Accounting

Big tax changes promised in Trump administration

Published

5 months ago

November 7, 2024

President-elect Donald Trump offered up a long list of promises during his campaign, and next year will bring a major test with the upcoming expiration of many of the provisions from his first administration’s Tax Cuts and Jobs Act of 2017.

“No one has a crystal ball on what’s going to happen here, but certainly it’s a little bit clearer based on a Trump victory than it would have been based on a Harris victory,” said Brian Newman, a tax partner at Top 25 Firm CohnReznick in Hartford, Connecticut. “Obviously the big point is going to be either to extend or to make permanent TCJA provisions.”

Trump has also called for lowering the corporate tax rate, which was supposed to be made permanent with the TCJA. He has proposed to lower it to 20%, or 15% for companies that manufacture their products in the U.S.

“Going from 21% down to 20% may be a much easier sell than layering on something that would get the corporate rate down to 15%,” said Newman.

Trump has also called for bringing back 100% bonus depreciation. “Right now the bonus rate is at 40% and scheduled to go down to 20% next year,” Newman continued. “There’s been a push to get that back up to 100%. If that occurs, we’ll be talking to our clients for year-end tax planning about deciding on whether to delay placing an asset in service a month or two if, in fact, we think that we’re going to go back to 100% bonus, versus buying something this year and placing it in service this year. There are always transition rules. That’s something that we have to be cautious about. That’s something that is going to be closely watched, because it could have a significant impact on clients.”

On the other hand, parts of the TCJA could be jettisoned. Trump has also called for eliminating the act’s $10,000 limit on state and local tax deductions, also known as the “SALT cap,” for individuals, or raising it.

Former President Donald Trump speaks during a campaign rally in Mason City, Iowa.

“It’s an easy discussion to tell clients, if you have property taxes to pay, you’re probably better off paying the property taxes January 1 versus December 31 in the hopes that something does get passed,” said Newman. “You might get a benefit for it, versus now in 2024 you know you’re not going to get a benefit.”

The treatment of R&D expenses involves another provision of the TCJA that could be eliminated. “The last couple of years, taxpayers have had to capitalize their R&D costs and then amortize them over a five-year period,” said Newman. “That’s had a significant impact on compliance and the bottom line of taxable income. Trump has said that he would like to get those expenses currently deductible again, which would be helpful for businesses that have R&D expenses.

The Section 163(j) limitation on business interest could be another area where TCJA provision would be eliminated. “Currently, your adjusted taxable income does not include adding back depreciation and amortization like it did in the first few years of the TCJA. President-elect Trump has said that he would be in favor of going back to an EBITDA calculation so that you can add back your depreciation and amortization, which would make the limitation less painful for clients. That’s another area that I think you’re going to see some tax law changes.”

Some of these business tax changes were passed by the House earlier this year as part of the Wyden-Smith Tax Relief for American Workers and Families Act of 2024 but never got through the Senate because of disagreement over other provisions, such as expansion of the Child Tax Credit.

Trump has also called for not taxing income from tips, Social Security and overtime, as well as eliminating taxes on firefighters, police officers and members of the military.

However, that could encourage people to reclassify their income as the tax-exempt kind.

“It will always be interesting to see exactly how those things work and how they’re calculated, because everyone’s always looking to maximize what income is not subject to tax or may have lower tax rates,” said Newman. “But you have to make sure that you know, things are properly defined, and that ultimately, you know, we have a clear guidance on what the calculation should be.”

Trump has also called for eliminating the stock buyback excise tax for public companies that buy back their own shares of over $1 million in a taxable year. “Right now, there’s a 1% tax on that,” said Newman. “The Biden administration has proposed increasing that to 4%, but President-elect Trump has said that he would be in favor of eliminating that tax.”

He believes the qualified business income deduction under the TCJA will also be closely watched, “People would be looking for that to either get extended or made permanent,” said Newman. “That’s a 20% deduction on certain flow-through income, which has been very beneficial to people who it applies to. Unfortunately, it does not apply, for the most part, to accountants and other professional services organizations.”

Trump has also called for doubling the standard deduction as it was in the TCJA. That could cause even fewer people to itemize their deductions. “There’s a good amount of people who don’t itemize because the SALT cap is limited to $10,000 and then if you don’t have large home mortgage interest or other itemized deductions, you’re not getting over the standard deduction threshold as it currently stands,” said Newman. “If you double the standard deduction, there will be less and less itemizers, and those types of deductions don’t become as valuable.”

That may prompt donors to reduce their charitable contributions if they can’t itemize the deduction.

Trump has also called for other tax breaks, such as tax credits for family caregivers taking care of parents or loved ones, and allowing those who buy an automobile made in the U.S. to write off the interest on their car loans.

