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Business Journals
2 days ago
- Business
- Business Journals
The tax impact of the One Big Beautiful Bill Act on businesses and owners
The "One Big Beautiful Bill Act" (OBBBA) extends some of the previous tax items in the Tax Cuts and Jobs Act while also introducing some changes. There are several tax planning opportunities to consider as managing tax due and the impact on cash flow for businesses and their owners can be challenging. Below are some of the most significant areas that impact businesses and their owners from the OBBBA. Permanent key business tax provisions: Key business tax provisions enacted in the 2017 Tax Cuts and Jobs Act (TCJA) that were set to either expire or had hit milestones included in the TCJA that had negative tax implications for businesses and their owners. These include: Bonus depreciation: The bill revives 100% bonus depreciation for property acquired and placed in service on or after Jan. 19, 2025. Businesses planning capital investments may benefit from bonus depreciation, which allows them to reduce taxable income and improve cash flow — freeing up funds to reinvest in growth. Section 179 expense: Section 179 previously allowed businesses to expense up to $1.16 million of qualifying property, with a phase-out threshold beginning at $2.89 million, both indexed for inflation. The OBBBA increased the maximum amount a taxpayer can expense to $2.5 million and increased the phase-out threshold amount to $4 million. Domestic research and experimental (R&E) expenditures: Businesses were previously required to capitalize and amortize domestic research and experimental expenses (Section 174 expenses) from Jan. 1, 2022, onward. This put stress on businesses and startups that had significant investment in R&D. The OBBBA suspends the required capitalization of domestic research and experimental expenditures for amounts paid or incurred in taxable years beginning after Dec. 31, 2024, and before Jan. 1, 2030, allowing for immediate expensing. Foreign R&E expenditures must still be capitalized and amortized over 15 years. The bill provides small businesses with the option to apply this change retroactively back to 2022 through amended returns. It also allows taxpayers to accelerate any remaining Section 174 deductions in 2025 or over 2025 and 2026. Business interest deduction limitation (Section 163(j)): Businesses were subject to a limitation on deducting interest expense based on adjusted taxable income (ATI) that did not allow for an add-back of depreciation and amortization for tax years beginning after Dec. 31, 2021. The OBBBA changes this for taxable years beginning after Dec. 31, 2024, the adjusted taxable income for purposes of the Section 163(j) limitation regarding ATI will be computed by reference to earnings before interest, taxes, depreciation and amortization (EBITDA), rather than EBIT, potentially allowing for larger interest deductions for many taxpayers. Section 199A qualified business income (QBI) deduction: The 20% QBI deduction for pass-through businesses is made permanent. This allows business owners of pass-through entities to deduct up to 20% of their qualified business income on individual tax returns. Other key business tax provisions: Several additional changes were made in the OBBBA that are temporary or have an impact to specific businesses. These include: Lower international rates: The bill extends lower tax rates on international income with other modifications. The anticipated future rates were effectively higher as there were scheduled increases that will not be implemented due to changes established in the OBBBA. Opportunity Zones: The bill establishes a permanent Opportunity Zone policy while also modifying and expanding the program. Significant new reporting requirements were also included. Expensing of manufacturing property: Allows for the bonus depreciation of qualified production property 'manufacturing property' through 2031. Clean energy tax credits: The bill rolls back or phases out significant green energy tax credits from the Inflation Reduction Act (IRA), including those for electric vehicles, home energy upgrades, wind and solar. The roll-back or phase-out dates are important as any purchases must be made or projects must be placed in service prior to these dates for businesses to take advantage of these tax credits. Form 1099 reporting: The OBBBA increases the information reporting for payments made to certain persons engaged in a trade or business from $600 to $2,000 with the amount to be indexed annually for inflation in calendar years after 2026. Section 1202, Qualified Small Business Stock exclusion: The OBBBA expands eligibility for the exclusion by raising the cap on a corporation's aggregate gross assets at the time of issuance from $50 million to $75 million and modifies the exclusion to provide a tiered approach based on the year the taxpayer disposes of the stock. Tips credit: The OBBBA expanded this credit to include the beauty service industry starting in 2025. The tips credit previously applied only to the food and beverage industry and provides a credit for the FICA paid by the employer on tips. Careful consideration should be given to plan for the implementation of these changes. There are options for qualified businesses to apply some of these changes retroactively or on a go-forward basis. Tax planning should also consider the interaction of any elective changes on other tax deductions along with the overall impact on taxable income. With proactive planning with your Brady Ware team, your business can maximize tax savings strategies with the new OBBBA. Learn more on our website. There are also benefits and changes for individuals that are discussed in our related article on the OBBBA, ' The One Big Beautiful Bill Act: An individual taxpayer perspective.' Brady Ware is a top 200 CPA and advisory firm serving clients from our Dayton (OH), Columbus (OH), Atlanta (GA) and Richmond (IN) office locations focused on serving small- to middle-market privately held companies, high-net-worth families and nonprofit organizations.
