Latest news with #taxlegislation
Forbes
7 days ago
- Business
- Forbes
After Recent Tax Updates, What Business Owners Should Be Thinking About
David McGuire is a leading expert on cost segregation, fixed assets and depreciation law and a co-founder of McGuire Sponsel. After months of headlines, debate and political theater, one of the most talked-about pieces of tax legislation in recent history, the 'Big Beautiful Bill,' was signed into law on July 4. While much of the public focus has been on individual benefits—such as 'no tax on tips'—the real long-term impact for business owners lies in the provisions related to bonus depreciation, Section 179 expensing and research and development costs. These changes are technical, yes. But they're also deeply practical. If your company builds, buys or improves property (or invests in research and development) these changes offer a rare chance to clean up the past few years and create a more strategic path forward. But as with most things in tax, timing is everything. Here's what you need to know and why waiting could be a costly mistake. 100% bonus depreciation is back (but there's a catch). Bonus depreciation has long been a powerful planning tool, allowing businesses to fully deduct the cost of qualifying assets in the year they're placed in service. The Tax Cuts and Jobs Act (TCJA) in 2017 temporarily expanded this to 100%, but that benefit began phasing out in recent years. The new bill brings it back—and makes it permanent. That's the good news. But there's a caveat: This time, it's not just about when an asset is placed in service. It's also about when you signed a binding contract to acquire or build it. If your business entered into a contract before January 20, 2025, even if the asset is placed in service later in the year, it could be subject to the old, reduced depreciation rules—possibly only qualifying for 40% bonus instead of 100%. This creates some surprising results. Two assets placed in service in July 2025 could receive dramatically different tax treatment, simply based on contract timing. Don't assume your depreciation strategy is set. Review all current and future capital investments—especially real estate projects, equipment purchases and construction contracts. In some cases, it may make sense to adjust timing, renegotiate terms or split contracts to optimize bonus eligibility. Section 179 expensing gets a boost. Section 179 expensing has always been a go-to for smaller businesses looking to deduct the full cost of qualifying property. The new bill expands this benefit, increasing the deduction limit to $2.5 million, with a phase-out beginning at $4 million. What's especially valuable about Section 179 is that it's not subject to the same contract date rules as bonus depreciation. Instead, it's tied solely to the placed-in-service date, making it a more straightforward—and often more flexible—tool. Even better, most U.S. states conform to Section 179, whereas many do not recognize bonus depreciation. This makes 179 especially powerful for businesses operating across multiple jurisdictions with different tax rules. Businesses that exceed bonus depreciation thresholds, or operate in states that decouple from federal bonus rules, should take a fresh look at how Section 179 can support their tax planning strategy. R&D expensing is finally fixed. One of the most frustrating developments in recent tax law was the requirement, starting in 2022, to amortize research and experimental (R&E) expenses under Section 174. Many innovative companies (particularly those in manufacturing, tech and engineering) were suddenly required to spread those costs over five years, even if they provided no future benefit. This created a painful mismatch between how expenses occurred and how deductions were recognized. The new bill fixes that. Beginning in 2025, businesses may once again fully expense qualifying R&D costs in the year they're incurred. But it also goes a step further by offering two paths to clean up prior-year treatment: • Large businesses must carry forward any remaining amortized Section 174 costs from 2022-2024 into their 2025 return (or elect to spread it across 2025 and 2026). • Smaller businesses (with average annual gross receipts under $31 million) may amend prior returns to fully expense those R&D costs retroactively. This matters for businesses that avoided claiming the Section 41 R&D credit in recent years to sidestep 174 compliance, especially if they expensed those costs incorrectly on their returns. Now's the time to revisit those decisions and potentially unlock both deductions and credits. The planning window is open—but it's already closing. While the new law offers powerful opportunities, some of the most valuable options come with short deadlines. Certain elections including the ability to change accounting methods and pull forward prior-year deductions must be made on the first taxable year beginning after December 31, 2024. Additionally, businesses