What are the new administration's top tax priorities for 2025?

The top priority is extending the expiring TCJA provisions including reduced individual rates, the estate tax exemption, and the Section 199A deduction. Other priorities include potential corporate rate changes, new proposals such as eliminating taxes on tips and Social Security benefits, tariff policy, and adjustments to IRS enforcement funding.

Will the IRS continue increasing audit enforcement under the new administration?

The new administration's approach to IRS enforcement funding is still developing. While the Inflation Reduction Act provided substantial funding for increased audits, the incoming Congress may redirect some of that funding. However, the centralized partnership audit regime and existing enforcement initiatives are likely to continue regardless.

The New Administration's Tax Agenda: What to Expect | Lynch Law

With a new administration and a Republican-controlled Congress, the direction of federal tax policy in 2025 is beginning to take shape. The legislative and executive priorities announced in the first weeks of the year provide a roadmap, though the details remain subject to negotiation and the practical constraints of the budget process. Business owners who understand the broad contours of the agenda can begin positioning themselves to respond effectively as specific proposals crystallize into law.

TCJA Extension: The Top Priority

The administration has made clear that extending the expiring provisions of the Tax Cuts and Jobs Act is the centerpiece of its tax agenda. This includes the individual income tax rate cuts, the nearly doubled standard deduction, the qualified business income deduction under Section 199A, and the enhanced estate and gift tax exemption. Congressional leadership has signaled an intent to address the TCJA provisions through the budget reconciliation process, which allows passage with a simple majority in the Senate.^[1]

The cost of a full TCJA extension, estimated at over $4 trillion over ten years, creates significant fiscal challenges. Offsetting revenue measures, spending cuts, or acceptance of increased deficits will be necessary to fit the extension within reconciliation rules. The specific revenue offsets and structural changes included in the final legislation will determine the actual impact on individual taxpayers and business owners.

Corporate Tax Changes

The administration has proposed reducing the corporate tax rate from 21 percent to 20 percent, with the possibility of a further reduction to 15 percent for companies that manufacture products domestically. Whether these proposals survive the legislative process depends on their revenue cost and the appetite of congressional moderates for additional deficit spending. The existing 21 percent rate, which was a permanent provision of the TCJA, remains in effect regardless of the outcome of the reconciliation process.^[2]

New Tax Proposals

Several campaign proposals are expected to be included in the administration's legislative package. These include exempting tip income from federal income tax, exempting overtime pay from taxation, and reducing or eliminating taxes on Social Security benefits. Each proposal carries substantial revenue costs and implementation challenges. The tip and overtime exclusions, in particular, raise difficult questions about how to define eligible income, prevent reclassification of ordinary wages as tips or overtime, and ensure that the benefits reach their intended recipients.

Tariffs and Their Tax Implications

The administration's tariff agenda represents an indirect but significant tax policy shift. Increased tariffs on imported goods function as a consumption tax, raising the cost of goods for businesses and consumers. For businesses that rely on imported materials, components, or finished goods, tariffs directly affect the cost of production and the competitiveness of their products. The administration views tariff revenue as a partial offset to the cost of domestic tax cuts, creating an interplay between trade policy and tax policy that business owners must consider holistically.

IRS Budget and Enforcement

The new administration has signaled a shift in IRS enforcement priorities and funding. Reductions to the IRS budget enacted under the Inflation Reduction Act are expected to continue, with a focus on streamlining operations through technology and automation rather than increasing the auditor workforce. For taxpayers, this may mean fewer traditional face-to-face audits but increased reliance on automated matching, data analytics, and targeted enforcement campaigns in areas such as the Employee Retention Credit, cryptocurrency reporting, and high-income noncompliance.^[3]

What Business Owners Should Track

Several developments deserve close monitoring in the coming months. The reconciliation timeline will determine when, and in what form, TCJA extension legislation reaches the President's desk. The specific revenue offsets chosen could affect deductions, credits, or other provisions that business owners currently rely upon. Changes to the corporate rate, bonus depreciation, and research and development expensing could alter the calculus for capital investment and business planning decisions.

Business owners should work with their tax advisors to model the impact of potential changes on their specific situations. Scenario planning that accounts for full TCJA extension, partial extension, and sunset is a prudent approach until legislative outcomes become clear. Flexibility in tax planning decisions, where possible, preserves the ability to respond optimally to whichever scenario materializes.

References

^[1] Tax Cuts and Jobs Act, Pub. L. No. 115-97 (2017) (individual rate reductions, QBI deduction, estate tax exemption increase, and other provisions subject to December 31, 2025, sunset).
^[2] I.R.C. § 11(b) (corporate tax rate of 21 percent, enacted as a permanent provision of the TCJA).
^[3] Inflation Reduction Act of 2022, Pub. L. No. 117-169, § 10301 (providing additional IRS funding for enforcement, operations, and technology modernization).