Important Updates
Dear Clients,
On July 4th, President Donald Trump signed the One Big Beautiful Bill Act (OBBBA) into law, introducing sweeping changes to the federal tax landscape.
The bill passed narrowly, 218–214 in the House and 51–50 in the Senate, with Vice President JD Vance casting the tie-breaking vote. It extends many provisions from the Tax Cuts and Jobs Act (TCJA), P.L. 115-97, and advances key tax priorities of the Trump administration.
Key highlights include:
- New deductions that aim to eliminate income taxes on certain tips and overtime pay
- Permanent extension of 2017 TCJA individual tax rates
- Modifications to corporate taxation on foreign income
- Termination of numerous clean energy tax credits
For Families & Individuals
- Standard Deduction: Higher standard deduction made permanent ($15,750 single; $31,500 married).
- SALT Deduction: Cap raised to $40,000 (2025–2029), drops back to $10,000 in 2030. – Basic Phase-out (begins in 2025):
1. Begins at MAGI over $500,000-MFJ and single ($250k MFS), indexed for inflation.
– Phase out-rate is 30% (so MFJ fully phased out at $600k
– Threshold increase beginning in 2026 to $505,000 (and 1% thereafter through 2029)
– Can’t reduce SALT below $10,000 - Child Tax Credit: Increases to $2,200 per child (inflation-adjusted); $1,400 refundable credit made permanent. Both child and at least one parent must have an SSN.
- Senior Deduction: Temporary $6,000 deduction (2025–2028) for age 65+. (Phases out starting at $75k for single and $150k for MFJ)
- Adoption Credit: Up to $5,000 refundable Trump Accounts: $1,000 government-funded baby investment accounts (2025–2029), parents can add up to $5,000/year.
- Tax Rates: 2017 tax cuts made permanent, inflation adjustments extended.
- Educator’s Expense (2026): Educator expenses may be claimed in 2026 as itemized deductions. $300 above the line continues to be available.
- Dependent Care Credit: Raised from 35% → 50%, phases out at higher incomes.
- 529 Plans: Can now pay for K-12 expenses & postsecondary credentials tax-free.
- Charity Deductions: Non-itemizers can deduct up to $1,000 single / $2,000 married.
- No Tax on Tips: Deduct up to $25,000 tips income (2025–2028). Phase-out based on MAGI $150,000 (single) $300,000 (MFJ) Deduction is limited to $25,000(whether single or joint return) – Self –employed taxpayers may qualify.
- No Tax on Overtime: Deduct up to $12,500 (single) / $25,000 (joint) of OT pay (2025–2028). MAGI phase out begins at $150,000 single, $300,000 MFJ. Only the overtime portion is deductible. Must provide SSN on return and if married filed a joint return.
- Car Loan Interest: Deduct up to $10,000/year for U.S.-made car loans (2025–2028). Phase-out begins at MAGI: $200,000- (complete phase-out at $250,000 if you have $10,000 deduction). Single taxpayers-$100,000 (complete phase-out at $150,000 if you have $10,000 deduction).
For Businesses & Investments
- QBI Deduction: 20% deduction made permanent; phase-in thresholds raised.
- Estate & Gift Tax: Exemption doubled to $15M single / $30M married (inflation-adjusted).
- Bonus Depreciation: 100% write-off made permanent for new property (from Jan 19, 2025).
- Sec. 179 Expensing: Limit increased to $2.5M (phase-out starts at $4M).
- R&D Expenses: Domestic R&D can be deducted immediately; foreign R&D still amortized.
- Employer Child Care Credit: Increased from 25% → 40%, cap raised to $500K–$600K.
- Spaceports: Now treated like airports for tax-exempt bonds.
- Production Property: 100% bonus depreciation for manufacturing property.
- Advanced Manufacturing Credit: Raised from 25% → 35%.
Clean Energy & Environmental
- Ends many clean energy credits (e.g., EV credits, solar, hydrogen) by 2025–2028.
- Clean vehicle credits are to sunset on September 30,2025
- Residential Energy Credit Sunset: December 31, 2025 – Energy efficient windows, heat pumps, et, Solar Panel Credit
- Extends clean fuel production credit (Sec. 45Z) through 2029.
- Adds restrictions on foreign entities claiming certain energy credits.
International & Other Business Taxes
- FDII & GILTI: Renamed and taxed at 14%.
- BEAT Tax: Rate increased slightly (10% → 10.5%).
- Foreign Tax Credit: Adjustments to allocation rules.
- Business Interest Limitation: New calculation order rules.
Administrative, Excise & Miscellaneous
- 1099-K Threshold: Back to $20,000 & 200 transactions (was set to drop to $600).
- 1099 Reporting: Raised from $600 → $2,000, indexed to inflation after 2026.
- Firearms Tax: Transfer tax reduced.
- Farmland Sales: Allows tax to be paid in 4 annual installments.
- Remittance Transfers: New 1% tax on certain cash transfers abroad.
Should you have any questions, please feel free to reach out to us. Our team is available to assist and support you.
Sincerely,
Alisa Na CPAs & Advisors
