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- Business Owners: 2025 Trump Tax Updates Explained -part 1
Business Owners: 2025 Trump Tax Updates Explained -part 1
What are the most recent Trump tax updates for 2025 for small business owners?
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As the Tax Cuts and Jobs Act (TCJA) provisions approach their December 31, 2025 expiration date, business owners face significant potential changes to their tax landscape. President Trump's administration has signaled intentions to not only extend many TCJA provisions but also implement new tax policies that could substantially impact how business owners structure their finances.
In part 1 of this guide, today we’ll examine the proposed changes.
In part 2 (watch for later this week) we’ll examine the potential affects on different business structures.
In part 3 (watch for sometime next week) we’ll examine the practical steps business owners can take to prepare.
Overview of Trump's Proposed Business Tax Changes for 2025
President Trump has outlined several key tax proposals affecting business owners in 2025
The cornerstone of Trump's tax policy revolves around extending and enhancing the business-friendly provisions of the 2017 Tax Cuts and Jobs Act. While some TCJA provisions were made permanent (like the 21% corporate tax rate), many critical components affecting business owners are set to expire at the end of 2025 without congressional action.
Key Proposed Changes
Permanent extension of the Section 199A qualified business income deduction (20% pass-through deduction)
Reduction of corporate tax rate from 21% to 15% for companies manufacturing products in America
Restoration of immediate expensing for business investments (100% bonus depreciation)
Elimination of taxes on tips for service industry business owners
New deduction for auto loan interest on American-made vehicles
Increased tariffs on imports that may affect supply chain costs
Pass-Through Business Tax Adjustments
Small business owners discussing Trump 2025 tax rate changes impact on pass-through entities
For the approximately 95% of businesses operating as pass-through entities (S-corporations, partnerships, LLCs, and sole proprietorships), the Section 199A qualified business income deduction has been a significant tax benefit. This provision, which allows eligible business owners to deduct up to 20% of their qualified business income, is currently scheduled to expire after 2025.
Proposed Section 199A Changes
Feature | Current (Expiring 2025) | Trump Proposal |
QBI Deduction Percentage | 20% | 20% (permanent) |
Income Thresholds for Limitations | $170,050 (single), $340,100 (joint) | Likely increased with inflation |
Specified Service Business Restrictions | Phase-out for specified service businesses | Potential elimination of SSTB restrictions |
W-2 Wage Limitations | Apply above income thresholds | Likely maintained with adjustments |
Making the Section 199A deduction permanent would provide significant tax relief and planning certainty for millions of small and medium-sized business owners. According to the Tax Foundation, this provision alone accounts for approximately $648 billion of the TCJA's total cost over a ten-year period.
Proposed Corporate Rate Structure
Business Type | Current Rate (2023-2024) | Proposed Rate (2025) | Potential Impact |
C-Corporations (General) | 21% | 21% | No change for most corporations |
C-Corporations (US Manufacturing) | 21% | 15% | Significant tax savings for domestic manufacturers |
Foreign-Derived Intangible Income | 13.125% | To be determined | Potential changes to international tax structure |
"The proposed 15% corporate rate for American manufacturers represents one of the most significant shifts in tax policy in decades. This could fundamentally alter the calculus for businesses considering reshoring operations."
- William McBride, Chief Economist, Tax Foundation
The reduced rate for domestic manufacturing aims to incentivize companies to produce goods within the United States. However, this differential rate structure could create complexity in determining which business activities qualify as "manufacturing" and how to allocate income between qualifying and non-qualifying operations.
Corporate Tax Rate Adjustments
While the TCJA permanently reduced the corporate tax rate to 21% from the previous 35%, Trump has proposed further reductions specifically targeted at businesses that manufacture in the United States.
Proposed Corporate Tax Rate Structure
Business Type | Current Rate (2023-2024) | Proposed Rate (2025) | Potential Impact |
C-Corporations (General) | 21% | 21% | No change for most corporations |
C-Corporations (US Manufacturing) | 21% | 15% | Significant tax savings for domestic manufacturers |
Foreign-Derived Intangible Income | 13.125% | To be determined | Potential changes to international tax structure |
"The proposed 15% corporate rate for American manufacturers represents one of the most significant shifts in tax policy in decades. This could fundamentally alter the calculus for businesses considering reshoring operations."
- William McBride, Chief Economist, Tax Foundation
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Capital Investment and Depreciation Changes
One of the most significant proposed changes for business owners involves the treatment of capital investments. The TCJA initially allowed 100% bonus depreciation for qualified property, but this benefit began phasing out in 2023 and is scheduled to be completely eliminated by 2027.
Proposed Bonus Depreciation Schedule
Year | Current Law | Trump Proposal |
2023 | 80% | N/A (past) |
2024 | 60% | N/A (current) |
2025 | 40% | 100% |
2026 | 20% | 100% |
2027+ | 0% | 100% |
The restoration of 100% bonus depreciation would allow businesses to immediately deduct the full cost of eligible business property rather than depreciating it over several years. This change would significantly impact cash flow and could incentivize increased capital investment.
"Permanent expensing for machinery, equipment, and research and development costs would create an economically powerful package that could boost long-term GDP by an estimated 0.5%."
- Garrett Watson, Director of Policy Analysis, Tax Foundation
Additionally, Trump has proposed maintaining the immediate expensing for research and development (R&D) costs, which began requiring five-year amortization in 2022. This change would be particularly beneficial for technology companies and manufacturers with significant R&D operations.
Watch for part 2 later this week! We’ll examine the potential affects of Trump’s 2025 tax changes on different business structures.