All those tax breaks may prove difficult for states that rely on income taxes from their residents and can’t afford to let their deficits run wild. “Year after year, the state tax liabilities on transactions and income are becoming more and more a larger component of the total tax burden of both companies and individuals,” said Newman. “One of the things that states like to do is decouple from federal provisions. We always want to keep in mind, even if you get new provisions at the federal level, if they’re not already decoupled, you may get decoupled on provisions for the state. For instance, if President-elect Trump is successful in exempting, say, overtime pay, you may get a lot of states decouple from that, and the states will still tax that.”

Trump’s tax policy will also depend on what Congress does and how much control Republicans will be able to exercise, especially in the House.

“Tax was not the focal point of the campaign, and when it did emerge as an issue, former (and future) President Trump presented tax policy ideas largely in broad strokes, though he also had no small number of new ideas for voters to consider,” said Jonathan Traub, managing principal and tax policy group leader at Deloitte Tax LLP, in a statement. “Of course, tax legislation generally originates in Congress, not the White House, so any new tax laws enacted will bear the imprint of the legislative branch with its many competing interests and priorities. And, just as importantly, the ability of the Republicans to use budget reconciliation to fast-track major tax and spending bills to the White House depends on the outcome of a handful of uncalled House races around the country.”

Accounting

Estate planning for the Tax Cuts and Jobs Act expiration

Published

55 seconds ago

April 4, 2025

Business Finance News

The political calculus involved with the details of estate planning next year and beyond may be distracting financial advisors and clients from a larger, simpler conversation, one expert says.

On the off chance that the federal estate-tax exemption levels of $13.99 million for individuals (and double for couples) revert to half those amounts when Tax Cuts and Jobs Act provisions expire in 2026, only 0.2% of households would face potential duties upon transfer of assets, according to Ben Rizzuto, a wealth strategist with Janus Henderson Investors‘ Specialist Consulting Group. He predicted that most financial advisors and high net worth clients, such as those he works with and others across the industry, will see no changes.

With few other revenue-raising provisions available to President Donald Trump and Republican lawmakers, they’re not likely to shield all estates from payments to Uncle Sam — as much as they might like to play undertaker to the “Death of the Death Tax,” Rizzuto said, using the label for estate taxes adopted by critics favoring bills like the “Death Tax Repeal Act.” Lawmakers’ decisions on future exemptions from the taxes (and when they make those decisions) remain out of advisors’ control. Meanwhile, they must remind clients that estate planning is much more than having a will and avoiding taxes, Rizzuto said.

“For financial advisors and clients, I would expect for many of them not to have to worry about federal estate taxes next year,” he said in an interview. “Even though they may not have to worry about it, there are still a lot of good conversations to be had.”

The 1%

Trust tools that reduce the value of the assets that will transfer to spouses or other beneficiaries upon a client’s death, combined with the available statistics about the shrinking share of estates subject to taxes, could bring some peace of mind to clients. The 2017 tax law itself pushed down estate tax liability as a percentage of gross domestic product to a quarter of its 2001 level, according to an analysis by the “Budget Model” of the University of Pennsylvania’s Wharton School. Just two years after the law’s passage, the number of taxable estates had plummeted to 1,275 — or 1% of the number at the beginning of the century.

At the same time, advisors could raise any number of questions with clients about their estates that involve varying degrees of expertise and collaboration with outside professionals. And many surveys have found that clients are expecting them to do so. For example, at least 70% out of a group of 10,000 adults contacted in January by WeAreTalker (formerly OnePoll) on behalf of online legal information service Trust & Will said advisors should offer estate planning. In addition, 40% of the group said they would switch to an advisor who provided that service.

“We’re seeing a fundamental shift in client expectations,” Trust & Will CEO Cody Barbo said in a statement. “The findings are clear. Advisors who fail to integrate estate planning into their practice aren’t just missing an opportunity; they are facing a threat to their client base as wealth transfers to younger generations over the next two decades.”

Get back to the planning basics

In that context, advisors and their clients should steer clear of trying to make sense of a complicated, ever-changing flow of news from Capitol Hill as Trump and the GOP pursue major tax legislation with a year-end deadline, Rizzuto said. If clients truly could be on the hook for estate taxes, a grantor retained annuity trust, a spousal lifetime access trust or gifting strategies may eliminate the possibility. One method involved with the latter could set them up in the future to receive stock that is “highly appreciated with lower basis,” Rizzuto noted, citing the example of equities that have gained a lot of value that a client could give to their parents.

“Why not gift them upstream?” Rizzuto said. “My father holds it. I tell him, ‘Dad, you have to do these things: Live for another 12 months, make sure you don’t sell, make sure that you update your will or your instructions to gift it back to me when you die.’ That’s another idea that we’ve been talking about with advisors.”

From another perspective, these possible paths forward may beckon to clients this year, if they are tuning into Beltway news about the progress of the tax legislation, he said. To bypass the risk of client perceptions that their advisor isn’t doing any tax planning at all, Washington’s complex maneuvering around the future rules is, “if nothing else,” a “great opportunity for advisors to bring this up at a very high level,” Rizzuto said.

