The impact of recent and prospective tax law changes: What you need to know

Tax laws change frequently, with updates impacting the best tax planning practices for businesses across industries. Over the next year, there will be significant changes to tax laws with the potential sunset of the Tax Cuts and Jobs Act (TCJA) and economic changes in the White House led by the Trump administration.

Polston Tax has put together a guide to the major tax law changes you can expect to be enacted in 2025 and occur prospectively in 2026. It will also review potential changes that haven’t yet become law and how they might affect your tax planning in the coming years.

How Will Trump’s Presidency Impact 2025 Tax Law? 

Donald Trump’s presidency is likely to have a positive effect on American construction and energy industries, including gas, oil and coal. Whether through tariffs, tax law changes or lowered restrictions, President Trump is dedicated to “making America the dominant energy producer in the world,” as stated in the 20 Core Promises found in his platform.

In the 2024 election, Republicans took a majority in the Senate and Congress in addition to the presidency. This makes it more likely that Trump’s proposed policies will become legislation, with a lasting impact on the American economy and tax laws. Specific tax law changes that are already being discussed include:

• Extending the 20% Qualified Business Income (QBI) deduction
• Making 100% bonus depreciation for businesses permanent
• Reducing income taxes for American manufacturing companies

The full impact of tax law changes under Trump remains to be seen. Many of these policies will take time to pass through legislation and are unlikely to have an immediate effect. However, it’s important to be aware of the current administration’s goals so you can start planning for the future.

Tariffs and Inflation

Part of Trump’s vision for the U.S. economy is tariffs on imported goods. In the short term, this may be painful for American companies that currently ship their materials in from other countries, where they’re often more affordable than made-in-America goods. Even with tax cuts, the next few years could be challenging for businesses while the economy shifts. 

Inflation has also been unusually high in recent years, with a 9.1% increase in consumer prices from June 2021 to June 2022. However, from January 2024 to January 2025, the Consumer Price Index only rose 3%, so inflation seems to be calming down post-pandemic. As businesses plan for their 2025 taxes, inflation trends are important to consider.

General Tax Changes

Each year, the IRS adjusts income tax brackets to prevent “bracket creep.” This is when inflation, rather than higher earnings, pushes individuals into a new tax bracket. By adjusting marginal rates for inflation, the IRS can keep the tax system more equitable when costs are rising.

The IRS has already announced its general tax changes for 2025, including: 

• Tax brackets have been adjusted to provide relief in response to growing inflation over the past few years. 
• Standard deductions will increase by $400 for individuals filing separately, $800 for couples filing jointly and $600 for heads of households. 
• Alternative minimum tax exemption amounts increase to $88,100 for unmarried individuals, $68,650 for married individuals filing separately and $137,000 for married couples filing jointly. 

These general tax changes may be adjusted again next year, depending on changes to the economy and tax law throughout 2025. However, you can use this updated information to plan and pay your taxes for 2025.

Changes to the Tax Cuts and Job Act

The Tax Cuts and Job Act was passed in late 2017 and reformed both individual and corporate tax rates in America. Some examples of its impact include a standard deduction and reduced taxes for individuals and companies. When the TCJA was passed, many of its provisions were set to expire at the end of 2025—a date that’s rapidly approaching.

Unless these provisions are extended, the tax landscape could look very different in 2026. While some of the provisions will sunset in 2026, others will expire in 2027 or 2028. Most of the sunsetting provisions will affect individual taxes, but some of them also impact American companies.

Examples of TCJA provisions that are expiring soon include:

• QBI deduction 
• Bonus depreciation of 60% in 2024
• Higher expense limits for Section 179
• Pass-through deduction of 20% for qualified business income

Trump has already discussed extending some of these provisions so businesses won’t be impacted by higher taxes when TCJA provisions expire. While it seems likely that this will happen, it hasn’t been decided for certain. While companies wait to see upcoming tax law changes, it’s wise to plan for higher tax rates.

SECURE Act 2.0 Provisions

The original SECURE Act of 2019 was passed to reform retirement savings rules. Some of its provisions included a higher age for required minimum distributions and a requirement that most people inheriting an IRA must withdraw the entire amount within 10 years. The SECURE Act 2.0 passed in 2022 and included further tax law updates, such as:

• If an employer starts a new 401(k) plan, they must automatically enroll employees with a contribution rate of at least 3%.
• Catch-up contribution limits for employees between 60 and 63 years old have increased to $10,000 for 401(k) plans.
• In cases of natural disasters or emergencies, penalties for early withdrawal from retirement accounts are eliminated.

Like SECURE 1.0, the goal of SECURE 2.0 is to help Americans prepare for retirement and manage funds in their later years. Many of these updates impact company policies for retirement accounts like 401(k) and 403(b) plans, so you should talk to a tax professional to understand how these tax laws can affect your company’s finances.

