By Dan Griffith, Director of Wealth Strategy at Huntington Private Bank, and Todd Medendorp, Managing Director of Growth and Advisory Strategies at Huntington Commercial Bank
Key takeaways
- Congress is actively considering policy, regulation, and tax changes that could impact the tax environment for businesses in 2025.
- Increased M&A activity is anticipated in 2025, leading to competitiveness in the market and driving deal volume and value.
- Understanding financial standing and end goals, with the help of experienced tax, legal, and financial experts, can help businesses better position themselves for stability, growth, and resiliency.
For business owners, tax planning is always a relevant topic. However, a number of factors now make tax planning in 2025 as important as ever. Leaders now find themselves facing a potentially uncertain tax environment as new policies, regulations, and tax changes begin to take shape in the coming year. While a Capstone Partners’ survey of U.S. middle market business owners between July and August 2024 found the overall sentiment among surveyed CEOs was that a change in the White House would have a positive impact on business operations†, any significant shift in policy necessitates careful consideration of short- and long-term tax and growth strategies.
Understanding the potential implications of a unified government shift and identifying strategies to drive growth amid uncertainty can help prepare organizations for what’s ahead.
Tax Policy Expectations for 2025 and Beyond
The future of the 2017 Tax Cuts and Jobs Act (TCJA) is unclear. While many of its tax provisions are set to expire at the end of 2025, it’s possible some or all could be extended or made permanent. The coming years may see proposals for more favorable tax policies that could further influence business decisions.
Though this is not an exhaustive list, below are a few tax policy changes that could have the most significant impact on businesses and their owners.
1. Domestic Production Corporate Income Tax Adjustment
The TCJA corporate tax rate reduction is not set to sunset with its other provisions. However, there has been support for further lowering the corporate tax rate from 21% to 15% for companies with domestic production‡. This focus on U.S.-based production could incentivize onshoring for companies seeking lower tax expenses that are in a financial and operational position to do so.
2. State and Local Tax (SALT) Deduction Cap
The TCJA capped state and local tax (SALT) deductions at $10,000, which resulted in higher tax liability for businesses, especially those in high-tax states, to deduct these expenses. Policymakers are negotiating potential changes to the SALT cap, from eliminating to expanding it§. Eliminating the cap could lead to potential savings for companies most impacted by it and for many business owners individually. Evaluating how this cap elimination could change tax liabilities might open the door to shifting tax strategies and rethinking the location of operations.
3. Bonus Depreciation Deduction
Under the TCJA, businesses can deduct the full cost of qualified new investments in the year they were made for five years. If this provision is extended, companies could continue to use the 100-percent bonus depreciation benefit to reduce qualified property costs. As equipment and property investments are often critical to growth, this move would shift how companies think about capital expenditures in the coming years.
Planning for Growth and Transition Amid Volatility
Despite a still-uncertain tax landscape and growing discussions about tariffs, macroeconomic clarity from consecutive rate cuts and the election are still expected to spur owners to deploy growth and exit strategies. Understanding the M&A market forecast can help leaders assess the timing of major decisions, especially significant taxable events.
The M&A market is in its third year of a downcycle. Given that the M&A cycles show downturns lasting just 12-24 months, the market is past due for an upswing. In the last 12 months, just 2% of business owners surveyed reported selling their company, with many delaying sales processes due to the depressed valuation environment†. The lack of companies available to buy during this time has dampened strategic acquisition volume from buyers, who are now flush with cash and hungry for acquisition opportunities. CEOs are also preparing for a market rebound, with nearly half of business owners surveyed planning to execute growth strategies to capture additional market share and scale.
Dealmaking is already gaining momentum as of Q3 2024 and middle market volume could rise as much as 20% next year††. Increased dealmaking activity triggers competitiveness in the market. Maximizing growth strategies, building a strong leadership team, and understanding financial needs are crucial for business owners eyeing an exit opportunity.
What Steps Should Business Owners Consider?
1. Evaluate your financial position.
Start by assessing your company’s financial standing and opportunities. Develop a list of actions that could trigger taxable events, such as growth plans, capital investments, M&A, debt restructuring, and so on. There are strategies business owners can deploy today that might not be available in 2026, but this can be difficult to predict. Prioritize that list based on what you want to accomplish in the next year, and what makes sense to hold on until the future comes into clearer focus.
2. Understand your end game.
You might not be considering selling or transitioning your organization – 37.9% of surveyed CEOs have yet to start planning for one†. But exiting a business is inevitable, and preparing for it should be a priority.
Considering the uncertainty of the tax landscape, tariffs, and a rising M&A market, it might be time to conduct or update a business valuation to understand the organization’s current growth. Changes in tax policy could impact how much value you retain in a transition and your overall financial outcomes. Then, reflect on your long-term goals – your end game, so to speak – and how they align with your current position. Although many business owners focus on the corporate balance sheet, be sure that you develop a personal exit plan as well. Knowing where your business stands today, and your organization’s goals, can help you identify opportunities to optimize your tax strategies and build resiliency.
3. Leverage your advisors to explore strategic options.
We’re in an increasingly complex macroeconomic and policy environment. Leaning on your team of experts to guide you can make a significant difference. You never know when an opportunity will arise, so it is never too soon to gather a group of trusted advisors. Discuss the best approach to expansion initiatives, succession planning, and investments amidst tax policy volatility, regulatory changes, and tariff activity. Work closely with legal, tax, and financial professionals who understand your company’s position and can support operational initiatives and business expansion plans.
Looking toward the future
With the uncertainty around shifting policies, it’s likely 2026 will bring a new tax landscape for individuals and businesses. Prioritizing planning can help ensure your organization is positioned to take advantage of opportunities and withstand volatility.
Navigating the tax landscape to make financial decisions that benefit your organization and your legacy can be a challenge. We’re here to support you every step of the way. Reach out to our teams to learn more.