“Advisors will really need to go back to basics and have some foundational conversations with clients,” he said, suggesting their goals with taxes as one key point of discussion. “‘What is it that we actually control within your financial and tax plan?’ When it comes right down to it, it’s really just incomes and deductions.”

Accounting

Developing future leaders in accounting: the new imperative in an AI and automation driven era

Published

3 hours ago

April 4, 2025

Business Finance News

As technology continues to automate routine tasks, the role of finance professionals is evolving, demanding deeper capabilities in critical thinking, communication and business acumen.

Many of PrimeGlobal’s North American firms are focused on cultivating these skills in their future leaders. Carla McCall, managing partner at AAFCPAs, Randy Nail, CEO of HoganTaylor, and Grassi managing partner Louis Grassi shared their views with PrimeGlobal CEO Steve Heathcote on the need for future leaders to balance technological proficiency with human-centered skills to thrive.

AI is transforming the sector by streamlining workflows, automating data analysis and reducing manual processes. However, rather than replacing accountants, AI is reshaping their roles, enabling them to focus on higher-value tasks. In the words of Louis Grassi, AI can be seen as a strategic partner, freeing accountants from routine tasks, enabling deeper engagement with clients, more thoughtful analysis, and ultimately better decision-making.

Nail emphasized the importance of embracing AI, warning that those who fail to adapt risk being replaced by professionals who leverage the technology more effectively. HoganTaylor’s “innovation sprint” generated over 100 ideas for AI integration, underscoring why a proactive approach to adopting new technologies is so necessary and valuable.

McCall advocates for an educational shift that equips professionals with the skills to interpret AI-generated insights. She stressed that accounting curricula of the future must evolve to incorporate advanced technology training, ensuring future accountants are well-versed in AI tools and data analytics. Moreover, simulation-based learning is becoming increasingly crucial as traditional methods of education become obsolete in the face of automation.

Talent development and leadership growth

As AI reshapes the profession, firms must rethink how they develop and nurture their future leaders. To attract and retain top talent, firms need to prioritize personalized development plans that align with individual career goals.

HoganTaylor’s approach to talent development integrates technical expertise with leadership and communication training. These initiatives ensure professionals are not only proficient in accounting principles but also equipped to lead teams and navigate complex client interactions.

Nail underscored the growing importance of writing and presentation skills, as AI will handle routine tasks, leaving professionals to focus on higher-level analytical and decision-making responsibilities.

Soft skills are the success skills

While technical proficiency remains vital, future leaders must also cultivate critical thinking, communication and adaptability — skills McCall refers to as the “success skills.” McCall highlights the necessity of business acumen and analytical communication, essential for interpreting data, advising clients and making strategic decisions.

Recognizing teamwork and collaboration remain crucial in the hybrid work environment, McCall explained in detail how AAFCPA fosters collaboration through structured remote engagement strategies such as “intentional office time,” alcove sessions and stand-up meetings. Similarly, HoganTaylor supports remote teams by offering training for career advisors to ensure effective mentorship and engagement in a dispersed workforce.

McCall emphasized why global experience can be valuable in leadership development. Exposure to diverse markets and accounting practices enhances professionals’ adaptability and broadens their perspectives, preparing them for leadership roles in an increasingly interconnected world.

Grassi reminded us that an often-overlooked leadership skill is curiosity. In his view the most effective leaders of tomorrow will be inherently curious — not just about emerging technologies but about clients, market shifts and global trends. Encouraging curiosity and continuous learning within our firms will distinguish the true industry leaders from those simply reacting to change.

A balanced future

What’s clear from speaking to our leaders is PrimeGlobal’s role in fostering trust, community and knowledge sharing. McCall recommended member-driven panels to discuss AI implementation and automation strategies and share best practice. Nail, on the other hand, valued PrimeGlobal’s focus on addressing critical industry issues and encouraged continuous evolution to meet professionals’ changing needs.

The future of leadership in the accountancy profession hinges on a balanced approach, leveraging AI to enhance efficiency while cultivating essential human skills that technology cannot replicate, which Grassi highlights skills including leadership and building client trust.

As McCall and Nail advocate, the next generation of accountants must be agile thinkers, skilled communicators and strategic decision-makers. Firms that invest in these competencies will not only stay competitive but will also shape the future of the industry by developing well-rounded leaders prepared for the challenges ahead.

By investing in both AI capabilities and essential human skills, firms can not only future proof their leadership but also shape a resilient and forward-thinking profession ready to meet the challenges of the future.

As Grassi concluded, while technical skills provide the foundation, leadership in accounting increasingly demands emotional intelligence, empathy and adaptability. AI will change how we perform our work, but human connection, trust and nuanced judgment are irreplaceable. Investing in these human-centric skills today is critical for firms aiming to build resilient leaders of tomorrow. To remain relevant and thrive, professionals must prioritize developing strong success skills that will define the leaders of tomorrow.