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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In The Headlines
- What do TikTok influencers and soybean farmers have in common? They may be impacted by the recent U.S.-China trade deal. After months of tariff hikes, U.S. President Donald Trump and Chinese President Xi Jinping came to an agreement that will have ripple effects across numerous industries. The U.S. agreed to reduce tariffs on China to 10% in exchange for China taking more measures to curb the illicit fentanyl trade. Another topic of conflict has been the rare earth minerals—materials needed for computer chips for a wide range of technologies including A.I. tools, defense systems, and smartphones. China is the world’s largest producer of rare earth minerals. Previously, Chinese officials had threatened to impose restrictions on U.S. access to these materials, but the recent deal included a one-year suspension of those restrictions. The deal also included a plan for China to purchase 12 million metric tons of soybeans from the U.S. Lastly, an agreement is expected to be finalized that would allow TikTok’s U.S. operations to come under the control of U.S. investors. A key sticking point is whether the app’s algorithm would be part of the sale.
- Despite recent cloud outages, Amazon sees rising stock prices and revenue. Shares recently saw a 12% increase a mere week after widespread Amazon Web Services (AWS) outages impacted food orders, hospital networks, mobile banking, security systems, and airlines across the globe. AWS saw a 20% boost in revenue compared to the same time last year, landing at $33 billion. Amazon’s digital advertising business also saw unexpectedly high sales, rising 24% this year to $17.7 billion. The e-commerce and cloud computing giant also announced plans to increase its spending to $125 billion this year, largely aimed at ramping up on its artificial intelligence services. At this level, Amazon will outpace spending by its top rivals—Google, Meta, and Microsoft. Meanwhile, Amazon has also been making headlines because of its recent layoffs. The e-retailer plans to let go of 14,000 corporate employees. The company claims that this is unrelated to finances or AI investments but is part of an effort to streamline company culture.
- Tariffs are impacting U.S. automakers but not slowing revenue. Recent estimates suggest that President Trump’s tariffs cost U.S. car manufacturers a combined $30 billion this year. Automakers have also faced a semiconductor shortage related to China banning Dutch company Nexperia from exporting its chips. Nevertheless, U.S. companies Ford and General Motors (GM) both saw higher quarterly earnings than expected, with Ford bringing in $2.6 billion and GM seeing $3.4 billion for Q3. The same is true for Stellantis, which manufactures Chrysler, Dodge, Jeep, and Ram vehicles. The company increased revenue by 13% since this time last year. Meanwhile, the Trump administration’s shift on environmental policies for the automotive industry has helped some automakers and hurt others. Ford, GM, and Stellantis all count large high-emission vehicles among their best-sellers. This has enabled these companies to largely offset the cost of tariffs. However, the same policies have negatively impacted electric vehicle makers like Tesla and Rivian, since their vehicles will no longer enjoy the same tax credits and other benefits introduced under the Biden administration.
What's New In The Tax World?
What to expect if the enhanced premium tax credits expire
As the federal government shutdown stretches past a month, at the center of the stalemate is the question of what to do about the enhanced premium tax credits. Currently, many Americans who get health insurance through the Affordable Care Act (ACA) marketplace also qualify for a subsidy to help cover the cost of health care. Estimates show that about 22 million of the 24 million people with an ACA plan receive these tax credits. Under the 2021 American Rescue Plan Act, Americans whose income exceeds 400% of the federal poverty level are eligible. However, the extension of those credits is set to expire at the end of 2025.
Now, as open enrollment season has begun, many Americans are seeing major cost increases. Going into November, analysts estimated that the average ACA enrollee would see premiums go up by over 114%. This also factors in an average 26% increase in premium prices initiated by the health insurers. The actual price change will likely depend on whether you live in a state that runs its own Marketplaces or that uses Healthcare.gov. State-run Marketplaces are expected to see an average 17% hike compared to a 30% spike for Healthcare.gov users.
