President Trump’s reelection campaign leaned heavily on being pro-business on tax and policy reform. However, predicting what actual changes will come from the new administration is challenging. One of the cornerstones of the campaign’s proposals was the extension of the 2017 Tax Cuts and Jobs Act (TCJA). The TCJA has generally been beneficial to dealers but is scheduled to sunset after 2025. There have also been several tax changes and policy proposals floated by the Trump Administration that could impact the auto dealer industry. Below, we’ll review some of the expiring TCJA provisions and Trump Administration proposals that are likely to have a significant impact on dealers and their businesses.
Key TCJA Provisions Currently in Place
Estate Tax Limit: The estate tax limit was doubled as part of the TCJA, and upon its expiration, these limits will revert to the old threshold, albeit indexed for inflation. Even with dealership prices cooling off over the last year, many dealers are over the current threshold of $13.6 million, and almost all dealers would likely be over the limit if this is cut in half.
Qualified Business Income Deduction (QBI): This is the 20% deduction that’s generally available to pass-through business owners. This effectively limits your pass-through income to 80% of whatever you earn, and has been a key benefit for dealers, who are largely operating their dealerships as S-corporations.
Bonus Depreciation: The TCJA allowed for 100% bonus depreciation initially but has been gradually phasing that out. In 2024 and 2025, bonus depreciation will drop to 60% and 40%, respectively. However, even with the phase out, the rules around the property qualifying for bonus depreciation were broadened significantly, making it much more beneficial to undertake cost segregation studies on dealer facilities, even at the reduced rates.
SALT Deduction Cap: One of the more controversial provisions of the TCJA was the $10,000 cap on the state and local tax (SALT) deduction, which limits the amount taxpayers can deduct for state and local taxes. The cap on the SALT deduction has significantly impacted residents of high-tax states, and has helped to spur the various pass-through entity (PTE) tax regimes that have been implemented in the Northeast.
Again, all these provisions are scheduled to sunset after 2025 unless Congress takes action to extend them. “Tax extenders” have always been part of the political game, and these are expected to be treated in a similar manner, although hopefully Congress acts quickly enough to allow for informed tax planning this time around.
Tax and Policy Proposals
Renewal of 100% Bonus Depreciation: Under the first Trump Administration, there was a push to extend the 100% bonus depreciation for businesses, and the intent would be for this to become permanent. This provision would offer flexibility to many businesses but would be most impactful for dealers that are upgrading their facilities, whether through renovation or new build, or looking to acquire new dealerships.
Removal of SALT Deduction Cap: The Trump Administration has proposed eliminating the $10,000 cap on the SALT deduction, which would benefit taxpayers in high-tax states who have been disproportionately impacted by the cap. It is not clear how such a move would impact the state PTE taxes, which were at least partially enacted to help circumvent the SALT cap.
Tariffs and Their Impact on Auto Dealers: The possibility of new tariffs on imported vehicles and auto parts is creating uncertainty in the industry. If implemented, these tariffs could add thousands of dollars to the cost of new vehicles, further straining affordability at a time when high interest rates and supply chain challenges have already driven up prices. While some automakers may receive exemptions from proposed 25% tariffs, many popular brands and models could still be affected. Additionally, tariffs on steel and aluminum, which remain in place, continue to increase manufacturing costs, impacting both new car pricing and dealership margins. With potential retaliatory tariffs from trade partners also in play, dealers should be prepared for shifting market conditions and carefully manage their inventory to mitigate the potential impacts.
Suspension of Clean Energy Credits: The future of the credits that helped fuel EV demand and offset some of the implementation costs is uncertain at best. These credits have been a target throughout the reelection campaign, and if the Trump Administration gets its way, these are not likely to survive, which will significantly impact the affordability of EVs and related equipment.
The Road Ahead
While it is difficult to predict what will happen, or the timing thereof, the current TCJA provisions are still in effect for the 2024 and 2025 tax years, so there is a baseline for planning over the next year. What comes after is hard to say. Whether changes are from the TCJA expiring, or new proposals being undertaken, it seems certain that the 2026 tax landscape will look vastly different from our current position. In the meantime, dealers should be talking to their advisors to determine how to best prepare themselves for the potential changes ahead. While there will certainly be opportunities to capitalize on, there are also plenty of potential risks. Proactive planning and preparation will help you be positioned for success.
Matthew Marcoullier is a director at ARB. He focuses primarily on financial accounting and consulting services for auto dealerships, commercial businesses, and closely-held businesses. Matt previously served as a Senior Auditor for the State of Maine Department of Audit.
ARB’s Sahaley DuPree and Sam Goodine contributed to this article.