that extended their 2024 tax returns will still need to comply with the previous 174 amortization rules, even as they prepare to switch gears in 2025. This creates a narrow window for proactive planning. Business owners should work closely with their tax advisors to: • Review the timing and structure of capital projects • Evaluate whether to amend 2022-2024 returns • Identify opportunities to optimize R&D credit claims • Prepare for method changes or Section 481(a) adjustments in 2025 The sooner that planning begins, the better the outcomes are likely to be. This is a moment to reset. This bill is a chance for businesses to pause, reset and take a smarter approach to tax planning moving forward. If your company has invested in new buildings, machinery or technology over the past few years, there's a good chance you've either left money on the table or are carrying forward costs you don't need to. This new law gives you the tools to change that—but only if you act. No two businesses will approach this the same way. But the most successful ones will take this moment to consider the options and make informed decisions with a multiyear view. The opportunity is real. Now's the time to get curious—and get moving. The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation. Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
Yahoo
18-07-2025
- Business
- Yahoo
High income taxpayers in California and New York set for a SALT windfall in 2026
The Republican party is heralding its new tax legislation as a win for middle income Americans. But the most substantial tax savings in the bill is reserved for wealthy individuals across the country—and particularly in high-tax states like California and New York. That's because the legislation increases the deduction level for state and local taxes, also known as SALT. This allows federal taxpayers who itemize their deductions to fully deduct state and local income taxes as well as property taxes, and is most beneficial to wealthy taxpayers in states with a high cost of living and high tax rates—the ones who are in position to elect for itemizing over the standard deduction. To wit: while only 7% of taxpayers earning under $200,000 itemized deductions in 2022, 38% of taxpayers earning over $200,000 did, according to the Bipartisan Policy Center (BPC). Under the 2017 tax bill passed under the first Trump administration, a cap was officially put on this deduction for the first time, limiting what taxpayers could deduct to $10,000. The cap is quadrupled under the new law, and now stands at $40,000. It begins to phase down for taxpayers making over $500,000. Various analyses find that taxpayers in California, Illinois, New Jersey, and New York stand to benefit the most: They account for 40 of the 50 top congressional districts affected by the cap. And 13 of the top 15 are located in just California and New York, per BPC. The old cap primarily affected taxpayers making over $200,000 per year; those earning less than that 'typically don't pay enough SALT to be significantly affected by the $10,000 cap,' notes BPC. In fact, the bottom 80% of earners would see no benefit at all, according to the Tax Foundation. The map below shows the difference between the average SALT paid and the $10,000 cap in different Congressional districts, according to BPC's data. The greater the difference, the more the households can benefit from the increased cap. What to do about the SALT cap became one of the more contentious aspects of passing the bill, with Republican politicians from high-tax states like New York and California pushing for it while those representing lower-tax states blasting it as a giveaway for the rich. It's also one of the most costly aspects of the new legislation, which attempts to pay for its many tax breaks by cutting funding to Medicaid and food stamps and will still add over $3 trillion to the national debt. Increasing the SALT cap adds $180 billion to the debt over the next 10 years. For all that, the provision last only through 2030, like many of the individual tax changes in the law, including new measures to limit taxes on tips and overtime. 'It's increased relief, but it is temporary,' says Marc Gerson, member at Miller & Chevalier and former majority tax counsel for the House Ways and Means Committee. 'And so it's something that Congress will have to revisit.' How the SALT cap phases out One aspect of the new law high-income households should heed: the $40,000 SALT cap begins to phase out for those earning $500,000 and is reduced to $10,000 for those earning $600,000 and above. 'The provision mandates a reduction of the SALT deduction by 30% of income greater than $500,000,' notes Ben Rizzuto, wealth strategist at Janus Henderson Investors. 