Business Journals
2 days ago
- Business
- Business Journals
The One Big Beautiful Bill Act: An individual taxpayer perspective
The "One Big Beautiful Bill Act" (OBBBA) brings a lot of changes, but for individual taxpayers, five areas stand out as particularly important for understanding their tax situation and planning for the future. Here are the top 5 areas individual taxpayers need to pay attention to from the OBBBA: 1. Permanent tax rates and standard deductions: What it is: The OBBBA makes the individual income tax rates (10%, 12%, 22%, 24%, 32%, 35%, and 37%) from the 2017 Tax Cuts and Jobs Act (TCJA) permanent, preventing them from increasing as scheduled. Crucially, it also permanently increases the standard deduction amounts (e.g., to $15,750 for single filers, $23,625 for heads of household, and $31,500 for married couples filing jointly starting in 2025), with inflation adjustments. Personal exemptions remain at zero. Why it matters: This provides long-term stability and generally lower tax burdens for most Americans. Taxpayers need to be aware of these permanent figures to accurately estimate their taxable income and determine if they should take the standard deduction or itemize. For many, the increased standard deduction will mean they no longer benefit from itemizing. 2. State and local tax (SALT) deduction cap increase (temporary): What it is: The cap on the SALT deduction is temporarily raised from $10,000 to $40,000 (increases through 2029) for most filers, with a phase-out for high-income taxpayers. This higher cap is effective through tax year 2029 and will revert to $10,000 in 2030. Why it matters: This is a huge win for taxpayers in high-tax states, potentially reducing their federal tax liability significantly. However, the temporary nature of this increase means taxpayers should plan for the reversion in 2030, as it will impact their future tax bills. 3. New temporary deductions (2025-2028): What it is: The OBBBA introduces several new, temporary deductions: Tip income deduction: Up to $25,000 in qualified tip income is deductible. Subject to a phase out the taxpayer's modified adjusted gross income exceeds $150,000 ($300,000 for MFJ) and expires in 2028. Overtime pay deduction: Up to $12,500 ($25,000 for joint filers) of qualified overtime pay can be deducted. Subject to the same phase out based on AGI as the TIP income deduction. Car loan interest deduction: Up to $10,000 of interest on loans for U.S.-assembled vehicles can be deducted, subject to AGI limits. Senior deduction: An additional $6,000 deduction ($12,000 for married couples) is available for taxpayers aged 65 and older, phased out at certain AGI thresholds. Why it matters: These deductions offer immediate tax savings for specific groups of taxpayers. However, their expiration after 2028 means taxpayers who benefit should factor this into their short-term financial planning and not rely on them for long-term tax reduction. 4. Child Tax Credit (CTC) and other family-related credits: What it is: The CTC is permanently increased to $2,200 starting in 2026, indexed for inflation. There are also changes to the refundable portion and a permanent $500 dependent credit per qualifying dependent who does not qualify for the CTC. Additionally, "Trump Accounts" are introduced, providing a $1,000 government-funded deposit for children born between 2025 and 2028, with parental contribution limits and tax-free withdrawals for specific uses (education, small business, first-time home purchase). Why it matters: These changes can significantly boost the disposable income of families with children and dependents. Families should review the new income thresholds and eligibility requirements for these credits and the "Trump Accounts" to maximize their benefits and plan for their children's future. 