What is the battle going on in Congress? Democratic lawmakers are strongly advocating to extend the enhanced tax credits and include this extension in the deal to end the government shutdown. Republican lawmakers are insisting that the subsidies should be negotiated separate from the shutdown. A recent analysis found that about 57% of ACA marketplace enrollees live in Republican congressional districts, and about 80% of all premium tax credits went to those living in states won by President Trump in 2024.
What happens if a deal is not reached to extend the enhanced premium tax credits? Some enrollees may be able to drop down to a lower-tier plan to reduce costs, but this typically means a higher deductible and could still result in higher out-of-pocket health care costs over the course of the year. Lower-tier plans sometimes also have different networks and may require plan holders to switch providers or medications—or pay a much higher cost. The deadline to enroll in a new health insurance plan is January 15, 2026. For coverage to begin on January 1st, you must enroll or change your plan by December 15th.
State-By-State Updates
- Florida lawmakers consider rewriting their property tax system, especially for homesteads. Members of the state House have submitted competing proposals that would change how primary residences are taxed. Recently, Governor Ron DeSantis responded to concerns that reducing property taxes would also reduce revenue for local governments. DeSantis asserted that the majority of property tax revenue is not from Floridians’ main homes but from other properties, such as vacation homes, investment properties, commercial properties, and Airbnbs. The Florida Policy Institute and Office of Economic and Demographic Research confirmed that 36% of property tax revenue comes from primary residences, while the other 64% comes from other property types. However, city and country governments have still expressed apprehension over how a major tax code revision could change their budgets. Analysts estimate that if Florida were to eliminate homestead property taxes entirely would cost the state about $18.5 billion each year.
- Illinois weighs a Chicago area sales tax hike to fund public transportation. A $1.5 billion plan is on the table that would help Chicago transit agencies avoid a shortfall in early 2026. State legislators have seemingly abandoned previous plans to tax entertainment or package deliveries. The new measure instead focuses on redirecting revenue from a sales tax on automotive fuel purchases to the tune of $860 million. The remaining $200 million would be redirected from the state’s Road Fund, which sets aside money for road construction projects. Funds would instead go to public transportation operations. Lawmakers in downstate Illinois (outside the Chicago area) are concerned that reducing the Road Fund could unfairly impact their constituents, since only $129 million from the new bill would go toward their agencies. In addition to these changes, the new bill would increase the Regional Transportation Authority sales tax to 1.25% in Cook County and 1% in other regions. Tolls will also be increased by 45 cents in northern Illinois to fund new tollway projects.
- New Mexico considers funneling conservation tax revenue toward well clean-ups. State lawmakers are debating how to raise the money needed to clean up abandoned oil and gas wells, a project that is expected to cost between $700 million to $1.6 billion. The project is considered a priority, since abandoned wells can pollute groundwater and the air and can reduce the efficiency of nearby wells. The state has already spent tens of millions of dollars to plug about 1,000 unused wells. A new proposal would require well operators to make a security deposit of $150,000 for each inactive or high-risk well. Operators are currently only required to provide $250,000 for active wells. However, opponents to this proposal say it burdens smaller oil producers and harms an important state industry. Instead, some lawmakers are suggesting that conservation tax revenue be redirected from the general fund to the reclamation fund, which currently funds the well cleanup project.
- Will Ohio eliminate state property tax this year? The Buckeye State recently approved four bills to reduce property taxes. One changes a current tax reduction formula to make way for future tax cuts. Another allows local commissions to cut taxes if they raise more revenue than is needed for the projects or services they are funding. Two more place limits on property tax increases to reflect the rate of inflation. However, the last two bills will result in a 10% reduction in revenue amounting to about $2.4 billion over the next three years. Still, some Ohio lawmakers are advocating to eliminate state property tax entirely. A possible first step would be to offer a 100% homestead exemption to seniors and disabled persons—an idea floated by some legislators. However, property taxes currently generate about $20 billion per year, so making up for the shortfall could be a complicated process. Opponents of the idea fear tax cuts would harm local governments and especially school funding.
