Post-Election Tax Update Webinar Recap

In this article:

1. Corporate Tax Planning
2. State-Level Compliance
3. Estate Planning Opportunities
4. The Tax Landscape
5. Long-Term Financial Planning
6. Navigate Changes Effectively

The outcome of the U.S. election sets the stage for potential tax policy shifts, leaving decision-makers wondering how they may prepare for what lies ahead. The new administration is considering changes to personal, corporate, and estate taxes along with broader economic policies. Considering this uncertainty, AAFCPAs advises that clients plan proactively to make informed financial decisions as legislation evolves.

During AAFCPAs’ recent 2024 Post-Election Tax Update Webinar (November 2024), speakers discussed key areas to watch and strategies to consider in light of the new political landscape.

We summarized the main takeaways below. You may also listen to the full webcast at your convenience.

Corporate Tax Planning

The Tax Cuts and Jobs Act (TCJA), signed into law in 2017, lowered the corporate tax rate to 21 percent, a provision that does not sunset as do many individual tax changes. Further reductions, potentially to 18 percent, are being considered, creating opportunities for businesses to adjust their strategies.

Provisions like bonus depreciation and the deductibility of research and development costs could also be revisited. Restoring 100 percent bonus depreciation and allowing full R&D expense deductibility would provide relief for companies making significant investments in equipment or innovation.

Pass-through entity (PTE) taxes, now enacted in more than 30 states, offer S corporations, LLCs, and partnerships a way to bypass the federal $10,000 cap on State and Local Tax (SALT) deductions for owners. The Qualified Business Income (QBI) deduction, which lowers effective tax rates for eligible business income, also remains a critical tool for tax savings. Staying ahead of these developments is essential to preserving cash flow and ensuring compliance.

State-Level Compliance

As state governments seek to address budget pressures, tax compliance at the state level is becoming increasingly complex. Businesses operating across multiple states must ensure they are in compliance with sales and use tax where applicable. Non-compliance may quickly become a liability, particularly when uncovered during the due diligence phase of a business transaction. State tax compliance issues, such as uncollected sales tax in states with economic nexus laws, can disrupt deals, delay closings, or lead to unexpected costs.

For those contemplating a relocation to a lower-tax state like Florida or New Hampshire, the importance of a well-documented residency change cannot be overstated. States losing taxpayers to low-tax jurisdictions are diligent in reviewing residency claims and often conduct audits to confirm that individuals have genuinely severed ties with their former state. These audits go beyond formalities like changing a driver’s license or voter registration. States may examine where you spend most of your time, the location of your primary care providers, your involvement in local charitable or religious organizations, and even where your family spends vacations.

If you retain a home in your previous state, scrutiny may increase. Auditors will assess whether the former residence is maintained as a secondary home and how much time is spent there. Establishing a clear and consistent record of residency in the new state—one that demonstrates a complete shift in domicile—is essential to withstand challenges and avoid being taxed by both jurisdictions.

Planning well in advance of a major life event, such as selling a business, is especially important. A long-term record of domicile in the new state can be a critical factor in defending residency claims and reducing exposure to state tax audits. For individuals and businesses alike, proactive planning ensures compliance while avoiding costly disputes and unexpected tax bills.

Estate Planning Opportunities

The federal estate tax exemption remains a powerful tool for preserving wealth, with the current $13.6 million exemption set to increase slightly in 2025. However, this exemption is still set to sunset in 2026 unless extended, reducing the amount to approximately $7 million. While the incoming administration may prevent its sunset, early action can ensure you lock in higher exemptions through strategic gifting.

State-level estate tax exemptions remain far lower than the federal threshold, with Massachusetts imposing a $2 million exemption, even after a recent increase. AAFCPAs advises that clients review their estate plan regularly and adjust to account for both federal and state rules to avoid unintended consequences for heirs.

Additionally, the Qualified Small Business Stock (QSBS) exclusion remains an attractive option for C corporation shareholders, allowing the exclusion of up to $10 million in gains on both federal and state taxes. Many states, including Massachusetts, allow for similar tax treatment. This benefit may be enhanced with advanced planning, making it critical to consult with your tax advisor before restructuring or executing transactions.

The Tax Landscape

Emerging proposals under the new administration could bring notable changes to the tax landscape. These include eliminating federal taxes on overtime pay and restaurant tips, removing taxes on Social Security benefits, and introducing new tariffs. While many of these ideas remain speculative, they underscore the need to stay informed about the ways in which potential changes could influence financial decisions.

Business owners should also keep an eye on deregulation efforts, which may simplify operations but could also create sector-specific challenges. Industries like manufacturing may see targeted tax incentives, while companies engaged in cross-border transactions should prepare for possible shifts in trade policies and tariffs.

Long-Term Financial Planning

Political transitions often spark short-term market fluctuations. However, AAF Wealth Management reminds clients that successful financial strategies require a focus on long-term objectives. Whether planning for retirement, selling a business, or making capital investments, decisions should align with your broader financial goals, not solely with immediate tax or market considerations.

A balanced approach that integrates tax planning, investment strategies, and estate and operational planning helps mitigate risks and capitalize on opportunities. Revisiting your financial plan regularly ensures it reflects changes in both your personal situation and the economic landscape, supporting sustained financial health.

Navigate Changes Effectively

AAFCPAs understands the challenges involved in navigating uncertain tax and regulatory environments. We offer proactive counsel to help clients prepare for potential changes and capitalize on opportunities. From optimizing your corporate tax strategy to ensuring compliance at the state level, we provide the insights and expertise needed to position your organization for success.

If you have questions, please contact Jonathan Bloom, CFP®, AIF®, Partner & Wealth Advisor at 774.512.4081 or jbloom@nullaafwealth.com, Joshua England, LLM, Esq., Partner & Tax Attorney at 774.512.4109 or jengland@nullaafcpa.com, Richard Weiner, CPA, MST, CM&AA, Tax Partner at 774.512.4078 or rweiner@nullaafcpa.com—or your AAFCPAs Partner.