The future of federal taxes and the IRS under President Trump is unclear for many reasons. The uncertainty affects both the current tax-return season and individual tax-planning decisions that look beyond this year.
The Tax Cuts & Jobs Act (TCJA), a wide-ranging set of tax-law changes that took effect in 2018, is set to expire after 2025. While the tax cuts of the TCJA seem likely to be extended beyond 2025, the details are already mired in preliminary wrangling in Congress, making it hard to predict exactly what the extended tax law will look like.
Meanwhile, the IRS is experiencing whiplash. In 2022, the tax agency received a funding boost under the Inflation Reduction Act. The purpose was to make long-term improvements in IRS technology and services, to hire thousands of new staffers in needed roles, and to intensify IRS audit and collection efforts among very wealthy taxpayers to ensure they pay their “fair share.” Now President Trump is aggressively seeking to reduce the size and strength of the IRS amid his zealous initiative to shrink the workforce and activities of the federal government.
IRS Policy Under Trump: Potential Big Shifts Ahead
This week the Trump administration’s Department of Government Efficiency (DOGE), led by Elon Musk, is starting its cost-cutting “audit” of the IRS. This pressure on the IRS, along with staff layoffs, the federal hiring freeze, resignations, and retirements, is likely to have an impact on service during tax season.
In the longer term, the future of the IRS program to deepen audits and tax collection from high-income, high-wealth taxpayers—informally termed at one time the IRS Wealth Squad—seems to be in doubt. President Trump’s stated pick to be IRS Commissioner, former Republican congressman Billy Long of Missouri, lacks the tax-law experience of predecessors in the role but would bring political loyalty to Trump. If the Senate confirms Long to lead the agency, future IRS policy would thus probably align with White House goals to curb IRS initiatives. (At the IRS, the Commissioner and the Chief Counsel are the only two positions nominated by the White House; all other IRS employees are career civil servants. Long’s confirmation hearings have not yet started.)
Other potential concerns are that President Trump could use IRS audits as retribution against his political adversaries and others who have displeased him. (See my recent Forbes.com article on that topic: Could Trump Force The IRS To Audit Your Tax Return?)
The IRS: Advisor Predictions
Amid these stark shifts at the IRS, what do tax experts predict? A recent webinar that I moderated on tax-return topics featured a panel of financial and tax advisors. I asked them how the new White House administration and its early actions at the IRS are affecting their attitude or approach to tax-return reporting and advice for clients.
CPA Stephanie Bucko, co-founder of Mana Financial Life Design in Los Angeles, said her initial concern is the impact that cuts in the IRS workforce may have on the processing of tax returns. “I think the main thing that comes to mind is staffing reductions, which could put delays on things.”
As for what, if anything, taxpayers can do, Bucko has a few ideas. “If you’re expecting to get a refund, file as soon as you can,” she recommended. “Do e-filing. Try to make everything as simple as possible. Make sure there aren’t any errors, because making amendments can take a lot of time. We’re already seeing big delays in amendments. That could be exacerbated.”
The other advisors who presented in the webinar voiced feelings that are widespread among many tax professionals in this time of change and uncertainty. “I can’t predict what this administration is going to do,” stated CPA Dan Hodgin, the owner of Silicon Valley Tax Group in Campbell, California. “We can plan only on current circumstances and current tax law.”
Daniel Zajac, CFP, EA, the managing partner of Zajac Group near Philadelphia, said his firm shares this outlook: “We’re going to wait to see how this all plays out. We’re not making any major changes.”
In a poll of webinar attendees, largely tax professionals and financial advisors, I asked specifically whether they predict that the special IRS emphasis on auditing wealthy taxpayers will continue under President Trump. While a slight majority expressed the belief that the IRS will decrease its special audit and collection initiative, a fairly large minority held the view that it will stay the same.
Tax Policy: Tax Cuts & Jobs Act
Under the Republican White House and Congress, the tax cuts of the TCJA will almost certainly live beyond their current expiration date at the end of 2025. That much has been apparent since the results of election night in November. The questions now are whether the extension will be temporary or permanent and what modifications in the tax law Congress could make along the way.
Some Republican Senators in Congress are telling President Trump that they will oppose a mere short-term extension of the TCJA beyond 2025. They want the TCJA’s tax cuts to be made permanent. How this will be fiscally feasible remains in doubt for various budget reasons, including the Trump administration’s concurrent plans to increase spending on border security, energy, and defense.
Tax Policy: Capital Gains
You have probably heard by now of Project 2025. Organized by the Heritage Foundation (a conservative think-tank) and supported by many conservative organizations, Project 2025 is providing the early playbook for the Trump administration in several areas. It includes specific recommendations on tax policy.
One of its suggestions, on capital gains, President Trump pursued briefly in his prior presidential administration. Near the end of his first White House term, Trump sought a way to require the IRS to issue rules that would index for inflation the all-important cost basis used to calculate capital gains and losses when stocks and other securities are sold. Under Trump’s interpretation of presidential powers, he might order this modification of the tax rules without approval from Congress.
While indexing the cost basis for inflation would bring record-keeping complexities for taxpayers and brokerage firms, it could also be seen as a potential pro-economic-growth tax policy. Another recommendation in Project 2025, one that would require a tax-law change by Congress, is to cut the top tax rate on capital gains from 20% to 15%.
Tax Policy: TCJA Extension And SALT Deduction Cap
Whatever happens with the TCJA, one focus of the tax-policy debate surrounding its extension will certainly be the future of the state and local tax (SALT) deduction. For taxpayers who itemize deductions (Schedule A of Form 1040), the TCJA capped the SALT deduction at $10,000. For the SALT deduction to be worthwhile, your other itemized deductions together with the maximum $10,000 SALT deduction must add up to more than the amount of the standard deduction (in 2025, $15,000 for single filers and $30,000 for joint filers).
The SALT deduction is especially unpopular in states with high income and property taxes, such as California, New Jersey, and New York. For any action on extending or making permanent the TCJA, some modification must be made in the SALT deduction to get the full vote support needed from all Republican members of the House of Representatives. This means it’s highly likely we will see an increase in the amount of the cap. While President Trump has eagerly announced his desire to eliminate the SALT deduction cap entirely, this is less likely, given that removing it would cost $1.2 trillion in federal revenue over the next decade.
In the webinar that I moderated, I also polled the advisors in the online audience about what they believe will happen with the TCJA and the SALT deduction after 2025. Most (65%) do predict some sort of change in the SALT deduction.
Tax-Season Resources
The webinar where all of these insights occur is available on demand. The website myStockOptions.com has a Tax Center with abundant resources to help with tax returns involving equity compensation and stock sales.
Read the full article here
