“ONE BIG BEAUTIFUL BILL”
Provisions made Permanent or Extended
- Tax Rates: The BBB made the current income tax rates permanent.
- Increased Standard Deduction- The TCJA increases to the Standard Deduction are made permanent and increased to $15,750 for 2025 for single filers, $23,625 for heads of household, and $31,500 for married individuals filing jointly. These amounts will be adjusted annually for inflation. This change is effective for years beginning after December 31, 2024.
- Personal Exemptions: The BBB permanently eliminates the deduction for Personal Exemptions, except for a $6,000 deduction for taxpayers who are over the age of 65. This deduction starts phasing out at $75,000 for a single taxpayer (fully phased out at $175,000) and $150,000 for married filing joint (fully phased out at $250,000). This exemption for seniors is set to expire after December 31, 2028.
- Qualified Business Income: The Qualified Business Income (“QBI”) deduction (also known as the Section 199A deduction) is made permanent.
- The QBI deduction remains at 20% of qualified income, as opposed to the House bill, which proposed raising the deduction to 23%.
- Estate Tax Exemption: The Estate Tax Exemption (sometimes referred to as Lifetime Exclusion) is permanently increased to $15,000,000 for gifts made after December 31, 2025. The $15,000,000 will be indexed for inflation after 2026.
- Mortgage Interest Deduction: The BBB permanently extends the Mortgage interest deduction limitation to the interest on the first $750,000 ($375,000 if married filing separately) of home acquisition indebtedness. Interest deductions on home equity indebtedness is permanently disallowed.
- Casualty Losses: The BBB permanently extends the TCJA provision, which limited the itemized deduction for personal casualty losses to only Federally Declared Disasters. The BBB also includes a provision that now allows for State Declared Disasters.
- Miscellaneous Itemized Deductions: The bill makes permanent the TCJA provision that disallowed miscellaneous itemized deductions, other than Educator Expenses. This is effective for tax years after December 31, 2025.
- Bonus Depreciation: The BBB permanently extends Bonus Depreciation. The allowance is increased to 100% for property acquired after January 19, 2025.
- Excess Business Loss: The BBB makes the excess business loss limitation permanent. It was originally set to expire after December 31, 2028. The Excess Business Loss limitation was enacted as part of the TCJA. It limits the amount a taxpayer could deduct for a business loss to $250,000 for single filers ($500,000 for married taxpayers filing jointly). The limitation amount is adjusted annually for inflation.
Modified Provisions
- Research and Experimental Expenditures: The BBB allows taxpayers to immediately deduct domestic research and development (R&D) expenditures beginning after December 31, 2024. Small Business Taxpayers will be able to deduct domestic R&D expenditures that were previously capitalized for tax years after December 31, 2021. Small Business Taxpayers are defined as taxpayers with average annual gross receipt of $31 million or less. Taxpayers with average annual gross receipts of more than $31 million will be allowed to deduct previously capitalized R&D expenses incurred after December 31, 2021, over one or two years.
- Business Interest Limitation: The BBB modifies the definition of Adjusted Taxable Income to be calculated permanently without regard to the allowance for depreciation, amortization, or depletion when calculating the 30% business interest limitation. This is effective for tax years beginning after December 31, 2024.
- Section 179 Expense: The BBB increases the amount a business can expense to $2.5 million and increases the phase out limitation to $4.0 million. These amounts will be adjusted annually for inflation.
- Advance Manufacturing Investment Credit- The BBB increases the credit from 25% to 35%. This is effective for property placed in service after December 31, 2025.
- Opportunity Zones: The BBB creates a new permanent Opportunity Zone program. The BBB does not extend the current Opportunity Zone program that was created in the TCJA. This would generally be effective after December 31, 2026.
- Percentage of Completion Method: The BBB provides an exception to the requirement to utilize the percentage of completion method of accounting for certain residential construction contracts.
- Qualified Small Business Stock (QSBS): The BBB modifies the existing 100% exclusion of gain on QSBS stock held at least 5 years and now includes both a 50% exclusion for stock held with at least a 3-year holding period and a 75% exclusion for stock held with at least a 4-year holding period. This provision is effective for QSBS issued after the enactment date. The amount of gain that can be excluded is increased from $10 million to $15 million. The BBB also increases the aggregate gross asset threshold amount a QSBS could hold from $50 million to $75 million. These amounts are increased for inflation annually after December 31, 2026
New Tax Provisions
- Charitable Contribution Deductions: Starting in 2026, individuals who do not itemize deductions can deduct charitable contributions made in cash during the tax year. The annual maximum of $1,000 for single filers ($2,000 for married filing jointly).
- Important new changes for taxpayers who itemize: There is a floor of 0.5% for individual charitable contribution deductions and 1% for corporate contribution deductions.
- No Tax on Tips: The BBB provides a deduction up to $25,000 for cash tips received by an individual who works in an industry that customarily receives tips. The deduction phases out with Modified Adjusted Gross Income of $150,000 ($300,000 in the case of a joint return).