'The phaseout of the deduction could mean that if an individual's income increases by $100,000—from $500,000 to $600,000—their taxable income could increase by $130,000.' Both the cap and the income thresholds will increase by 1% yearly through 2029. Still, Rizzuto says it makes sense for wealthy taxpayers 'to carefully plan around income changes' or increases through Roth conversions or IRA distributions, given the phase out. He also advises taxpayers to discuss how these tax law changes will affect their tax situation and overall financial plan with their financial advisor or accountant. Rizzuto adds that the increased SALT cap means wealthy taxpayers have a higher probability of a bigger tax refund next year, assuming their income and other deductions will not changed significantly. If you will qualify, he says it might make sense to change your withholdings now. 'The question taxpayers need to answer when it comes to withholdings, if they expect a tax refund, is whether they'd rather have their money now or later,' he says. 'If they want it now, then decreasing withholdings to receive more in their paycheck would make sense and allow them to utilize those funds for other financial goals. If they'd rather receive a refund from the IRS, then leaving withholdings as is would make sense.' SALT workaround All that said, the legislation preserves a workaround for some high earners that would effectively eliminate the cap altogether. Called the pass-through entity tax, or PTET, many states allow pass-through owners and partners to avoid the cap. That benefits people like car dealers, law firm partners, doctors, and other owners of professional service firms (but not their employees). Essentially, this allows these taxpayers to pay state tax at the entity level on their pass-through income, rather than the individual level, and in doing so avoid the federal cap. This story was originally featured on Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
14-07-2025
- Business
- Yahoo
Trump's tax bill means biggest ever cuts to healthcare & food aid
Yahoo Finance Senior Columnist Rick Newman explains the impact of Trump's tax legislation on the American social security net, including the US government's healthcare system and food aid offerings. To watch more expert insights and analysis on the latest market action, check out more Market Domination Overtime here. Well, the cost of health care is expensive for America and that spending could get more complicated in a post big beautiful bill era. Senior columnist, Rick Newman digging into the details and joins us now. Rick. Hey Josh. Uh you know, I think we've been so focused on what's happening with tax rates and tax cuts adding to the deficit and then everything that's going on tariffs with tariffs. A really big thing that has been overlooked is what Trump and his fellow Republicans are doing to the social safety net. Uh this is mostly through spending cuts that are in the tax bill Trump just signed, but some of it is uh separate actions that the Trump administration is taking. Put it all together, um we are going to see the biggest um cutbacks in federal spending on health care and in federal spending on food aid um ever. These are mostly we've been expanding these programs. Uh we've uh we've made a lot of progress in terms of reducing the number of people who lack health insurance and of course is due to the Affordable Care Act um and uh food aid goes to some 40 million Americans. Uh Well, the Trump uh the bill, the uh the tax bill and other Trump actions, um we're going to cut each of those by about 16 million. So that's a 10-year window. So 10 years from now, if nothing changes, we're going to have um 16 million people uninsured who would otherwise have insurance. We're going to have 16 million people who are going to have to go through substantial cuts to food aid. Um and in some cases those will be the same people. Some people are going to get it on both ends and get that double whammy. So um when Trump became president the first time he talked about uh repealing and replacing the ACA. That's not something Republicans are really talking about anymore. Yet they are kind of doing the same thing and almost at the same scale once all these changes are in effect. Help me, Rick, understand some of these, the numbers and how we get to them. Because you've thought a lot more deeply about this obviously. Medicaid, for example, Rick, I was under the impression that if you work, yes, there are now requirements, work requirements for those uh benefits. But my understanding was if you work 80 hours a month or you receive job training or you're attend school, you're still receiving those benefits. So where, where are some of these cuts going to show up? Right, it's not one thing. It's a bunch of different things and I think part of the Republican strategy here is to spread this out to make maybe make it hard for people to notice or or put all the dots together. But um there are going to be more stringent eligibility requirements for Medicaid. And importantly, there are going to be um tougher paperwork requirements. So it's going to be harder to qualify, to be eligible for Medicaid. And then you're going to