INCOME TAX RATE EXTENSION
The 2017 Tax Cuts and Jobs Act (TCJA) permanently set individual income tax rates at 10%–37%, preventing the scheduled rate increases that were set to take effect this year. Income thresholds for each bracket continue to be adjusted for inflation, providing long-term certainty for taxpayers. This stability is expected to support economic growth by encouraging steady consumer spending, which accounts for roughly 70% of GDP.
Lower marginal tax rates may also provide a modest boost to work incentives, while the reduction in tax policy uncertainty creates a more predictable environment for businesses that rely on consistent consumer demand.
EXPANSION OF BONUS DEPRECIATION & R&D
Beginning in 2025, businesses will benefit from permanent 100% bonus depreciation, allowing them to immediately deduct the full cost of most new and used equipment placed in service after January 19, 2025, reversing the previous phase-out schedule.
In addition, permanent R&D expensing will permit immediate deductions for domestic research and experimental (R&E) costs incurred after December 31, 2024, replacing the prior requirement to amortize these expenses. Together, these provisions are designed to stimulate capital investment by significantly lowering the after-tax cost of acquiring new assets, encouraging companies to invest in machinery, technology, and facilities.
The resulting boost in cash flow also supports innovation, as firms can reinvest in research that enhances competitiveness. Increased business investment is expected to drive productivity gains, job creation, and domestic manufacturing growth, strengthening the overall U.S. economy.
SPECIFIC INCOME/EXPENSE DEDUCTIONS
From 2025 through 2028, several temporary tax deductions will provide targeted relief to workers and seniors, with benefits phased out at higher income levels. Taxpayers can deduct up to $25,000 in qualified tip income and up to $12,500 in overtime pay ($25,000 for joint filers), easing the tax burden for hourly and service industry employees.
Additionally, interest on car loans for new U.S.-assembled vehicles is deductible up to $10,000, and seniors aged 65 and older receive an extra $6,000 deduction ($12,000 for joint filers). These measures are designed to boost consumer spending by increasing disposable income among key groups while encouraging purchases in sectors like the domestic auto industry.
Although temporary, the deductions aim to provide a short-term economic stimulus by driving targeted demand and supporting immediate growth in consumer-driven activity.