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2025 Tax watch: Key policies that could impact you.

Tax policy was a cornerstone of President-elect Donald Trump’s campaign, with promises of significant tax cuts for individuals and businesses. As we enter 2025, a Republican-controlled Congress is preparing to take up Trump’s proposals, but many key decisions remain uncertain. At the center of the conversation is the future of the Tax Cuts and Jobs Act (TCJA)—the sweeping tax reform passed during Trump’s first term that is set to expire at the end of 2025.

While campaign promises are rarely fully realized in policy, several areas of the tax code warrant close attention as the year unfolds. At Leelyn Smith, we’re keeping a close eye on the potential for new legislation and extensions of existing tax policies.

Leelyn Smith’s Director of Tax Services, Zach Gordon, recently highlighted key areas for individuals, families, and business owners to consider in their tax planning for 2025 and beyond.

Before diving into these priorities, it’s important to acknowledge that Republican control of the White House and Congress doesn’t guarantee swift passage of tax reforms. Lawmakers will need to navigate competing priorities, budget constraints, and soaring federal deficits. With narrow majorities and varying views within the Republican party and across the aisle, Congress faces tough choices on which policies offer the best chance of passage—and the greatest positive impact on the economy.

Tax policies to monitor in 2025.

Section 199A Deduction: What business owners should watch

The Section 199A deduction, commonly known as the Qualified Business Income Deduction (QBID), is one of the most significant tax incentives for business owners—and it may be on the chopping block. This deduction allows eligible business owners to reduce their taxable income by up to 20% if they operate what the IRS defines as a qualified business.

The QBID was introduced as a form of relief for sole proprietorships and pass-through entities—such as LLCs, partnerships, and S-Corporations—that don’t benefit from the lower corporate tax rates available to C-Corporations. Certain service-based businesses, including physicians, attorneys, and consultants, can also qualify for the deduction. However, for these businesses, the benefit begins to phase out at income thresholds of $191,500 for individual filers and $383,900 for joint filers.

If the QBID sunsets, many business owners may seek alternative strategies to mitigate the tax impact. For example:

  • Reclassifying as a C-Corporation: Partnerships and S-Corps might consider converting to a C-Corp, offering some potential tax advantages. While C-Corps are subject to double taxation, there can be incremental tax advantages if the gap between the corporate and individual tax rates becomes meaningful enough. In such cases, the flexibility and strategic benefits of filing as a C-Corp may be attractive.
  • Switching to S-Corp status: Business owners who previously reported income as a sole proprietor or on a partnership return may find S-Corp status more appealing, as it allows them to reduce self-employment taxes on a portion of their income. Previously, the advantages of QBID often outweighed the savings from minimizing self-employment taxes, but the shifting tax landscape could make S-Corp status a more attractive alternative.

As these potential changes unfold, business owners should carefully evaluate their entity structure and tax strategy to ensure they’re well-prepared for what’s ahead.

Key individual exemptions and deductions to watch.

The Tax Cuts and Jobs Act (TCJA) of 2017 brought significant changes to individual taxes, including more favorable tax brackets, higher exemptions, and a substantially increased standard deduction. These provisions have lowered individual tax liabilities to historic lows based on the share of income taxed. However, as Congress debates new tax legislation, the stakes are high: extending these benefits could cost an estimated $4.7 trillion over the next decade, according to Grant Thornton.[1]

At Leelyn Smith, we’re watching several key areas that could have the most meaningful impact on our clients:

  • Increased Alternative Minimum Tax (AMT) Exemption and Standard Deduction: Keeping these provisions at their current levels—or potentially increasing them—would benefit all taxpayers. Higher standard deductions have simplified tax planning and filing by reducing the need to track detailed records for itemized expenses.
  • Mortgage Interest Deduction: The TCJA reduced the mortgage interest deduction limit to $750,000 (from $1 million) for mortgages taken out after 2017. With mortgage rates now at multi-decade highs, maintaining this deduction at current levels is especially important for homeowners managing higher monthly payments.
  • State and Local Tax (SALT) Deduction Cap: The current $10,000 cap on state and local tax deductions has been a challenge for taxpayers in high-tax states. Discussions about repealing or adjusting the cap have resurfaced, but any changes would come with significant budgetary consequences, potentially adding trillions of dollars to federal deficits.   
  • Estate and Gift Tax Sunset: The generous $13.99 million lifetime exclusion for estate and gift taxes is scheduled to be cut in half after 2025 unless Congress acts. For families and individuals with significant assets, this creates a pressing window for estate planning and gifting strategies to minimize future tax exposure when passing wealth to heirs or charities.

Preparing for what’s next.

The potential changes to tax policy under President-elect Trump’s upcoming term could have far-reaching implications for individuals, families, and business owners. From the future of the Section 199A deduction to key exemptions like the standard deduction and estate tax thresholds, staying informed and proactive is essential.

At Leelyn Smith, we are closely monitoring developments in Washington and analyzing how these changes could impact our clients. By planning ahead, you can take steps to optimize your tax strategy, and pursue your long-term goals.

If you have questions or want to discuss how to prepare for the year ahead, we encourage you to reach out to your Leelyn Smith advisor.


[1] GrantThornton, “Trump victory expands tax policy possibilities” November 8, 2024.


Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.

This information is not intended to be a substitute for individualized tax advice. We suggest that you discuss your specific tax situation with a qualified tax advisor.

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