5. Estate and gift tax exemption: What it is: The federal estate and gift tax exemption is permanently increased to $15 million per individual ($30 million for married couples) starting in 2026, indexed for inflation. Why it matters: While this was set to sunset at the end of 2025, this is highly relevant for high-net-worth individuals and families. It substantially raises the amount of wealth that can be transferred free of federal estate and gift taxes, making estate planning considerably more flexible and potentially reducing future tax burdens for heirs. Specific rules and limits are connected to many of the provisions in the OBBBA and several changes aren't mentioned in this article. With proactive planning with your Brady Ware team your specific financial situation can be maximized to the new OBBBA for immediate and longer-term strategies. There are also benefits and changes for individuals who are business owners that are discussed in our related article on the OBBBA, ' The tax impact of the One Big Beautiful Bill Act on businesses and owners.' Brady Ware is a top 200 CPA and advisory firm serving clients from our Dayton (OH), Columbus (OH), Atlanta (GA) and Richmond (IN) office locations focused on serving small- to middle-market privately held companies, high-net-worth families, and nonprofit organizations. Adam Titus, CPA, is a shareholder with Brady Ware and is focused on helping businesses in numerous industries including manufacturing, construction and real estate. Adam works with clients on taxation and business planning and numerous other aspects such as transactions, structuring and other advisory issues.
Axios
5 days ago
- Business
- Axios
IRS outlines tax deductions from Trump's "big, beautiful bill"
Starting next year, millions of Americans — from restaurant servers to retirees — could receive lower tax bills under President Trump 's recently signed tax legislation. Why it matters: The sweeping law locks in Trump-era tax cuts and rolls out a fresh set of deductions, including tax breaks for tips, overtime pay, car loan interest and seniors. Follow the money: The legislation extends the expiring 2017 Tax Cuts and Jobs Act. That would decrease federal tax revenue by $4.5 trillion from 2025 through 2034, the Tax Foundation says. The legislation also slashes food and health benefits for the poorest Americans. The White House has said the law will spur strong economic growth. Standard deduction 2025, SALT and Child Tax Credit The legislation makes the Child Tax Credit permanent and increases it by $200 per child to $2,200. TurboTax spokesperson Lisa Greene-Lewis told Axios the legislation increased the state and local tax (SALT) deduction cap for homeowners and permanently extends lower individual tax rates. "For the majority of filers who claim the standard deduction, the standard deduction increased to $15,750 for single filers, $31,500 married filing jointly and $23,635 for head of household for tax year 2025 under the new bill," Greene-Lewis said. For single filers, that's an increase of $750, for joint it's $1,500 more and for heads of households it's up $1,135 from the deductions previously announced for taxes filed in 2026. IRS tax deductions The big picture: The Internal Revenue Service published a new fact sheet this week outlining how — and when — the law's temporary tax deductions will take effect. They will apply starting with tax returns filed in 2026 and expire in 2028 when Trump leaves office. The following new and temporary deductions were highlighted by the IRS: No tax on tips deduction 🧾 Workers in tip-heavy jobs — like restaurant servers and salon staff — can deduct up to $25,000 in qualified tips from their income. The new break applies to both W-2 employees and some self-employed workers. The tax deduction would decrease once a worker's income hits $150,000, or $300,000 for joint filers. By the numbers: Roughly 4 million U.S. workers were in tipped occupations in 2023, or 2.5% of all employment, according to estimates from The Budget Lab at Yale University. The median weekly wage for tipped occupations was $538 in 2023, compared to $1,000 for non-tipped workers, per the Yale lab. What's next: The IRS will release a list of eligible tip-earning jobs by Oct. 2, 2025, along with updated employer reporting rules. No tax on overtime deduction 🕒 Workers who receive "qualified overtime compensation may deduct the pay that exceeds their