Retroactive '100% expensing' emerges as Trump tax priority

ARTICLE | March 06, 2025

Authored by RSM US LLP

Executive summary

President Donald Trump, in a speech to Congress on March 4, gave the strongest public indication to date that significant tax legislation expected later this year could contain provisions that apply retroactively. Ultimately, it is up to Congress to draft and enact tax legislation before more than 30 provisions in the Tax Cuts and Jobs Act of 2017 (TCJA) are scheduled to expire at the end of 2025. At this stage, tax policy outcomes remain uncertain.

Trump calls for retroactive application of “100% expensing”

Significant tax legislation expected later this year “will provide 100% expensing” and “will be retroactive to Jan. 20, 2025,” President Donald Trump said in a speech to a joint session of Congress on March 4.

Whether that ends up coming to fruition remains to be seen as Congress drafts tax legislation and navigates complex political, legislative and budgetary dynamics in the coming months. However, Trump’s statements were the strongest public indication to date that certain tax provisions in upcoming legislation might apply retroactively.

“As part of our tax cuts, we want to cut taxes on domestic production and all manufacturing,” Trump said. “And just as we did before, we will provide 100% expensing. It will be retroactive to Jan. 20, 2025.”

Trump did not specify to what “100% expensing” would apply, which leaves some important questions.

His contextual reference to the TCJA brings to mind capital expensing. The TCJA provided for immediate 100% expensing—known as bonus depreciation—starting in 2018. Bonus depreciation began to phase out in 2023—it is 40% for 2025 and is scheduled to expire after 2026.

Other tax priorities and tariffs

The possibility of retroactive capital expensing was one of the tax-related takeaways from the president’s speech. He touched on several tax policies that have been at the forefront of a tax legislative agenda anchored by the upcoming expiration of the individual provisions of the TCJA.

• Trump reiterated some of his other tax priorities, including no taxes on tips, overtime wages and Social Security benefits. He also expressed his desire to make interest payments on loans for American-made cars tax-deductible.
• Trump referenced his campaign proposal to reduce the corporate tax rate on domestic production, as well as “all manufacturing.” Details about what type of activity would qualify would need to be fleshed out by Congress.
• Trump referred to the CHIPS Act as “a horrible, horrible thing” He added: “You should get rid of the (CHIPS) Act, and whatever’s left over, Mr. Speaker, you should use it to reduce debt—or any other reason you want to.” However, outright repeal of the measure in its entirety at this stage is unlikely.

Although Trump’s statements are influential, it is ultimately up to Congress to draft tax changes. The costs of tax changes will factor heavily in what Congress does.

Trump also covered tariffs, saying that reciprocal tariffs, including nonmonetary tariffs, will take effect April 2. He highlighted many of the tariffs his administration has already imposed, including the 25% tariffs on foreign aluminum, copper, lumber and steel.

Tax policy process is progressing

The president’s speech is just one component of the broader tax policy process playing out in Washington, including the effort in Congress to unlock budget reconciliation to allow for the passage of a tax measure later this year.

To that end, the House and Senate made incremental progress in late February by approving separate budget resolutions. The differences between the two measures must be reconciled before tax legislation can move forward.

That step underscores the urgency for businesses and individuals to ensure they are ready for potential tax legislation that addresses expiring TCJA provisions and other tax issues. Policymakers are considering provisions and circulating various tax proposals that could affect the tax profiles of businesses and individuals.

Your tax advisor can help you prepare by modeling how various tax proposals would affect you.