Proposed Tax Changes for 2025: Insights and Thoughts from an Advisor for Clients

January 3, 2025

As discussions around tax policy heat up, the proposed 2025 tax changes under former President Donald Trump are generating significant interest. With a focus on lowering corporate tax rates, extending favorable depreciation rules for the construction sector, and reducing personal income tax burdens, these proposals aim to stimulate economic growth, enhance U.S. competitiveness, and support hardworking Americans. Below, we’ll explore how these proposed changes can impact businesses and individuals alike.

Corporate Taxes

Corporate taxes are slated to stay at the 21% federal rate, and that will not expire as the Tax Cuts and Jobs Act (TCJA) sunsets at the end of 2025. Former President Trump has indicated he would like this to go even lower, to 15-20%. A reduction in corporate rates is highly skepticized by even republicans, so this is unlikely to change in my opinion.

Specific changes to the construction industry surrounding tax rates and depreciation could be significant^[1].

C corporations may see their tax rate drop to 15% for domestic manufacturing^[2]. This will allow for increased investment into US based manufacturing facilities, further driving US job growth and manufacturing capabilities.

There have been proposed incentives for increased domestic production and possible penalties or fines for outsourcing jobs overseas^[2]. This would mean a renewed focus on domestic growth.

Pass-through entities (S corporations, partnerships, sole proprietorships) benefit from the continuation of the Qualified Business Income Deduction (QBID). This provision allows a 20% deduction on qualified business income^[3].

Why This Matters:

Boosting Business Investment: Lower taxes mean businesses have more capital to invest in expanding operations, hiring employees, and upgrading equipment, which can drive long-term economic growth.
Strengthening U.S. Competitiveness: By reducing the tax burden, the U.S. can remain a global leader in attracting businesses and preventing the offshoring of jobs and capital.
Creating Jobs and Innovation: Companies will have more resources to invest in research, innovation, and workforce development, which benefits the broader economy.

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Extended Depreciation Benefits: A Boon for Construction

Trump’s proposal also includes making permanent or extending full expensing for certain construction-related assets. Under the TCJA, businesses were allowed to immediately deduct 100% of the cost of eligible assets, a policy that is set to phase out by 2026. The new proposal would ensure this benefit continues, offering powerful incentives for companies in the construction, manufacturing, and real estate sectors.

The reintroduction of 100% bonus depreciation could be a game-changer for construction firms^[2]. The TCJA had a sunset provision however starting in 2023, where the deduction is getting phased out by 20% annually, the 2024 rate for bonus depreciation is only 60%. If we see it go back to 100%, construction companies will benefit from the immediate deduction and allow further investment into domestic construction, technology improvement, and increased infrastructure spending.

Why This Matters:

Encouraging Infrastructure Development: Extending full expensing will promote new construction projects, creating jobs in the construction sector and improving infrastructure across the country.
Simplifying Business Planning: Businesses will benefit from greater certainty and simplicity in tax planning, freeing up resources for strategic investments.
Supporting Economic Expansion: Increased construction activity stimulates local economies, creating opportunities not only for contractors but also for suppliers and related industries.

‍

Environmental Policies and Tax Obligations

Changes in environmental policies will impact the way companies have to comply with current regulations^[1]. Another key element of the proposed economic vision includes reducing environmental policies and restrictions, particularly in sectors like construction, energy, and manufacturing. By rolling back regulations that are often seen as overly burdensome, the proposed changes aim to accelerate infrastructure development, lower compliance costs, and promote economic expansion.

Why This Matters:

Accelerating Infrastructure Projects: Reducing red tape can significantly speed up the approval process for large construction and infrastructure projects, allowing critical developments—such as roads, bridges, and energy facilities—to move forward more efficiently. This will help address long-standing infrastructure needs while creating high-paying jobs.
Lowering Business Costs: Compliance with stringent environmental regulations often involves costly permitting processes and delays. By streamlining these regulations, businesses can allocate more resources to innovation, expansion, and job creation instead of bureaucratic overhead.
Promoting Energy Independence: Easing restrictions on energy-related projects—such as pipelines, drilling, and natural gas development—can enhance U.S. energy independence, lower energy costs, and provide a boost to sectors reliant on affordable energy.