regular rate of pay" — the "half portion" in "time-and-a-half" overtime, the IRS said. The maximum annual deduction is $12,500, or $25,000 for joint filers. The deduction phases out for taxpayers with modified adjusted gross income over $150,000, or $300,000 for joint filers. What they're saying: Kristin Baldwin, compliance director at employer organization CoAdvantage, told Axios that employees who receive tips or overtime won't see any immediate changes in their paycheck, but will need to file for the deductions in 2026 on their tax returns. $6,000 senior tax deduction 💸 Zoom in: The temporary tax deduction is for individuals 65 and older, who can claim an additional $6,000 deduction, or $12,000 for a married couple when both qualify. This deduction is in addition to the standard deduction and available for itemizing and non-itemizing tax returns. It phases out for taxpayers with modified adjusted gross income over $75,000, or $150,000 for joint filers, the IRS said. Yes, but: Trump promised to eliminate taxes on Social Security income. This temporary deduction comes close. The tax break will raise the number of seniors with enough deductions to offset taxable benefits from 64% to around 88%. The deduction leaves out the poorest seniors — who already don't pay Social Security taxes — and the wealthiest ones, too. New car tax deduction on loan interest 🚗 Driving the news: Taxpayers can deduct up to $10,000 annually in interest on new car loans — if the car is U.S.-assembled, for personal use and purchased new. Qualified vehicles are cars, minivans, vans, SUVs, pick-up trucks or motorcycles, with a gross vehicle weight rating of less than 14,000 pounds. Final vehicle assembly has to be done in the U.S. to qualify. Yes, but: Used vehicles and leases don't qualify. "The taxpayer must include the Vehicle Identification Number (VIN) of the qualified vehicle on the tax return for any year in which the deduction is claimed," the IRS said. The deduction phases out for taxpayers with modified adjusted gross income over $100,000, or $200,000 for joint filers.
Yahoo
5 days ago
- Business
- Yahoo
Here's your potential tax cut in 2026 from the One Big Beautiful Bill Act
Millions of taxpayers could see a lower tax bill next year due to the so-called "big, beautiful bill" that was signed into law on July 4 by President Trump, with a recent analysis finding that every income group will see some savings. On average, taxpayers will save about $2,900 per household in 2026, according to the analysis from the Tax Policy Center, a nonpartisan think tank focused on taxes. But higher-income Americans are more likely to see a bigger relative boost than lower-income households, their analysis found. The new law extends the tax cuts in President Trump's 2017 Tax Cuts and Jobs Act, with many of those provisions otherwise slated to expire at year-end. But the legislation also adds a bevy of new tax breaks, ranging from eliminating taxes on overtime and tips to lifting the state and local taxes deduction from $10,000 to $40,000. About $6 of every $10 in tax breaks will go to the top 20% of households, or people who earn incomes of about $217,000 or more, the Tax Policy Center analysis found. "Average tax cuts are generally larger as a percentage of after-tax income for higher income households than for lower income households," it noted. !function(){"use strict"; 0!== e= t in r,i=0;r=e[i];i++)if( d= For instance, the typical household in the bottom quintile — those earning up to $34,600 per year — will save an average of about $150 in tax payments next year, or 0.8% of their income. But those in the top quintile, or who earn $217,101 or more, will save an average of $12,540 next year, or 2.5% of their incomes, the analysis found. To be sure, an individual's tax savings next year will depend on a number of variables, such as their number of children, which allows people to claim the Child Tax Credit, or whether they can tap one of the new tax breaks, such as the elimination of taxes on some tipped income. Wall Street Journal reports Trump sent "bawdy" birthday letter to Epstein, Trump threatens to sue 7.3 magnitude earthquake hits southern Alaska Medical expert on Trump's chronic venous insufficiency diagnosis Sign in to access your portfolio
