RANT: Preparing/Planning/Guessing for the 2nd Trump Tax Plan

[Michael Plaks]

Every time we're preparing for a new administration, there's plenty of tax-related noise. The new President is going to do this, do that, yada yada yada.

Unfortunately, a lot of financial and tax professionals join this nonsense and pollute our brains with never-ending "How to prepare for the incoming tax changes..." podcasts and posts. Prepare for what, excuse me?

Presidents do not change tax laws.

They can issue pardons and various executive orders, but changing tax laws can only be done by Congress.

It does not matter what tax laws Biden or Trump want and promise. It's up to Congress, not up to them.

But this time Trump has a trifecta!

True, Republicans in 2025 will control the White House and both chambers of Congress.

You can easily Google how the legislative process works or just trust my Cliff Note: having a simple majority usually does NOT assure that Congress passes any bill, including tax bills.

More so, bills are not necessarily voted by party lines. There's plenty of internal disagreements in each party, and taxes happen to be one of the areas of frequent clashes between legislators from the same party.

Why can't everyone in Congress just agree on more tax benefits?

Well, there is this pesky obstacle called budget. Tax breaks cost the government money, and somebody has to pay for them. When you need money for something, you have only 2 options.
A. Take it from somewhere else. Naturally, this makes some other people (read: voters) unhappy.
B. Borrow. In case you have not noticed, our national debt is already out of control, and there're legal limits on additional borrowing.

The government has a third option: print more money. They do. The result is an even deeper inflation than what we already suffer from.

The other reason tax bills get stalled in Congress is that most bills combine multiple unrelated measures, usually serving various special interests. The fighting over them is endless. As in - we will not vote for your bill unless you include our other thing there. Argh.

Campaign promises vs reality.

Shall we look at prior campaigns vs what was actually implemented?

Some parts of Trump 2016 tax plan.
- Plan: 3 tax brackets. Reality: still 7.
- Plan: reduce corporate tax rate to 15%. Reality: 21%.
- Plan: apply this rate to pass-through and self-employment business income. Reality: 20% QBI deduction.
- Plan: eliminate AMT - Alternative Minimum Tax. Reality: still here, only a temporary increase in the exemption.
- Plan: eliminate NIIT - Net Investment Income Tax. Reality: nope.
- Plan: eliminate estate tax. Reality: still here, only a temporary increase in the exemption.
- Plan: postcard-size tax returns. Reality: LOL.

You can do a similar comparison for the Biden 2020 tax plan yourself.

Worth noting: both Trump and Biden had the benefit of their respective parties' majority in both chambers of Congress during the early years of their presidencies.

Planning for uncertainty...

...is a thankless job. We don't know whether a presidential idea will be implemented at all. We don't know what parts will survive the battles in Congress. We don't know when. We don't know if the new regime will be retroactive.

In short, we don't know anything. But boy, do we love recording podcasts and writing articles and sounding smart.

So, Trump is going to restore 100% bonus depreciation, y'all say? Sure, I'm all for it!
Assuming it does happen, despite all the obstacles that I mentioned earlier, could you please clarify a few details for me?
- Will it be from the day of that new law forward or for the entire 2025?
- Will it apply to 2024 as well?
- Will it also rectify 80% from 2023?
- Will we have to amend old tax returns or do it as a current year catch-up?

Unless you give me these answers, I cannot tell you whether it's better to place your property in service in December of 2024 or in January of 2025. I can only GUESS. Wanna pay me for guessing?

Nothing wrong with guessing. But let's not confuse guessing/hoping with planning, OK?

Just ask Dallas folks. They have been "planning" for their next Super Bowl parade since 1995.

PS. For a bird's eye view of end-of-year tax planning, read this old post:
https://www.biggerpockets.com/forums/51/topics/1007488-debun...