At Around the Tax World, you can find out all about what’s going on in the wonderful, worldwide world of tax. Every month, we’ll feature a few mini-articles on what’s been going on in the world when it comes to tax, and fully available for viewing even if you don’t have a subscription.
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Check out what’s happening all around the world of tax!
In The Headlines
- The S&P 500 has its worst performance in over 70 years in the stretch between Christmas Eve and New Year’s Eve. The Standard and Poor’s 500 index tracks the stocks of 500 of the large public U.S. companies. Between December 24th and December 31st, the index dropped 2.6%, the worst end-of-year performance since 1952. What does this mean for investors in 2025? Fortunately, early in the new year the S&P 500 had already begun to rise. Analysts note that historically an end-of-year decline does not necessarily predict the next year’s trends. January is typically one of the strongest months for companies tracked by the index. Thus far in 2025, the stock market indices the Nasdaq Composite and the Dow Jones Industrial Average have both risen slightly.
- Tesla sales see a dip at the same time as the Cybertruck becomes eligible for the EV tax credit. Elon Musk and crew saw a 1.1% drop in global sales across 2024 as overall demand in the U.S. for electric vehicles decreased within the last year. This marks Tesla’s first reported sales decline since 2015. Meanwhile, Tesla’s only truck model recently became eligible for the $7,500 federal tax credit for plug-in and fuel cell electric vehicles. The dual-motor Cybertruck, which is priced at $79,990, saw lagging sales numbers at the end of 2024, but the tax benefit is expected to increase demand for this distinctive vehicle. However, the EV tax credit may turn out to be short-lived, since President-elect Donald Trump has indicated his plan to eliminate them.
- Big banks are abandoning the global climate change alliance as the presidential inauguration draws near. Many of the biggest lenders in the U.S. have recently announced their departure from the Net Zero Banking Alliance (NZBA), an international group of banks committed to moving toward net-zero greenhouse gas emissions by 2050. Among the recent departees are Bank of America, Citigroup, Goldman Sachs, Morgan Stanley, and Wells Fargo. In spite of dropping out of NZBA, a number of these banks have issued statements that they remain committed to their environmental goals. Commentators see a connection between this mass exit and the changes that the incoming Trump administration is expected to make. One anticipated change is to withdraw the U.S. from the Paris Climate agreement, which also happened in 2017 during Trump’s first presidential term.
What's New In The Tax World?
The newly-minted Department of Government Efficiency may take an axe to the IRS. In preparation for his return to the White House, President-elect Trump has already announced numerous changes including instituting a new advisory commission. Led by billionaire entrepreneurs Elon Musk and Vivek Ramaswamy, the Department of Government Efficiency (DOGE) as it is popularly known (an official name has not been selected) will be tasked with removing regulations and reducing government spending. The men have stated that they intend to cut the federal budget by at least $2 trillion. Targeted areas include the Consumer Financial Protection Bureau, the Department of Education, the Federal Bureau of Investigation, and the Internal Revenue Service. When it comes to the IRS, Musk recently posted a poll on X asking users if DOGE should eliminate the IRS’ funding entirely.
The IRS received a $14.1 billion budget for Fiscal Year 2024, much of which was to be spent on taxpayer services, tax enforcement, and operations support including IT development and security. Musk has named the possibility of creating a government-backed app to manage tax filing, eliminating the need for third-party services provided by companies like H&R Block and TurboTax. The DOGE co-head has also discussed simplifying the tax code, which could look like a federal flat tax with fewer income-based brackets. The touted benefits would include a more straightforward tax filing process and fewer tax avoidance loopholes. Experts anticipate that a new tax code could mean lower refunds and fewer deductions, including those that benefit low-income families and individuals with high medical expenses. However, this could also mean more income in each paycheck and not redirected toward taxes.
Some experts have suggested that DOGE’s best bet to increase IRS efficiency is to close the tax gap—the money owed in taxes each year that is never paid. This would likely require hiring more IRS staff to audit the wealthiest Americans and large corporations. The National Bureau of Economic Research found that auditing taxpayers in the 90th income percentile provides a high return on investment: $12 regained for every $1 spent. Currently, the tax gap equals an estimated $696 billion per year. Collecting this amount would make up about 30% of DOGE’s goal of reclaiming $2 trillion. However, since Musk and Ramaswamy have spoken about significantly reducing the number of federal employees, this does not seem a likely course of action for the new department.
State-By-State Updates
- Kansas legislators will battle it out over new property tax cuts. Last year, lawmakers approved $1.2 billion in tax cuts, including raising property tax exemptions from $40,000 to $75,000. State Republicans have named property tax cuts as a top priority in 2025, but any new bills are likely to come up against opposition from Democratic Governor Laura Kelly. The governor has voiced concerns about the impact of the last slew of tax cuts, which are expected to reduce state revenue by $2 billion over the next five years. Additional tax reductions could mean cutting funding for schools and construction projects. House Speaker Dan Hawkins has advocated for using Kansas’ general funds toward these needs instead.
