under the Inflation Reduction Act could increase costs for companies that invest in renewable energy.
- Tariffs and trade conflicts. The cornerstone of Trump’s economic plan is tariffs on foreign goods entering the U.S. He’s proposed tariffs of 60% on goods from China and up to 20% on everything else the U.S. imports. These tariffs will impact businesses that rely on imports by increasing costs and possibly disrupting supply chains. The Tax Foundation estimates these tariffs would offset more than two-thirds of the long-term economic benefits of Trump’s proposed tax cuts.
Easing regulatory barriers
During his previous term, Trump reduced regulations across several sectors, including energy, finance, and manufacturing. If he continues this approach, it could provide for easier expansion and reduced operating costs for businesses in heavily regulated industries.
Changes in labor access
A Trump administration will likely bring stricter immigration rules, which could limit access to labor in industries that rely on immigrant labor, such as agriculture and technology. Startups and other companies that rely on highly skilled international talent could have a harder time hiring if Trump institutes stricter visa policies.
Practical Steps for Small Business Owners
The impact of Trump’s proposed changes depends on which combination of policies ultimately take effect and how they’re structured. In the meantime, here are a few steps small business owners can take to prepare.
- Review your tax strategy. Work with your tax advisor to understand how extended TCJA provisions and other tax policy changes might impact you. Identify areas where you might benefit from tax savings, such as planning capital purchases to align with 100% expensing of machinery and equipment or research and development. Make a plan to maximize these benefits if they take effect.
- Plan for possible cost increases. Rising costs due to tariffs could strain cash flow. Consider building up your cash reserves and reassessing your prices and supply chain. You may want to look for alternative domestic suppliers to reduce dependency on imported goods and minimize risks associated with international trade conflicts. If your business is involved in production, look for opportunities to increase domestic production to maximize the potential domestic production activities deduction.
- Consider renewable energy investments. If you’re considering renewable energy, you may want to act sooner rather than later. Locking in savings under the current tax structure could benefit your cash flow if the new administration repeals green energy tax credits.
- Rethink hiring strategies. If stricter immigration policies are a concern, focus on developing the local workforce to create a pipeline of local talent. For example, you might be able to partner with educational institutions or offer training programs to attract and retain qualified local candidates.
How Bench can help
Remember, the specifics of these policies—if implemented—will likely evolve. So it’s essential to keep an eye on legislative changes and consult with advisors who can help you adapt quickly and take advantage of potential tax benefits.
If you’re ready to let a tax pro handle your taxes, let Bench do your books and file your taxes. Then you can turn potential challenges into opportunities to thrive, regardless of the political landscape.