401(k) and Roth IRA Changes

Many self-employed individuals use a 401(k) or Roth IRA account to save funds for retirement. If you have employees, they’ll have similar accounts for their retirement funds. Tax law changes impact how much you can contribute to these accounts each year.

Here are a few updates to be aware of when it comes to retirement account planning:

• Contribution limits have increased to $23,500 for employee 401(k) and 403(b) accounts. 
• Employers can now offer Roth matching contributions for 401(k) accounts. 
• Employers must now allow part-time, eligible employees to contribute to retirement plans. 
• Per SECURE Act 2.0, new 401(k) plans automatically enroll employees at a minimum contribution rate.

Updated requirements for retirement plans in 2025 allow employees and employers to benefit from increased savings and reduced taxes. The goal of recent legislation like the SECURE Act 2.0 is to make retirement more accessible and affordable for Americans, increasing peace of mind by making saving easier.

Tax Changes Impacting Construction and Energy

If you’re a business owner in energy or construction, there are specific tax credits and deductions you should know about in 2025. If you meet the criteria, you could be eligible for multiple business deductions and considerable tax savings over the year.

Tax Credits for Construction

There are several tax credits available for construction businesses in 2025, including:

• Investment Tax Credit for New Construction: This credit allows you to deduct 30% of the cost of installing solar energy systems from federal taxes.
• Energy Efficient Commercial Buildings Deduction: With this credit, you can deduct up to $1.00 per square foot for a building with 50% energy savings.

Many construction tax credits only apply to renewable energy sources. However, because the Trump administration supports energy sources like coal, gas and oil, there will likely be other tax cuts and lowered restrictions for the construction industry in the future. Energy-efficient choices should continue to be prioritized for tax credits.

Tax Credits for Oil and Gas

Tax cuts and credits that are available for oil and gas industries in 2025 include:

• Intangible Drilling Costs Deduction: Some oil and gas companies can deduct drilling costs like labor, fuel and supplies when drilling new wells. 
• Percentage Depletion Allowance: With this tax incentive, oil and gas companies can deduct a percentage of their gross income as a depletion expense.
• Energy-efficiency improvements: Oil and gas companies that reduce energy use for operations can apply for energy efficiency tax credits.

These credits, deductions and other programs can help reduce the tax burden on companies in energy industries. As the Trump administration makes legislation changes, companies may see further tax cuts and incentives to help promote oil and gas within the United States.

Depreciation Rule Updates

Equipment depreciation often helps industries like construction and transportation invest in their businesses with new equipment. Section 179 allows businesses to deduct the complete cost of qualifying equipment during the year it’s purchased and put into service. In 2025, the maximum deduction limit is $1,250,000 for equipment.

Some companies may benefit from bonus depreciation, which allows businesses to deduct a percentage of eligible equipment cost that’s purchased and put into service during that tax year. For 2025, the bonus depreciation rate is 40% for new and used equipment.

Before taking Section 179 or bonus depreciation, always check state laws. Some states have additional restrictions on deduction limits that can impact your tax planning. It’s important to have the full picture before you start figuring heavy equipment deductions into your taxes for 2025.

Tax Changes for Self-Employed Individuals

If you’re self-employed, there are additional tax laws you need to know about. Self-employed individuals are responsible for their own health care and retirement plans, and tax cuts can help you navigate that part of your finances for the best outcome. 

Health Care Premium Deductions

Several health care deductions and tax credits are available for self-employed individuals in 2025. Here’s an overview of some of the top tax cuts for self-employed business owners this year:

• Health Insurance Deduction: Self-employed individuals can deduct 100% of health insurance premiums from their taxable income. 
• Qualified Health Insurance Premiums: This program allows self-employed individuals to purchase health insurance through the Affordable Care Act (ACA) Marketplace to access premium tax credits and reduce costs. 
• Premium Tax Credit: This tax credit is available for self-employed individuals and can help lower the cost of health insurance purchased through the marketplace.

Additionally, note that 2025 will see higher health savings account (HSA) contribution limits. Now, you can contribute up to $4,300 to your HSA. The contribution limit is $8,550 for those with family coverage, and individuals born before 1971 can add an extra $1,000.

These tax credits and deductions are designed to help reduce health care premiums, making it more affordable for self-employed business owners. You can review these options with a tax professional to find the best fit for you and reduce the costs of taxes due in 2026.

Update Your Tax Planning for 2025

If you own a business, it’s important to review tax updates each year and adjust your financial planning to make the most of tax credit and deduction opportunities. Between the introduction of a new administration and the phasing out of TCJA provisions, 2025 is going to be an important year for tax law changes.

Construction, transportation, and oil and gas industries can expect to see lower taxes and fewer restrictions to promote American-made products in the near future. However, what these might look like is still uncertain. Additionally, although Trump has discussed extending several TCJA provisions, final decisions have yet to be made.

As companies begin tax planning for 2025, it’s important to stay focused on what laws and regulations are currently impacting your industry.

This story was produced by Polston Tax and reviewed and distributed by Stacker.