- Minnesota residents will see a spike in property taxes—but land trusts may get the worst of it. Cities and counties across the state approved increased levies for 2025. In Minneapolis, this means a 7% bump for local homeowners and a more than 40% increase for land trust homeowners in the city. Why the major change for Minneapolis in particular? Previously, city laws had set a lower tax rate for Minneapolis residents, but a new state law overrides that. Land trust homes will now be taxed according to market price, which will raise taxes in the city but lower taxes for homeowners in the rest of the state. Minnesota has 14 community land trusts that help income-qualified applicants cover the cost of a house. In exchange for this financial aid, the trust keeps its ownership of the land. Minneapolis’ land trust does have an emergency fund homeowners can apply for to offset the cost of these tax increases.
- Nevada families will enjoy a sales tax exemption for diapers in 2025. The change was approved by voters, 69% of which said “yes” to the ballot question. Local nonprofit Baby’s Bounty estimates that Nevada families spend over $1,000 on diapers each year for just one child. The tax exemption will save about the equivalent of a month’s worth of diapers per year, totaling $400 million across the state over the next 25 years. Some have celebrated the change as a way to address the impact of inflation, but others are concerned that the loss of state revenue could result in less investment in school and public programs that also benefit families.
- Wisconsin introduces a new tax for electric vehicle charging stations. As of 2025, an excise tax of 3 cents per kilowatt-hour on electricity provided to EV batteries or related energy storage devices. All businesses that offer EV chargers will have to register with the Wisconsin Department of Revenue. The tax applies to publicly available and private charging stations and whether or not consumers pay for use of the electricity. The tax does not apply to residential EV charging stations. Legislators estimate that the new tax will generate $3.35 million this year, which will go toward road repairs and construction. These projects were primarily funded by the state gas tax, but since that tax has been adjusted for inflation, Wisconsin has struggled to secure enough funds to cover transportation needs.
Tax Planning Tips
Taxpayers in these nine states will see an income tax reduction starting this year. The recent movement toward cutting income tax rates traces back to the COVID-19 pandemic when many states unexpectedly found themselves with surplus tax revenue. Advocates of these tax cuts say that lowering state taxes draws in new residents and businesses to boost the local economy. Opponents have expressed concerns that the spike in state revenue was an anomaly specific to the pandemic and permanent tax cuts could negatively impact funding for other key needs down the road.
Out of the nine states implementing tax cuts this year, seven have both a Republican governor and a GOP-controlled legislature. This includes Indiana, Iowa, Louisiana, Mississippi, Missouri, Nebraska, and West Virginia. Louisiana will see one of the highest cuts—by converting to a flat tax rate, taxpayers who earn over $50,000 per year will drop from a 4.25% rate to only 3%. New Mexico, which has a Democratic governor and legislative majority, and North Carolina, with a Democratic governor and Republican-controlled legislature, will also implement tax reductions this year.
What might we see in a 2025 Tax Reconciliation Bill? President-elect Donald Trump is expected to advocate for a renewal of provisions from the 2017 Tax Cuts and Jobs Act (TCJA) to prevent them from expiring this year. This includes the yearly $10,000 limit on state and local taxes (SALT) deductions and the $750,000 cap on the size of a mortgage that is qualified for a mortgage interest deduction. These tax laws have been contentious in states with high income, high taxes, and high home prices where SALT and mortgage interest deductions tend to benefit more taxpayers. Examples include California, Connecticut, New Jersey, and New York. Homeowners in such states may need to be prepared for these caps to stay in place.
TCJA also introduced a lower corporate tax rate of 21%—reduced from its previous level at 35%—and lower individual income tax rates. Low tax rates are likely to stay in place. The same is true for the TCJA restriction on itemized deductions. Previously deductible items like work-related expenses, investment expenses, tax preparation fees, and hobby expenses were no longer eligible to be written off. These restrictions are likely to remain under a new tax bill.
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2025 Tax Surprises You Shouldn’t Overlook
There are a few tax rules new for 2025 that may catch some individuals and their tax advisers by surprise. These changes have not received lots of attention either because they are overshadowed by related changes that are more significant, or they were enacted a few years back with a future effective date that arrives in 2025. This article covers changes for 2025 that you will want to be sure to share with clients to avoid surprises at a later date.
Leaving the United States, Part I: Expats
When Americans speak of leaving America, they generally are expressing a desire to live elsewhere in the world for cultural reasons or due to cost of living. These people are called expatriates, aka expats. For clarity, a mere visit to another country does not make you an expat. To be an expat, the move needs to be long-term and often includes working or retiring in the new country. Expats live somewhere outside the U.S., but still have a tax obligation to the U.S. and possibly the country they move to. That will be the focus of this article.
Tax Preparer Hit with Stiff Sentence
John Anthony Castro is a colorful character. He entered several Republican primaries seeking the Presidential slot after failing to win the primary for a Senate seat representing Texas. He sued to have our once and future President Donald Trump be removed from the ballot on Fourteenth Amendment Section 3 grounds. As we can easily infer, those suits went nowhere. But more than anything, John Anthony Castro was a tax guy with a virtual practice with locations in four cities. Not anymore. Now he is resident in a Bureau of Prisons facility – the Federal Medical Center Fort Worth. On October 30, 2024, Judge Terry Means sentenced Castro to 188 months in prison, followed by one year of supervised release and restitution of $277,243, following his conviction on 33 counts of “Aiding and Assisting in the Preparation and Presentation of a False and Fraudulent Return.” Does the sad story of John Anthony Castro hold any lessons for us? Perhaps.