These changes are designed to strike a balance between responsible stewardship of the environment and the need to promote economic growth. By removing unnecessary regulatory barriers, the U.S. can unlock its full economic potential, particularly in the construction and industrial sectors, while creating new opportunities for workers and businesses alike.

This approach reflects a commitment to fostering growth and efficiency in critical industries while ensuring that America remains competitive on the global stage.

Planning for the 2025 Tax Changes: How Individuals Can Prepare and Reduce Their Tax Burden

With potential changes to personal income tax brackets and other tax-related policies on the horizon, individuals have an opportunity to proactively plan and position themselves for 2025. While the proposed reforms aim to simplify the tax code and lower rates, there are several strategies individuals can implement to maximize their financial benefits and reduce their tax liability.

The IRS has adjusted income tax brackets for 2025 ^[4].

Key changes:

2.8% increase in bracket thresholds
Adjusted standard deductions

Tax Rate	Single Filers	Married Filing Jointly
10%	$0 - $11,925	$0 - $23,850
12%	$11,925 - $48,475	$23,850 - $96,950
22%	$48,475 - $103,350	$96,950 - $206,700
24%	$103,350 - $197,300	$206,700 - $394,600
32%	$197,300 - $250,525	$394,600 - $501,050
35%	$250,525 - $626,350	$501,050 - $751,600
37%	Over $626,350	Over $751,600

The standard deduction for single filers will go to $15,000 in 2025, $30,000 for joint filers, and up to $22,500 for head of household filers.

‍

Key Strategies for Reducing Personal Taxes:

Leverage Retirement Accounts for Tax Deferralsome text
- Maximize Contributions: Contributing to tax-advantaged accounts such as 401(k)s, IRAs, and Health Savings Accounts (HSAs) can reduce taxable income. As tax brackets are set to shift, deferring income into these accounts now could provide significant benefits under changed rates in 2025.
- Roth Conversions: Consider converting traditional retirement accounts to Roth IRAs in 2024, especially if you anticipate being in a higher tax bracket in the future. While this strategy requires paying taxes upfront, it allows for tax-free withdrawals later, potentially at a lower overall tax cost. It is best to speak with your advisor on the cost and benefits of this strategy.
Explore Tax-Loss Harvesting and Strategic Investment Planningsome text
- Offset Capital Gains: If you hold investments, using tax-loss harvesting to offset gains can be a smart way to reduce taxable income. The potential continuation of favorable capital gains rates under the new proposals could make this even more valuable.
- Rebalance Portfolios: The proposed changes to capital gains and other investment-related taxes may provide an incentive to rebalance portfolios before the end of 2024, ensuring you're well-positioned to capitalize on future tax policies.
Utilize Deductions and Credits Effectivelysome text
- Bunching Deductions: Consider "bunching" deductions such as charitable contributions or medical expenses into a single tax year to maximize the benefit under changing standard deduction rules.
- State and Local Tax (SALT) Planning: Keep an eye on potential adjustments to SALT deduction limits. If higher thresholds are reinstated, planning for deductible expenses in advance could offer significant savings.
Optimize Depreciation for Real Estate and Business Ownerssome text
- If you're a business owner or own rental property, consider accelerating depreciation deductions before any changes to construction depreciation rules take effect. Taking advantage of current provisions, like bonus depreciation, could result in substantial tax savings before reforms are implemented.
Stay Informed and Engage with a Financial Advisorsome text
- Work with Experts: Tax laws are complex, and with significant changes on the horizon, consulting a financial advisor or tax professional can help you navigate the new landscape. They can provide personalized strategies that align with your unique financial situation and goals.
- Monitor Legislative Updates: Staying informed about the progress of tax reforms will be critical. Adjusting your financial strategy in real-time as legislation evolves can help you remain agile and prepared.
Looking Ahead and Proactive Planningsome text
- Plan Ahead for Estate Taxes: Estate and gift tax exemption will decrease from $13 million to $7 million per taxpayer in 2026^[7]this is expected to significantly increase the amount of Americans who are subject to estate taxes at the Federal level. Proactive planning can help capture some of the current rules and lock in current limits.
- Expiration of the Current Tax Code: Many Tax Cuts and Jobs Act provisions expire after 2025^[5]meaning we will see an increase in brackets, and a reversal of many provisions we have benefited from over the last 8 years. Work with your advisor to discuss how these changes may impact your long term financial outlook.

