The Tax Relief for American Families and Workers Act of 2024, H.R. 7024, which includes 100% bonus depreciation and other tax benefits for businesses, is unlikely to pass this year, as the election nears and its chances of getting a vote on the Senate floor dwindle.
But the 2024 election sets up an even bigger tax fight that will have a major impact on advisors and their clients. Most of the Trump-era tax cuts passed in 2017 — including lower income tax rates and the doubling of both the standard deduction and the lifetime estate and gift tax exclusion — are set to expire at the end of 2025.
In a recent email exchange with ThinkAdvisor, Jeff Bush of The Washington Update called the business tax bill modest and bipartisan and said he had hoped it would be attached the farm bill, which must pass before the fiscal year ends on Sept. 30.
"Given the differences between the two parties, I think a simple extension, beyond the election, of the farm bill is more likely," he said.
The 100% bonus depreciation provision, which began to phase out in 2023, was a part of the 2017 tax overhaul, Bush notes. The Tax Relief for American Families and Workers Act also allows for immediate research and development expensing and expands the Child Tax Credit.
But there are lots more potential tax changes on the horizon for advisors to watch, Bush tells ThinkAdvisor, given the upcoming election and a Supreme Court decision on the constitutionality of taxing unrealized gains as income.
THINKADVISOR: The Tax Cuts and Jobs Act (TCJA) of 2017 will expire at year-end. What does this mean for advisors?
JEFF BUSH: Advisors need to understand the 2024 election sets the course of the country's taxation for the next decade.
At the end of the year, barring any tax reform legislation, [most of] the Tax Cuts and Jobs Act (TCJA) of 2017 will expire as if it never existed. In this scenario, Washington does not agree on tax reform next year, and we would return to the 2017 tax code with the limits indexed for inflation.
It is a pivotal year in proving whether the tax philosophy of tax cuts provides outsized GDP growth and higher revenues, therefore "paying for themselves," or whether the country needs to rethink its current tax posture to reflect the changes in our demographics and wealth distribution. What is exciting about 2025 is that every voter can weigh in on this issue in November with their vote.
Every financial advisor should pay close attention to this election. The potential uncertainty of the outcome underscores the need for preparedness and vigilance. Failure to do so is professional negligence. The election will have a dramatic impact on money management moving forward. Advisors need to prepare clients, and their portfolios, for a possible shift in taxation philosophy.
Republicans and Democrats have different views on tax reform. What should advisors be watching for this year?
The two parties have hugely different visions for the tax code. Republicans suggest we should double down on the TCJA, while Democrats want the code to more closely track the country's wealth disparities. This stark contrast underscores the significance of the election's potential impact on tax reform and wealth management.
