As the new presidential term approaches, we’re watching closely to see how potential changes in tax policy could impact our clients, especially investors and business owners. With President-elect Trump’s proposed tax policies, there may be significant developments to consider. Here are a few key points that may affect your tax strategy and financial planning:

1. Extension of the Tax Cuts and Jobs Act (TCJA)

President-elect Trump has expressed an intention to extend the TCJA, which could mean continued benefits for many investors. Notably, real estate investors would continue to enjoy perks like:

100% Bonus Depreciation: This allows you to immediately deduct the cost of certain property investments, a huge advantage for real estate investors looking to offset rental income.

Qualified Business Income (QBI) Deduction: This 20% deduction could remain available to eligible business owners and investors, keeping more income in your hands.

2. Corporate Tax Reduction

Trump’s proposal to reduce the corporate tax rate from 21% to 15% would primarily benefit C-Corporations, potentially boosting after-tax profits. While this change is targeted at C-Corps, businesses structured differently could also see indirect benefits as lower corporate taxes can stimulate economic activity across sectors.

3. Taxes on Tips, Overtime, and Social Security

Several of Trump’s proposals aim to provide relief on individual taxes:

Exempting Tips and Overtime from Taxes: Removing taxes on these income sources could improve income stability for workers, indirectly benefiting landlords by enhancing tenants’ ability to make steady rent payments.

Eliminating Social Security Taxes for Seniors: This change could improve financial flexibility for retirees, which may make housing more affordable and increase housing demand for rental properties in areas with large senior populations.

4. Tariff-Based System Proposal

President-elect Trump has suggested a shift away from income taxes in favor of tariffs. Although this is a preliminary idea, it could impact goods prices, such as construction materials and supplies. For real estate investors and developers, this may mean higher costs for renovations and construction, potentially squeezing profit margins.

At this stage, these proposals are not yet law, but we’re keeping a close eye on their progress. As always, we’ll be here to help you understand the implications of any enacted changes and adjust your tax strategy to maximize your benefits.