Conclusion: Position Yourself for Financial Success

The proposed tax changes in 2025 represent an opportunity for individuals to take control of their financial future. By leveraging tax-advantaged accounts, optimizing deductions, and working with trusted advisors, individuals can position themselves to benefit from lower tax rates and simplified regulations. Thoughtful planning now can help ensure financial stability and growth under the new tax landscape, allowing Americans to make the most of these tax reforms.

‍

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Ryan Bond is an investment adviser representative with Savvy Advisors, Inc. (“Savvy Advisors”). Savvy Advisors is an SEC registered investment advisor. The views and opinions expressed herein are those of the speakers and authors and do not necessarily reflect the views or positions of Savvy Advisors. Information contained herein has been obtained from sources believed to be reliable, but are not assured as to accuracy.

References:

^{[1] https://www.claconnect.com/en/resources/blogs/construction/tax-implications-for-the-construction-industry-after-2024-election}

^{[2] https://www.wipfli.com/insights/articles/mad-tax-post-election-tax-insights-for-the-manufacturing-sector}

^{[3] https://abdosolutions.com/tax-planning-for-2024-top-tips-for-your-construction-business/}

^[4]^{https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2025}

^{[5] https://www.seic.com/newsroom/financial-advisor-magazine-best-practices-2024-income-tax-planning}

^{[7] https://www.aprio.com/expiring-tax-cuts-and-jobs-act-provisions-what-the-construction-industry-must-know-ins-article-re/}

^{Material prepared herein has been created for informational purposes only and should not be considered investment advice or a recommendation. Information was obtained from sources believed to be reliable but was not verified for accuracy. It is important to note that federal tax laws under the Internal Revenue Code (IRC) of the United States are subject to change, therefore it is the responsibility of taxpayers to verify their taxation obligations.}

^{Savvy Wealth Inc. is a technology company. Savvy Advisors, Inc. is an SEC registered investment advisor. For purposes of this article, Savvy Wealth and Savvy Advisors together are referred to as “Savvy”. All advisory services are offered through Savvy Advisors, while technology is offered through Savvy Wealth. The views and opinions expressed herein are those of the speakers and authors and do not necessarily reflect the views or positions of Savvy Advisors}

Tax Strategy

Proposed Tax Changes for 2025: Insights and Thoughts from an Advisor for Clients

Ryan Bond

January 2, 2025

#Savvy

Corporate Taxes

Specific changes to the construction industry surrounding tax rates and depreciation could be significant^[1].

There have been proposed incentives for increased domestic production and possible penalties or fines for outsourcing jobs overseas^[2]. This would mean a renewed focus on domestic growth.

Why This Matters:

Boosting Business Investment: Lower taxes mean businesses have more capital to invest in expanding operations, hiring employees, and upgrading equipment, which can drive long-term economic growth.
Strengthening U.S. Competitiveness: By reducing the tax burden, the U.S. can remain a global leader in attracting businesses and preventing the offshoring of jobs and capital.
Creating Jobs and Innovation: Companies will have more resources to invest in research, innovation, and workforce development, which benefits the broader economy.

‍

Extended Depreciation Benefits: A Boon for Construction

Why This Matters:

Encouraging Infrastructure Development: Extending full expensing will promote new construction projects, creating jobs in the construction sector and improving infrastructure across the country.
Simplifying Business Planning: Businesses will benefit from greater certainty and simplicity in tax planning, freeing up resources for strategic investments.
Supporting Economic Expansion: Increased construction activity stimulates local economies, creating opportunities not only for contractors but also for suppliers and related industries.

‍

Environmental Policies and Tax Obligations

Why This Matters:

Accelerating Infrastructure Projects: Reducing red tape can significantly speed up the approval process for large construction and infrastructure projects, allowing critical developments—such as roads, bridges, and energy facilities—to move forward more efficiently. This will help address long-standing infrastructure needs while creating high-paying jobs.
Lowering Business Costs: Compliance with stringent environmental regulations often involves costly permitting processes and delays. By streamlining these regulations, businesses can allocate more resources to innovation, expansion, and job creation instead of bureaucratic overhead.
Promoting Energy Independence: Easing restrictions on energy-related projects—such as pipelines, drilling, and natural gas development—can enhance U.S. energy independence, lower energy costs, and provide a boost to sectors reliant on affordable energy.

