Trump's Tax Bill Advances, China Tariffs Shift, and How Long to Keep Tax Records

Published on: May 20, 2025 by Eric Trost, CPA, MST

Updated on: May 20, 2025

Recent developments in proposed tax legislation and global trade policy could have meaningful implications for both individual taxpayers and business owners. From potential extensions of the Tax Cuts and Jobs Act to sweeping new tax deductions, the latest proposal lays out a roadmap of tax reforms and financial incentives.

The proposal includes adjustments to tip and overtime taxation, a new savings vehicle for children, and deductions for gym memberships and auto loans.

On the global front, the U.S. and China have temporarily adjusted tariffs as they work toward a new trade deal. And to round things out, a common tax question is addressed: how long should you keep your tax documents?

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The Big Beautiful Bill (BBB): What's Inside the Latest Tax Proposal

The House Ways and Means Committee recently advanced a new tax bill officially titled The One, Big, Beautiful Tax Bill. While it's still a proposal, it outlines a wide array of changes that could impact both individuals and businesses if enacted.

Key Proposals:

Extension of Tax Cuts and Jobs Act (TCJA)	Many provisions set to expire in 2025, such as lower individual tax rates and the Qualified Business Income (QBI) deduction, would be extended through at least 2029 or 2030. Notably, the QBI deduction rate may be slightly increased, lowering the maximum business income tax rate to around 29%.
Increased Child Tax Credit	The proposal raises the credit from $2,000 to $2,500.
Tax-Free Tips and Overtime	Employees could deduct tip and overtime income when calculating their taxable income, effectively making these earnings tax-free. This could shift employee behavior and may prompt employers to rethink overtime policies.
Senior Deduction	While full tax relief on Social Security didn’t make the cut, seniors could see a new $4,000 deduction.
New "maga" Accounts	A new savings vehicle for children, these accounts allow up to $5,000 per year in after-tax contributions that grow tax-free. The federal government would contribute $1,000 to these accounts for newborns between 2025 and 2028.
Lifestyle and Loan Incentives	Deductions for gym memberships and interest on auto loans are also included, aligning with broader themes of health and mobility.

What's Missing or Controversial:

The proposed bill does not include tax relief on Social Security income.
Significant Medicaid cuts are included to help offset the cost of the tax provisions, a sticking point that could lead to substantial negotiation.
The proposed increase of the State and Local Tax (SALT) deduction cap from $10,000 to $30,000 remains contentious, especially among lawmakers from high-tax states who want an even higher cap.

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Trade Update: Temporary Tariff Adjustments Between the U.S. and China

Trade tensions with China have eased for now. A temporary 90-day agreement reduces tariffs to 30% on Chinese goods entering the U.S. and 10% on U.S. goods entering China. These rates are significantly lower than the previously imposed 145% tariffs, offering short-term relief and setting the stage for a more permanent trade deal.

For business owners, this reprieve offers a moment to evaluate supply chains and explore alternative sourcing options. If your business depends heavily on Chinese imports, it’s wise to monitor these negotiations and assess your flexibility should tariffs change again.

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Tax Document Retention: How Long Should You Keep Records?

A frequent question from both individuals and business owners is how long to hold onto tax documents. Here's a practical breakdown:

IRS Standard	Keep documents for at least three years from the date you file.
Wisconsin Rule	Wisconsin taxpayers should retain records for four years.
Extended Risk	If the IRS suspects significant underreporting of income, it can look back up to six years.
Best Practice	Holding onto documents for seven years offers a solid buffer.
Beyond Seven Years	Generally unnecessary from a compliance standpoint, though some choose to retain older returns for personal tracking or historical context.

If you’ve got tax returns going back 20 years, now might be a good time to declutter. Shred anything older than seven years unless you’re holding onto it for sentimental or record-keeping reasons.

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Biz Tip Topic Expert: Eric Trost, CPA, MST

Eric is a Principal with SVA Certified Public Accountants with vast experience and technical knowledge in tax compliance, research, and planning. He assists corporations and partnerships with tax savings through transaction structuring, tax credits and accounting methodology. He works closely with businesses to plan their cash flow for tax liabilities through quarterly estimate planning.

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