Tax Planning Tips
The IRS punts on a new tax law on reporting auto loan interest
Under the One Big Beautiful Bill Act (OBBBA), lenders are now required to report auto loan interest to the IRS. However, to ease the transition, the agency recently announced an exception for the coming year: Lenders will not have to file a 2025 report directly with the IRS as long as borrowers receive an interest statement by January 31st, 2026. If lenders do not meet this deadline, they will have to collect detailed information from each borrower, including their name, address, interest paid, loan principal, and vehicle identification number.
Why the new reporting requirement? The OBBBA allows taxpayers who purchase a new vehicle to deduct up to $10,000 in auto loan interest per year, starting in 2025 and continuing through 2028. To qualify, the new vehicle must have undergone final assembly in the U.S. The deduction can be claimed whether taxpayers itemize or take the standard deduction. However, the tax benefit is subject to income limits—it phases out for those earning over $100,000 annually.
Consider these end-of-year best practices for 2025 tax savings
With 2025 quickly winding to a close, there is still plenty of time to trim back that tax bill by taking a few strategic steps. The first is to harvest your tax losses. This may be especially helpful if you realized significant gains on your investments. If you also have underperforming investments, you can sell them at a loss to offset the taxes you’ll pay on capital gains. Even after you sell, you may also have the option of buying those same securities back later—as long as you abide by the wash sale rule. This rule says that if you sell a security but then buy it back within 30 days of that trade date, you cannot claim a loss on your taxes. Note that the deadline to recognize a loss for 2025 is November 28th.
You will also want to review the state of any retirement or health savings accounts you have. Consider maximizing your contributions to any tax-advantaged accounts, if you haven’t already. Because health savings accounts enjoy tax-free contributions, tax-free growth, and tax-free withdrawals (as long as they are spent on medical expenses), maxing them out is typically a wise move. The same can be true for 401(k)s and IRAs. You might also consider converting assets from a traditional IRA to a Roth IRA if you anticipate ending up in a higher tax bracket during retirement. Contributions to Roth IRAs are taxed upfront, but withdrawals are tax-free.
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CURRENT EDITION
Lessons Learned from the Tax Court: The Root of the Issue
When is a business really a business? As Supreme Court Justice Potter Stewart said in 1964, “I know it when I see it.” The US Tax Court, however, maintains a slightly less subjective standard. The Roots were pretty sure they were running a bona fide business; the IRS, however, didn’t share the sentiment. And since we’re reading about them in a segment called “Lessons Learned,” one should assume it did not go the way the Roots would have liked.
The Lessons From The Supreme Court Zuch Opinion
There is a great scene in the movie On The Basis Of Sex. The actors portraying Ruth Bader Ginsburg and her husband, Martin Ginsberg, a very high-level tax attorney, early in their careers are reading in separate rooms. He comes in with something he wants her to read and she snaps that she doesn’t read Tax Court cases. In that moment she showed her future as a Supreme Court Justice. Not many Tax Court cases reach the Supreme Court. So when one does it’s exciting. And, as it happens, Commissioner of Internal Revenue v Zuch contains some practical lessons worth considering.
Fractional Art Investing Is Real — How To Advise Your Clients On The Tax Consequences
In mid-November a portrait of a young Vietnamese woman by the artist Gustav Klimt, which was part of the estate of the late Leonard Lauder (the cosmetics billionaire), was sold at a Sotheby’s auction for $236.4 million. It set the record for the most expensive work of modern art ever sold at auction according to Bloomberg. That’s probably out of reach for most of our clients. But what if they could join together to buy an interest in the painting with an entity holding the asset? That’s the idea behind the burgeoning fractional art market. While, in general, the art market has been struggling for a few years, the fractional art market has been expanding. According to the website Digital Original, “Fractional art ownership is no longer a niche concept – it’s a growing investment trend that’s accessible, flexible, and supported by cutting-edge technology.” What, you may be asking, does this have to do with taxes? It may be more than you think for your high-net-worth clients. As a trusted advisor it’s important that you are aware of both the types of investment opportunities your clients may be buying into and the tax consequences.