This approach reflects a commitment to fostering growth and efficiency in critical industries while ensuring that America remains competitive on the global stage.

Planning for the 2025 Tax Changes: How Individuals Can Prepare and Reduce Their Tax Burden

The IRS has adjusted income tax brackets for 2025 ^[4].

Key changes:

2.8% increase in bracket thresholds
Adjusted standard deductions

Tax Rate	Single Filers	Married Filing Jointly
10%	$0 - $11,925	$0 - $23,850
12%	$11,925 - $48,475	$23,850 - $96,950
22%	$48,475 - $103,350	$96,950 - $206,700
24%	$103,350 - $197,300	$206,700 - $394,600
32%	$197,300 - $250,525	$394,600 - $501,050
35%	$250,525 - $626,350	$501,050 - $751,600
37%	Over $626,350	Over $751,600

The standard deduction for single filers will go to $15,000 in 2025, $30,000 for joint filers, and up to $22,500 for head of household filers.

‍

Key Strategies for Reducing Personal Taxes:

Leverage Retirement Accounts for Tax Deferralsome text
- Maximize Contributions: Contributing to tax-advantaged accounts such as 401(k)s, IRAs, and Health Savings Accounts (HSAs) can reduce taxable income. As tax brackets are set to shift, deferring income into these accounts now could provide significant benefits under changed rates in 2025.
- Roth Conversions: Consider converting traditional retirement accounts to Roth IRAs in 2024, especially if you anticipate being in a higher tax bracket in the future. While this strategy requires paying taxes upfront, it allows for tax-free withdrawals later, potentially at a lower overall tax cost. It is best to speak with your advisor on the cost and benefits of this strategy.
Explore Tax-Loss Harvesting and Strategic Investment Planningsome text
- Offset Capital Gains: If you hold investments, using tax-loss harvesting to offset gains can be a smart way to reduce taxable income. The potential continuation of favorable capital gains rates under the new proposals could make this even more valuable.
- Rebalance Portfolios: The proposed changes to capital gains and other investment-related taxes may provide an incentive to rebalance portfolios before the end of 2024, ensuring you're well-positioned to capitalize on future tax policies.
Utilize Deductions and Credits Effectivelysome text
- Bunching Deductions: Consider "bunching" deductions such as charitable contributions or medical expenses into a single tax year to maximize the benefit under changing standard deduction rules.
- State and Local Tax (SALT) Planning: Keep an eye on potential adjustments to SALT deduction limits. If higher thresholds are reinstated, planning for deductible expenses in advance could offer significant savings.
Optimize Depreciation for Real Estate and Business Ownerssome text
- If you're a business owner or own rental property, consider accelerating depreciation deductions before any changes to construction depreciation rules take effect. Taking advantage of current provisions, like bonus depreciation, could result in substantial tax savings before reforms are implemented.
Stay Informed and Engage with a Financial Advisorsome text
- Work with Experts: Tax laws are complex, and with significant changes on the horizon, consulting a financial advisor or tax professional can help you navigate the new landscape. They can provide personalized strategies that align with your unique financial situation and goals.
- Monitor Legislative Updates: Staying informed about the progress of tax reforms will be critical. Adjusting your financial strategy in real-time as legislation evolves can help you remain agile and prepared.
Looking Ahead and Proactive Planningsome text
- Plan Ahead for Estate Taxes: Estate and gift tax exemption will decrease from $13 million to $7 million per taxpayer in 2026^[7]this is expected to significantly increase the amount of Americans who are subject to estate taxes at the Federal level. Proactive planning can help capture some of the current rules and lock in current limits.
- Expiration of the Current Tax Code: Many Tax Cuts and Jobs Act provisions expire after 2025^[5]meaning we will see an increase in brackets, and a reversal of many provisions we have benefited from over the last 8 years. Work with your advisor to discuss how these changes may impact your long term financial outlook.