have to check in more often. You're going to have to prove on a more regular basis that you are employed. Uh and these and a bunch of other things are just going to, it's just they're just going to be people who cannot keep up with it or who don't qualify. So the congressional budget office um says this is going to reduce the number of people covered by Medicaid by eight million by 2034. There're going to be other things that happen. There's we're probably going to see some rural hospitals close because they require Medicaid funding. We're probably going to see nursing homes uh that close or we might see uh the quality of care decline or we might see um hospitals that just offer less stuff. Maybe they're not maybe they're going to cut mental health services. So this is going to happen in a lot of ways. And that's half of it. The other half is making it harder for people to qualify for uh for the for plans under the Affordable Care Act or Obamacare and one of these is going to be the expiration of subsidies that help people pay those premiums in the first place. Um that will happen this year unless Congress um re-ups those subsidies and Republicans don't want to do that. So um put it all together, about eight million losing coverage through Medicaid cutbacks and another eight million uh who will who will no longer be able to get it on the Affordable Care Act. All right, thank you, Rick. Appreciate it. Yeah. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
13-07-2025
- Automotive
- Yahoo
3 ways Trump's new tax legislation affects your money
Mind Your Money host Julie Hyman outlines three major ways President Trump's sweeping tax legislation impacts everyday Americans' wallets: 529 college savings plan expansion, no tax on tips, and car loan interest. To watch more expert insights and analysis on the latest market action, check out more Mind Your Money here. Sign in to access your portfolio
Yahoo
12-07-2025
- Business
- Yahoo
Trump's temporary tax breaks: 5 ‘big beautiful bill' provisions that may not stick around for long
Millions of Americans will see significant shifts in their tax bills under President Donald Trump's 'big beautiful bill.' The sweeping legislation delivers several key tax breaks, including no federal income tax on some tips and overtime pay, a car loan interest deduction, a higher state and local tax (SALT) deduction and a new 'bonus' deduction for qualifying seniors. However, those provisions come with an expiration date. 'These provisions are temporary largely due to how tax legislation must be structured to comply with budget rules in Congress,' says Paul Miller, CPA and founder of accounting firm Miller and Company in New York City. 'To avoid blowing up the federal deficit, many cuts or benefits expire after a few years unless extended,' he says. Here's a closer look at some of the major tax breaks that are slated to disappear and how that could impact your taxes. Under the new law, the cap on the state and local tax (SALT) deduction jumps from $10,000 to $40,000, but only for five years. The SALT deduction sparked intense debate during negotiations over the bill. Several key Republican lawmakers withheld their support until the cap was raised, particularly to provide relief to residents in high-tax states. In response, GOP leaders added the temporary increase to secure passage. While a taxpayer can claim up to $40,000 in 2025, that cap adjusts annually for inflation, starting with $40,400 in 2026. Once the provision expires after 2029, unless extended by Congress the deduction will revert to the prior $10,000 cap. The enhanced SALT deduction phases out for taxpayers with modified adjusted gross income (MAGI) of $500,000 or more in 2025. The MAGI limitation will also be adjusted for inflation through 2029. 'Once this provision sunsets, it could drop back down, meaning taxpayers in high-tax states could lose a significant deduction,' Miller says. 'If you're planning on paying off large state or local tax bills such as property taxes or state income taxes, now might be the time to do so.' Prior to the passage of the new tax law, the SALT limit was set at $10,000 with that cap scheduled to sunset in 2025. The new measure significantly expands the deduction for now and taxpayers who itemize their deductions can take advantage of the temporary measure. Learn more: These nine states have no income tax — will you save money? A key campaign promise by Trump is now law — at least for the next four years: to eliminate taxes on tips. Under the new law, taxes on qualified tips will be temporarily eliminated for some workers. Currently, tip income is taxable and workers who receive it are required to report and pay taxes on those earnings during the year. However, beginning in 2025, taxpayers can deduct up to $25,000 of tip income when they file their federal income tax return. The new tax benefit is available whether a taxpayer itemizes or takes the standard deduction, and is in effect from 2025 