It’s nice to know that, in the midst of so much division, Americans can still rally together around something – even if it’s just boxing. Over 60 million households Netflix-streamed the boxing match between Jake Paul and Mike Tyson that took place over the weekend.
Did you watch?
Spoiler alert – Tyson didn’t come out on top. But he wasn’t the only one. Netflix didn’t put on a winning performance either. More than 500 thousand streaming problem reports came in throughout the fight, according to Downdetector.
Now, there’s a lesson to be learned here: Netflix’s failure was that they weren’t prepared to handle this insane demand. And they struggled massively because of it.
I think we would all be wise to take Netflix’s example as a reminder to be prepared for uncertain outcomes. Especially now, with a new Commander in Chief coming to the White House, making our economic future even more unknown.
As you well know, shifts in the White House and Congress come with numerous economic and tax-related changes, which you as the further-down-the-totem-pole business owner have to navigate for your business. Change and uncertainty are familiar companions these past few years, aren’t they?
But, because of that, you need to be nimble in your positioning and plans. And I’m here to help you. My aim today is simple: Offer your Southeastern FL business clarity with this presidential transition.
Business Taxes 2025 In Your Southeastern FL Business Under Trump
“The only limit to our realization of tomorrow will be our doubts of today.” –Franklin D. Roosevelt
Whatever you feel about America’s new president, knowing what to expect and plan for financially (specifically with 2025 business taxes) with a Trump administration is necessary.
Let’s look at how that all breaks down:
The TCJA sunrise? The most pressing tax issue for Trump to settle is the expiring Tax Cuts and Jobs Act (TCJA) provisions. He’s indicated making the expiring provisions permanent.
One in particular could have a significant impact on your business: the Qualified Business Income (QBI) deduction. Extending it would mean owners of pass-through businesses (sole proprietorships, partnerships, LLCs, and S corporations) would get a 20 percent business income deduction. If it stays, your 2025 taxes (and beyond) will continue to benefit.
No more SALT cap. As part of the TCJA, Trump set the state and local tax (SALT) deduction limit at 10k (for married couples as well as individuals – married couples filing jointly don’t get a higher deduction limit).
This cap has been a headache for business owners who report income on their individual tax returns (pass-through business owners as previously mentioned), and many states have taken action since then to let business owners bypass the cap.
Trump is proposing scrapping the 10k limit altogether. But if he does, you’d still have to deal with SALT tax limits at the state level. Certain states might adjust tax rates or phase out certain credits and deductions if they rely heavily on high-income taxpayers.
Down with corporate taxes. During Trump’s campaign, he proposed dropping the federal corporate tax rate from 21 percent down to 20 percent. And, he proposed a special rate of 15 percent for businesses that strictly make products in the U.S.
Raising the bonus depreciation rate. I talked about this in last week’s note, so I’ll be brief. Trump is proposing raising the annually decreasing bonus depreciation deduction rate back up to 100 percent permanently.
This would be a huge benefit for you if you own your building – the government would permanently expense certain qualifying business purchases (facility renovations, technology upgrades, etc.).
Raising the R&D tax credit. Under the TCJA, the R&D credit provides dollar-for-dollar tax credits for businesses that do certain research and development activities (like product experimentation or testing technology).
Currently, the credit is 20 percent of the qualified research expenses you’ve incurred over the year over a base amount (I don’t want to get into the weeds here, but if you’re curious about whether your business could benefit from this, let’s chat).
Similar to the bonus depreciation deduction, Trump is proposing permanently letting U.S.-based manufacturers write off 100 percent of the cost of heavy machinery and other equipment in the first year.
Upping tariffs. During his campaign, Trump proposed raising tariffs on Chinese goods to 60 percent — which could force you to search for ways to absorb or offset the higher costs of imported goods, potentially through pricing adjustments or sourcing alternative suppliers.
No more taxes on tips or overtime. Trump’s proposal to no longer tax tips or overtime income is great news for employees, but it could make life difficult for you as a business owner.
If you employ a significant number of tipped workers, you would need to increase wages to compensate for the loss of tip revenue (which could lead to higher labor costs). Also, payroll systems would become complicated, and there could be a higher risk of fraudulent claims for overtime hours or tips.
Now, a few reminders here (for the sake of perspective): Trump made a lot of campaign promises that, realistically, may prove difficult to put in place by the time you’re filing your 2025 business taxes. And even though a Republican-controlled Senate and a Republican-majority House will remove lots of obstacles, Congress still decides the legislative path his proposals will take.
These proposals are simply potential future tax legislation changes to be aware of. So, as we’re waiting to see how these proposals play out, here’s what you can do to prepare:
- Look over your tax strategy. Find out how these proposals would uniquely impact you (we can offer insight here). Plan ahead for maximizing the possible tax savings opportunities in the near future (for example, if the bonus depreciation or the R&D credit rates get raised).
- Plan for the worst. There’s always the possibility that tax legislation doesn’t go the way you hope it will. Trump’s increased tariff proposals, specifically, could put a strain on your cash flow. Focus on building up extra cash now, just in case.
- Go domestic. If you can, find ways to avoid tariff consequences. Transition to U.S.-based suppliers and make sure your business isn’t dependent on too many internationally imported goods, where possible.
Yes, the new Trump administration adds a layer of complexity to your planning for your 2025 business taxes. Even though logistics are still TBD, the time to plan for these shifts is now. Let’s chat about just how you should go about that for your Miami Metropolitan business.
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Keeping you in the know,
Ralf Heyer