Yahoo
6 days ago
- Business
- Yahoo
3 Tax Breaks That Will Change This Year Because of the 'Big, Beautiful Bill'
KEY TAKEAWAYS The 'Big, Beautiful Bill' increases some major tax deductions for the 2025 tax year, but also ends other credits. The bill raises the standard deduction by $750 to $1,125 for taxpayers who don't itemize their 2025 taxes. Taxpayers who do itemize can deduct four times more of what they paid in state and local taxes than in previous years. The bill eliminates energy credits for clean vehicles and clean home tax bill will look different this year thanks to the 'Big, Beautiful Bill' President Trump signed the into law this month. The law extends and expands the Tax Cuts and Jobs Act (TCJA) that Trump enacted in 2018 during his first term. Some tax credits and deductions from this act will increase during the 2025 tax year, but other clean energy credits will be eliminated. Tax credits are the amount of money taxpayers can subtract directly from the taxes they owe. Tax deductions are how much taxpayers can subtract from their taxable income, to lower the overall amount of taxes they owe. These are the most significant tax credit and deduction changes in the 'Big, Beautiful Bill' that will apply to next year's 2025 tax returns. The Standard Deduction Will Increase The 'Big, Beautiful Bill' permanently increases the standard deduction, a fixed amount that taxpayers who do not itemize their deductions can subtract from their taxable income. Under the bill, the standard deduction for single taxpayers and married individuals filing separately increases by $750 for the 2025 tax year. It will also increase by $1,125 for heads of households and by $1,500 for married couples filing jointly. Standard deductions will continue to rise annually to keep in line with inflation increases. The Increased 2025 Standard Deduction Under The 'Big, Beautiful Bill' Single Taxpayers and Married Filing Separately Heads of Households Married Filing Jointly $15,750 $23,625 $31,500 SALT Deduction Expands The final bill temporarily increases the state and local tax (SALT) deduction. This deduction allows taxpayers who itemize their taxes to subtract all or some of what they paid in taxes to their state and local governments from their federal taxable income. The 'Big, Beautiful Bill' quadruples the original $10,000 cap that the TCJA put on SALT deductions to $40,000 for the 2025 tax year. That means taxpayers, specifically those with higher incomes or in high-tax states, can deduct more when they file their 2025 taxes next year. The bill also increases the cap every year to keep pace with inflation and wage growth. From 2026 to 2029, the cap will increase 1% annually until 2030, when the provision expires. The Cap On SALT Deductions Increases By 1% Every Year 2025 2025 2027 2028 2029 $40,000 $40,400 $40,804 $41,212 $41,624 The bill also establishes an income threshold for SALT deductions that increases by 1% every year. Beginning with the 2025 tax year, taxpayers who have an annual Modified Adjusted Gross Income of $500,000 or more will be phased out of the SALT deduction until their MAGI reaches $633,333 or more, at which point they cannot claim the deduction at all. Clean Energy Credits End The bill terminates several tax credits and rebates that Americans can use to purchase clean energy vehicles and clean home energy solutions. However, taxpayers still have some time to take advantage of these credits. Both the $4,000 used clean vehicle and $7,500 new clean vehicle credit expire on Sept. 30, 2025. That gives taxpayers less than two months to purchase a clean vehicle and claim a credit credit when they file their 2025 taxes next year. The Residential Clean Energy Credit, which equals 30% of the cost to install new clean energy home improvements, ends on Dec. 31, 2025. Taxpayers who want to claim this credit must have these systems installed and connected before the year ends. Read the original article on Investopedia
