Last week the Ways and Means Committee released an outline of potential adjustments to U.S. tax policies for 2025. Below is a detailed exploration of the proposed changes, organized by key areas of impact.

Tax Adjustments for Families and Education

SSN Requirement for the Child Tax Credit (CTC)
Reinstating the Social Security number requirement for CTC eligibility could save $27.7 billion over ten years. Advocates highlight reduced fraud, while opponents warn of potential exclusion for families ineligible for SSNs.

Elimination of Education Tax Credits
Proposals to repeal the American Opportunity Tax Credit and Lifetime Learning Credit could generate $85 billion in savings. However, critics argue this move may reduce access to higher education for lower-income families.

Head of Household Filing Status Elimination
Removing this filing status would save $192 billion, but single parents could lose access to higher standard deductions, potentially increasing their tax liabilities.

Corporate and Business Tax Adjustments

Corporate Tax Rate Reduction
Proposals to lower the corporate tax rate from 21% to 15% or 20% aim to boost competitiveness. However, such changes could reduce federal revenue by up to $522 billion over a decade.

Repeal of IRA’s Corporate Alternative Minimum Tax (AMT)
Eliminating the 15% corporate AMT introduced by the IRA could cost $222 billion over ten years, benefiting large corporations but potentially reducing government revenue.

Elimination of Business SALT Deduction
Ending the deduction for state and local taxes (SALT) by businesses could save $310 billion over ten years, aligning with efforts to simplify the tax code and reduce federal spending.

Cancel Amortization of R&D Expenses
The proposal to cancel the amortization of research and development (R&D) expenses aims to return to the pre-TCJA policy of allowing immediate expensing of these costs. Currently §174 expenses must be amortized over five years for domestic activities and 15 years for foreign activities.

Housing and Real Estate Proposals

Home Mortgage Interest Deduction Adjustments
Lowering the deduction cap to $500,000 or eliminating it entirely could save up to $1 trillion. While these changes would reduce benefits for higher-income homeowners, they may also impact the housing market and discourage homeownership.

Repeal of the SALT Deduction
Eliminating or modifying the State and Local Tax (SALT) deduction could generate up to $1 trillion in savings. Proposals include doubling the $10,000 cap for married couples or limiting the deduction to property taxes alone.

Nonprofit and Institutional Tax Changes

Expansion of Endowment Tax Rates
Raising the tax rate on university endowment investment income from 1.4% to 14% and expanding its applicability could generate $10 billion over ten years. This change encourages institutions to prioritize spending on American students.

Elimination of Nonprofit Hospital Tax Exemptions
This controversial measure could save $260 billion but may reduce hospitals’ ability to provide charitable care, impacting underserved populations.

Retirement and Savings Plans

Replacement of Health Savings Accounts (HSAs)
Replacing HSAs with a $9,100 Roth-style Universal Savings Account indexed to inflation is projected to raise $110 billion over ten years. Advocates highlight simplified savings structures, while critics question the adequacy of healthcare-focused savings options.

Miscellaneous Tax Proposals

Repeal of the Death Tax
Eliminating the estate tax, which currently affects estates exceeding $12.9 million per individual, would cost $370 billion over ten years. While some view this as easing burdens on family businesses, others argue it primarily benefits the wealthiest households.

Elimination of Tax Benefits for Transportation and Meals
Proposals to tax employer-provided transportation benefits and on-site meals could save $137 billion over ten years, shifting costs to employees and potentially reducing workplace incentives.

Taxation of Scholarship Income
Making scholarships and fellowships taxable could save $54 billion, but it may deter students from pursuing higher education, particularly in STEM fields.

Tariffs

Border Adjustment Tax
Imposing a tax on goods based on their consumption location could save over $1.2 trillion in a decade, benefiting domestic manufacturers but potentially increasing consumer costs.

Codification of Tariffs on Chinese Goods
Increasing tariffs on Chinese imports aims to bolster domestic industries, generating $100 billion in savings. However, it may strain U.S.-China trade relations.

Removal of the De Minimis Threshold
One of the most significant changes that could be made to tariff policy would be the elimination of the de minimis threshold for goods imported from specific countries. Currently, small-value shipments under $800 were exempt from tariffs, reducing costs for consumers and small businesses engaged in e-commerce. With the threshold’s removal, all shipments, regardless of value, will become subject to duties.

Healthcare-Related Tax Credits

Premium Tax Credit Repayment Cap Removal
Currently, individuals receiving advance premium tax credits reconcile these payments with their actual income on their tax returns. The cap on repayments for those earning below 400% of the Federal Poverty Level (FPL) could be removed, requiring all taxpayers to repay excess credits in full. This shift aims to reduce misallocated subsidies but may impose financial strains on low- and middle-income households.

ACA Subsidy Affordability Standard Revisions
Proposals include rolling back the Biden administration’s adjustment to the ACA affordability standard, which extended subsidies to dependents. This revision could lead to fewer families qualifying for ACA subsidies and incentivize employers to maintain family coverage under employer plans.

Energy and Environmental Policies

Repeal of Green Energy Tax Credits
Credits for clean vehicles, energy-efficient buildings, and renewable fuels, introduced under the Inflation Reduction Act (IRA), may be repealed, saving up to $796 billion over ten years. Critics argue this could slow the transition to a greener economy, while proponents claim it addresses market distortions.

Closing the EV Credit Leasing Loophole
A proposal to restrict electric vehicle (EV) tax credits to buyers (excluding lessees) could save $50 billion over a decade. This aims to ensure program integrity and target benefits more effectively.

What Will Happen With This?

The proposed tax changes for 2025 reflect competing priorities: fiscal responsibility, economic growth, and equity. While many measures aim to close loopholes, streamline benefits, or enhance revenue, these measures also will disproportionately impact specific groups, including low- and middle-income households, students, and businesses reliant on green energy incentives.

With Congress members having diverse constituents, and even many Republican representatives coming from nearly 50/50 divided states, it seems unlikely that many of the more extreme measures will pass. Policymakers face the challenging task of balancing budgetary goals with economic and social implications. Still, it is likely many bills will pass quickly this year with the 50% majority of a Republican Congress, and everyone has a desire to please President Trump right now after his sweeping win. As these proposals evolve, staying informed will be crucial for individuals and businesses alike, to be able to adapt quickly to these changes. If changes come up that you would like to gain some insight into how they may affect your business, then it would be wise to book a Consultation Call to go into detail of how this impacts you.