2025 has already been a year of tumult for small business owners and taxpayers in general. News headlines seem to shift daily with new tax proposals and predictions about the future of tariffs. For most of us, the question is how does this affect our bottom line? How can we plan for the future of our businesses with so many tax questions up in the air? And what does it look like to strategize for tax savings when tax policy could look completely different by the end of this year?
As professional tax planners would tell you, good tax planning is about being proactive—which is different from being premature. We don’t want to make major financial decisions based on predictions and assumptions about what Congress will or won’t do in the coming months. However, we also don’t always have the luxury of waiting until bills are signed into law to make important decisions. Some of the best tax strategies require advanced planning, as do strategies for sustaining and building up your business. The key is to find that middle path where your plans are flexible enough to pivot as the tax landscape changes—but where you also have a concrete and actionable plan.
Today we’ll start with an overview of current conversations around tax laws and tariffs: what do we know right now, what could change, and what does that mean for your tax plans?
What Do We Know Right Now?
When the ground beneath us feels like it keeps shifting, we may be tempted to do a little “fortune-telling” and try to read the “tea leaves” of the latest news articles to figure out what’s coming down the pipeline. A much wiser path is to begin your planning process by focusing on what you know to be true right now.
This is where working with a Certified Tax Planner can be immensely helpful. Your tax planner will be well-versed in current tax law and how that will impact your tax bill if nothing changes by the end of 2025. For instance, a number of tax provisions introduced under the 2017 Tax Cuts and Jobs Act (TCJA) are set to expire at the end of the year. That is something we know to be true. Will Congress extend or revise any of these provisions? We don’t know. We can speculate, but we don’t know for a fact what will be approved and when that will happen.
One important strategy that your tax planner can walk you through is scenario modeling. Rather than make predictions based on what your favorite news outlet is saying, you can sketch out a number of possible tax strategies, starting with what you would do if nothing changes. This allows you to compare-and-contrast the costs and benefits of implementing different strategies given all the unknowns surrounding tax law this year.
Certain TCJA provisions are currently set to sunset at the end of 2025. One change that would impact all taxpayers is the resetting of personal income tax rates. Both the marginal tax rates and income ranges for each bracket shifted under TCJA. As you look for strategies to lower your taxable income, this could impact how much you can actually expect to save. Similarly, the standard deduction is set to decrease at the end of the year from $12,000 down to $6,500. This could significantly affect how much tax you owe, but it could also make a different filing strategy—like itemizing your deductions—more beneficial.
Other expiring provisions include:
• The alternative minimum tax, which would likely apply to more taxpayers if the former income thresholds are reinstated
• The estate tax exemption, which will decrease by about half
• The expanded child tax credit, which will return to a lower income threshold
• The “199A” deduction for qualified business income, which will disappear entirely
What Tax Changes Could We See This Year?
One expected (though, again, by no means certain) change is the extension or renewal of the TCJA tax laws. All of the provisions listed above could simply be extended as-is or Congress could introduce a revised version. This could shift who is eligible for certain tax breaks and how much they could save. One tax law that has been the topic of many revision proposals is the cap on state and local tax (SALT) deductions. Right now, the cap is set to expire at the end of the year. However, some lawmakers are suggesting increasing the cap, so that taxpayers can enjoy a larger but not unlimited deduction. Other lawmakers have suggested introducing income thresholds so that higher-income taxpayers would not be eligible for SALT deductions.
Some suggested revisions would introduce a totally new policy compared to the pre-TCJA and post-TCJA worlds we’ve known so far. For instance, the Trump administration has spoken about the possibility of eliminating the estate tax entirely. Another proposal would introduce a global itemized deduction cap, which would limit how much a taxpayer can take in total itemized deductions. This cap would likely be based on a percentage of each taxpayer’s income.
What About Tariffs?
Tariffs are the other hot topic impacting small business owners and consumers alike. As of today’s date, imports to the U.S. get hit by a 10% baseline tariff with some exceptions. Chinese imports are still the hardest hit even though tariffs have fallen from 145% to 30% after recent negotiations. Some products like steel, aluminum, and automobiles are subject to a 25% tariff.
From a tax perspective, tariffs act as a stealth tax first for the businesses and then for consumers. The actual tariff is paid by whoever picks up the imported goods from the dock. Then businesses typically pass on that additional cost to the consumer, though it’s always a balancing act between keeping their profits margins up and maintaining their customer base. If you own a business and are not adjusting your prices to factor in tariffs, you might be unpleasantly surprised to find your profits dipping. Don’t wait to have these conversations with your tax planner and any financial advisors you engage—otherwise, you may end up with a 2026 tax bill you can’t afford to pay.
Summary
Amid all the noise from the news headlines, the best rule of thumb is to first focus on what you know to be true right now. From there, you can begin to factor in any likely changes in legislation as new bills inch closer to the president’s desk or new agreements are reached on tariffs. Scenario modeling is key to navigating these tumultuous times, which is where working with a professional becomes especially beneficial.
For help creating a flexible tax plan that can pivot with the changing tax laws, reach out to a Certified Tax Planner today.
