Tariff and Tax Saga Continues!
The Memorial Day weekend welcomes visitors to the Jersey shore, many enjoying the ups and downs of the “roller coasters” along the boardwalks.
President Trump decided to make sure all of us experienced a similar feeling, suggesting last Friday that the EU will be hit with 50% tariffs beginning in June. The markets last Friday responded as expected! By Monday morning (Memorial Day), 50% was moved back to July.
Adding to the roller coaster ride, statements suggest Apple will be hit with 25% tariffs if they do not manufacture iPhones in the United States. Walmart was told President Trump is watching, suggesting the company must absorb tariff costs and not pass them along to customers.
Apple should be left to manufacture products wherever they decide (lawfully of course), and Walmart should decide how THEY will deal with the cost of tariffs. Both companies contribute significant value to all of us, either directly or indirectly. I do have plenty more to say, however perhaps another time.
Question, how long will it take for the “tariff” negotiations to conclude? The “softer” economic data (consumer confidence/sentiment) has not trickled into the “hard” economic data (employment, profits, etc.). Let us hope that if the hard data does soften, tariff progress is already significant.
Tax Bill Heads to the Senate!
The pending Reconciliation Tax bill passed the House of Representatives and now sits in the Senate. It is worth paying attention to as it will impact most everyone.
A couple of proposed highlights for now, until we have more certainty, hopefully mid-summer. This information comes from Kitces.com.
- Standard Deduction increasing by $1K for single filers and $2K for Joint. Bonus deduction for those ages 65+ of $4K per person. The bonus deduction is subject to income phaseouts. Impacted years: 2025 through 2028.
- SALT deduction increases to $30K with income phaseouts for higher incomes.
- Child Tax Credit was scheduled to reduce to $1,000 in 2026. It will be increased to $2,500 for 2025 through 2028.
- Auto loan interest deduction of up to $10K/year if the automotive was assembled in the US. Income will completely phase out this benefit at $150K for individual tax filers and $250K for joint. There are additional caveats.
- No Tax on Tips and Overtime: There will be a tax deduction on the Federal level, however both will be subject to Social Security and Medicare taxes. There are additional caveats.
- 529 plans have added additional expense items to be considered a qualified expense, such as the Certified Financial Planner Professional (CFP) designation and more.
- Estate Tax exemption will increase to $15 million per person and will be indexed for inflation.
- HSAs, Heath Savings Accounts, will be expanded.
- Money Account for Growth and Advancement – Child Savings Accounts will provide a $1K government contribution to each newborn from 2025 through 2028. Families will be permitted to add $5K per year. There will be potential tax benefits, including tax-deferred growth and capital-gains treatment of the growth, but only if the funds are used for what the government will define as a “qualified distribution”. There are additional caveats.
- QBI, the Qualified Business Income deduction, is proposed to increase from 20% to 23%. Under current law, Doctors, Attorneys, and Financial Advisors have been subject to a phase-out that has eliminated many from taking any deduction. The new law will change how the phase out is calculated and may provide additional benefit.
- Debt Ceiling increase of 4 trillion.
There are additional provisions not discussed here.
All the above are subject to change and each will have caveats. Please do not adjust your planning, until we have certainly. When the new Tax bill is passed, we will quickly begin to assess the opportunities for clients. Let us hope we are afforded ample time if provisions will take effect in 2025.
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All data sourced from Wall Street Journal & Kitces.com May 23, 2025.
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