On the day before Independence Day, the Big Beautiful Bill (the Bill) passed the House, after passing the Senate two days earlier. President Trump signed the Bill on the 4th of July. Despite Republican control of both the House and the Senate, many were concerned about the cost of the Bill, estimated at $3.4 trillion, so passage was not automatic. Nevertheless, working through the night, the Bill ultimately passed, with a handful of Republicans joining the Democrats in opposition.
So, what are some of the primary tax changes (or non-changes) that could impact you and/or your business?
For businesses, these include:
- Reinstates and makes permanent 100% bonus depreciation (for 2025, it was scheduled to be 40%);
- Reinstates and makes permanent the full expensing of domestic research and development costs (although with some ability to elect to capitalize and amortize);
- Makes permanent the current 20% section 199A qualified business income deduction for pass-through business income;
- Adds a 100% bonus depreciation deduction for certain new domestic factories and buildings used in a production activity, placed in service before 2031;
- Increases the maximum section 179 expense to $2.5M and the phaseout threshold to $4M;
- No changes to using state pass-through entity tax workarounds to the individual state and local tax (SALT) cap, although see below for the SALT cap change;
- Expands the section 1202 qualified small business stock gain exclusion, by allowing some exclusion even when stock is held less than five years and increasing the maximum exclusion from $10M to $15M;
- Limits in certain respects the reach of the capital gain deferral of “qualified opportunity zones” (QOZ) with fewer low-income, economically distressed communities;
- Makes permanent the new markets tax credit program; and
- Several modifications to the clean energy tax credit rules.
As to individuals, they include:
- Makes permanent the current lower income tax rates and higher standard deduction enacted as part of the Tax Cuts and Jobs Act passed during President Trump’s first term;
- Temporarily increases through 2029 the $10K SALT cap deduction to $40K, with certain built-in increases and also phase-outs;
- Adds back and makes permanent the charitable contribution deduction for those who don’t itemize their deductions – maximum of $2K for married filing jointly filers and $1K for all others;
- Adds a new limitation to the overall amount of (most) itemized deductions that can be deducted – if you are a large itemizer, may want to maximize for 2025 before this new limitation kicks in;
- Adds a temporary personal exemption deduction of $6K for individuals at least 65 years old, with certain phase-outs;
- Adds a new temporary deduction to offset income from qualified tips and overtime pay; and
- Creates a new tax-exempt savings vehicle for certain beneficiaries up to $5K, with contributions able to come from a wide swath of individuals and entities.
Note: Need to pay close attention to the effective dates of these provisions as some are 2025 and others are 2026, with other nuances throughout the 900+ pages of the Bill.
This article was written for general informational purposes and summarizes tax laws. As such, it should not be relied upon for compliance with the Internal Revenue Code or state tax laws.
If you have questions about any tax-related matters, please contact Christopher Nuss or your BrownWinick attorney.