through 2028. To qualify, a taxpayer's MAGI must not exceed $150,000 for single filers or $300,000 for married filing jointly couples. The new bill not only extends the deduction to employees but also to independent contractors and business owners who receive tips as part of their operations. However, to qualify, their gross income (including tips) must exceed their business expenses, not including the tip deduction itself. For example, a freelancer who earns $55,000 in 2025 — including qualifying tips — and has $20,000 in business expenses (excluding the tip deduction) would be eligible to claim the deduction, since their gross income exceeds their expenses. Learn more: Standard deduction vs. itemized deduction: Pros, cons and how to decide Workers who pick up extra shifts may now qualify for temporary relief on their overtime pay. From 2025 through 2028, single filers can deduct up to $12,500 of overtime pay, and married couples filing jointly can deduct up to $25,000. Under the Fair Labor Standards Act of 1938, employees who work more than 40 hours per week are typically entitled to time and a half for each additional hour worked. Like regular wages, overtime pay is generally taxable. Under the new law, workers will still pay taxes on overtime pay throughout the year, but they may qualify for a deduction when filing their federal income tax return. The deduction is available regardless of whether the taxpayer itemizes their deductions or chooses the standard deduction. In order to qualify for the deduction, the taxpayer must provide a valid Social Security number. Both the tip income and overtime pay deductions operate in the same way: Taxpayers can reduce their taxable income as long as their MAGI is below $150,000 ($300,000 if married filing jointly). For taxpayers whose income exceeds these thresholds, the deductions will begin to phase out. 'This is a big [tax break] for working-class earners,' Miller says. 'If you rely on tips or are working extra hours, now's the time to capitalize on this break.' He cautions taxpayers not to assume this provision will last beyond 2028. Instead, he advises using it as a tool to help build an emergency savings fund and avoid increased spending during this time period. Learn more: Current tax brackets and federal income tax rates Taxpayers aged 65 or older can benefit from a temporary tax break of up to $6,000 from 2025 through 2028. This bonus deduction is designed to help ease the financial burden on older Americans. To qualify, seniors must meet both the 65-or-older age rule, and income requirements: Single filers must have income below $75,000 Married couples filing jointly must have income below $150,000 For a married couple filing jointly, if both spouses are 65 or older and meet the income thresholds, the deduction doubles to $12,000. This deduction can be claimed whether taxpayers itemize or take the standard deduction. This tax break expires after 2028, unless Congress extends it. The additional deduction for qualifying seniors is another helpful, though temporary, provision, Miller says. 'For retirees on a fixed income, even a modest bump in the standard deduction can significantly reduce their taxable income,' he says. 'It's a good time for seniors to reassess how they manage withdrawals from retirement accounts, and for families to consider tax-smart strategies for elder care.' Learn more: A new charitable giving tax deduction is coming, and millions of taxpayers will qualify Car owners can now claim a temporary deduction that allows up to $10,000 in interest paid on qualified auto loans to be deducted on their tax return. Before the passage of the new tax law, interest on personal auto loans wasn't deductible. This new provision applies to tax years 2025 through 2028. After that, the deduction will no longer be available, unless Congress extends the provision. Taxpayers may qualify for the new deduction whether or not they itemize or take the standard deduction. But their MAGI must not exceed $100,000 for single filers or $200,000 for married couples filing jointly. Along with income requirements, the vehicle must meet certain criteria, which include the following: Must be used for personal purposes (commercial vehicles won't qualify) Must be classified as a car, minivan, SUV, pickup truck or motorcycle Must weigh less than 14,000 pounds Final assembly of the vehicle must be completed in the United States Learn more: Electric vehicle (EV) tax credit hits a dead end under the megabill While millions of Americans will see tax savings as early as this year, it's important to remember that these breaks are temporary. From a bonus tax deduction for older adults to no federal tax on tips and overtime pay, and a higher SALT cap, now is the time to plan ahead. Many of these provisions are scheduled to expire in 2028, unless Congress acts. Taxpayers should take full advantage of these tax breaks before the window closes. 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