- 1099 Reporting: Information reporting (MISC, NEC)– Starting in 2026, the dollar threshold for information reporting increased from $600 to $2,000. This will be adjusted for inflation after 2025.
- De minimis payments by third parties (1099-K)– The original threshold for third-party settlement payment reporting has been reinstated: Gross payments of $20,000 or more AND more than 200 transactions
- No Tax on Overtime: The BBB provides a deduction up to $12,500 ($25,000 for married filing jointly) for qualified overtime compensation received during the year. The deduction phases out with Modified Adjusted Gross Income of $150,000 ($300,000 in the case of a joint return). The term ‘qualified overtime compensation’ means overtime compensation paid to an individual in excess of the regular rate of pay required under Section 7 of the Fair Labor Standards Act of 1938.
- Car Loan Interest Deduction: For tax years 2025 through 2028, noncorporate taxpayers may claim a deduction of up to $10,000 for interest paid or accrued on a post-2024 loan to purchase a qualified passenger vehicle for personal use (generally, includes a car, minivan, van, sport utility vehicle, pickup truck, or motorcycle that is new, the final assembly of which occurs in the United States, and that meets other requirements). There is an above the line deduction capped at $10,000 per year and phases out at Modified Adjusted Gross Income of $100,000 for single filers ($200,000 for married filing jointly) at a rate of $200 for each $1,000 over the threshold. U.S. assembly is required to qualify for the deduction. It is available to both itemizers and non-itemizers.
- Bonus Depreciation on Qualified Production Property: The BBB allows taxpayers to expense 100% of the cost of Qualified Production Property (this is separate from regular bonus depreciation mentioned above). Qualified Production Property is nonresidential real property used as an integral part of a qualified production activity. In order to qualify, the property must be located in the United States or any possession of the United States, original use of it must commence with the taxpayer, construction of the property must begin after January 19, 2025, and before January 1, 2029, and the property must be placed in service before January 1, 2031.
“New Federal Reporting Requirement for Beneficial Ownership Information (BOI)“
This is not an Internal Revenue Service (IRS) issue.
Beginning on Jan. 1, 2024, many companies in the United States will have to report information about their beneficial owners, i.e., the individuals who ultimately own or control the company. They will have to report the information to the Financial Crimes Enforcement Network (FinCEN). FinCEN is a bureau of the U.S. Department of the Treasury that establishes a database of companies’ beneficial ownership information to be used by law enforcement.
NOTE: This will be a free filing that companies can complete themselves. Be wary of official-looking mail from a third-party company offering to complete the beneficial ownership reporting on behalf of your company for a fee.
Do I Need to Report?
Most businesses are small businesses that may need to file. Your company may need to report information about its beneficial owners if it is:
- A corporation, a limited liability company (LLC), or was otherwise created in the United States by filing a document with a secretary of state or any similar office under the law of a state or Indian tribe.
- A foreign company and was registered to do business in any U.S. state or Indian tribe by such a filing
How Do I Report?
Reporting companies will have to report beneficial ownership information electronically through FinCEN’s website: www.fincen.gov/boi.
When Do I Report?
Reports will be accepted starting on Jan. 1, 2024.
- If your company was created or registered before Jan. 1, 2024, you will have until Jan. 1, 2025, to report BOI. (You must report!)
- If your company is created or registered on or after Jan. 1, 2024, and before Jan. 1, 2025, you must report BOI within 90 days of notice of creation or registration.
- If your company is created or registered on or after Jan. 1, 2025, you must report BOI within 30 days of notice of creation or registration.
- If your company is created or registered on or after Jan. 1, 2025, you must report BOI within 30 days of notice of creation or registration.
“KEY PROVISION TO THE RETIREMENT SYSTEM“
“Secure Act 2”
A bill that was signed into law at the end of 2022 and introduced changes to the current retirement system includes the notable retirement provisions, such as
Changing the RMD rules for Roth 401(k) accounts
Increasing the age when required minimum distributions (RMDs) must start to 73 in 2023 and then to 75 in 2033.
Mandatory 401(k) enrollment for employers with more than 10 workers after 12/31/24.
Cath-up Contributions must be ROTH.
Str-up Credit increased from 50% to 100% of the qualified start-up cost effective as of 12/31/22.
Reducing the penalty for failing to take RMDs from the current 50% to 25%, and in some cases 10%.
Allowing older retirement savers to make larger catch-up contributions.
Increasing the options for employers providing 401(k) matches
Permits withdrawal to pay for “unforeseeable or immediate financial needs relating to necessary personal or family emergency expenses.
The key characteristics are:
There is no 10% penalty for early withdrawal.
Amount is limited to $1,000 (or f the account less than $2,000, the amount that exceeds $1,000)
Withdrawal account can be repaid to the Plan within 3-year period.
No subsequent emergency withdrawals from the same unless the repayment is made to the Plan or IRA account.
