The recently passed legislation, often referred to as the “Big Beautiful Bill,” brings permanence to some existing provisions and introduces new ones that could all impact your tax, planning, and wealth strategies. As with any major tax change, the details matter, and understanding how these provisions work in practice is crucial for making informed decisions. We’re sharing this guide to help you understand what these changes mean and how they might affect your tax strategy and your long-term financial planning now and into the future.
For Your Business: Changes to Consider
Permanent Status for Business Owner Deductions
One of the most significant changes affects business owners who operate through pass-through entities like LLCs, S-Corporations, or sole proprietorships. The 20% qualified business income (QBI) deduction, which was set to expire after 2025, is now permanent starting in 2026.
What this provision means for you: If you’re an entrepreneur, this permanence helps you maintain cash flow in your business. Previously, the uncertainty around this deduction’s future made long-term planning challenging. Now, you can factor this 20% deduction into your business planning with greater certainty.
Enhanced Equipment and Asset Deductions
The legislation also changes the deduction landscape for businesses investing in equipment, vehicles, and technology. Section 179 expensing limits have increased from $1 million to $2.5 million, with the phase-out threshold rising from $2.5 million to $4 million, effective for tax years beginning after December 31, 2024.
Additionally, 100% bonus depreciation is now permanent for property placed in service after 2025. This provision functions as economic stimulus by encouraging companies to purchase assets, since businesses can deduct the full cost of eligible property immediately, reducing taxable income regardless of business size.
The key difference: This new provision is generally easier to apply than bonus depreciation, so the increased limit expands access to immediate deductions for asset purchases.
Research and Development Expensing Changes
For businesses involved in innovation, the legislation allows companies to fully expense domestic research and development costs instead of having to spread them over multiple years. This change is effective for tax years beginning after Dec. 31, 2024, or retroactively effective as of January 1, 2022 for businesses with less than $31 million in gross receipts.
We’ve already identified hundreds of thousands of dollars in potential benefits for qualifying clients through this provision.
This provision specifically applies to domestic R&D, which aligns with broader economic policy goals while providing immediate tax deductions for businesses investing in innovation. If your business has been developing new products, processes, or software, this provision could offer significant savings that may require amending previous returns.
Modified Compliance and Reporting Requirements
The reporting threshold for 1099-NEC and 1099-MISC forms increases from $600 to $2,000 for payments made after December 31, 2025, with annual inflation adjustments starting in 2027.
Additionally, the $600 reporting threshold for 1099-K forms has been repealed, returning to the original requirement of more than 200 transactions exceeding $20,000 annually. This change is retroactive to 2022.
While these changes reduce compliance work for small businesses, tax preparers, and the IRS, it remains important for business owners to properly document their contractor relationships at all income levels, meaning using W-9s and W-8s, for example.
Changes to Corporate Charitable Contributions
One new change in particular requires careful planning if your business contributes to charitable causes. Corporate charitable contributions now have a 1% floor, meaning corporations can only deduct contributions that exceed 1% of taxable income (up to the existing 10% cap). Previously, any deductible charitable contribution reduced taxable income.
While this change adds complexity around estimating the annual floor, we hope companies will continue their charitable activities and find ways to optimize their giving strategies. Any meaningful gift contributes to corporate social responsibility, and we’ll work with you to navigate your charitable giving strategy within these new parameters.
Modified Business Interest Deduction Rules
For businesses that rely on financing, the legislation restores and makes permanent the EBITDA-based calculation for the business interest deduction. This change, effective for tax years beginning after December 31, 2024, includes depreciation and amortization in the calculation, allowing many businesses— especially capital-intensive ones — to deduct more interest than under previous rules.
This provision makes borrowing more tax-advantageous and provides permanent rules that businesses can incorporate into their long-term planning.
There are several other provisions in the bill that go beyond reporting and deductions. So if you have other, more nuanced questions or considerations unique to your situation, please reach out to discuss these changes and others with your tax advisor.
For Your Personal Finances: Individual Tax Changes
Tax Rate Permanence
The individual tax brackets and rates established by the 2017 Tax Cuts and Jobs Act (ranging from 10% to 37%) are now permanent, providing long-term income tax predictability. This provision eliminates the uncertainty that existed around potential rate changes after 2025, though income limits will continue to adjust over time.
The permanence of higher standard deductions and the increased, expanded Child Tax Credit ($2,200 with inflation adjustments) also continues, reducing taxable income for most households and increasing refunds for families in particular.
New Deductions for Specific Groups
Several new deductions target specific groups of taxpayers, and it’s crucial to understand how they work in practice.
For Service and Hourly Workers: The legislation creates deductions for cash tips (up to $25,000, subject to income limits) and overtime pay (up to $12,500 for single filers or $25,000 for joint filers) for tax years 2025-2028. It is important to note that these are deductions that show up on your tax return, instead of exemptions from payroll withholding. Taxes will still be withheld from your paychecks as usual, and you’ll receive the deduction benefit when you file your return.
For Seniors: A new above-the-line deduction of up to $6,000 is available for individuals aged 65 and older (with phase-outs based on adjusted gross income) for tax years 2025-2028. Like the tips and overtime deductions, this deduction reduces your taxable income when you file your return and doesn’t affect upfront tax withholding.
Expanded Charitable Giving Deductions
One change we find particularly noteworthy is that non-itemizers can now deduct charitable contributions up to $1,000 for individuals or $2,000 for married couples, effective for donations after December 31, 2025. Historically, people who took the standard deduction have not been able to deduct charitable contributions. Non-itemizer deductions were temporarily allowed during COVID relief years (2020–2021), and this change expands that concept. This change allows charitable giving deductions across all income levels, regardless of whether taxpayers itemize deductions.
Homeownership Changes
The $750,000 mortgage interest deduction cap is now permanent, and mortgage insurance premiums are included as eligible interest, effective for tax years beginning after December 31, 2025. This provision restores a tax break that was previously available through short-term extensions and helps buyers who cannot afford a 20% down payment by allowing them to deduct private mortgage insurance (PMI).
Vehicle Purchase Changes
Up to $10,000 in interest on car loans for US-assembled vehicles is now deductible for purchases made between 2025-2028, with income-based phase-outs (so the timing of the purchase is important to consider). Interest on personal car loans has not been deductible for individuals since the 1980s, so this provision reverses the precedent of separating personal debt from tax-favored treatment (such as student loans or mortgages).
New Savings Accounts for Children
The legislation introduces “Trump Accounts” for certain children under the age of 18. Children born in 2025 through 2028 may be eligible to receive $1,000 in seed money as part of a Treasury pilot program. These funds grow tax-deferred and can be used for education, job training, or home purchases. While we’re still awaiting detailed guidance, this provision creates a new savings vehicle that may impact long-term financial planning for families with young children.
Planning Considerations Moving Forward
These changes create both opportunities and complexities that require careful analysis. Some provisions are permanent, providing some long-term certainty, while others are new or temporary, requiring strategic timing decisions.
Key considerations include:
- Business owners: Evaluate how equipment purchases and R&D investments might benefit from enhanced deductions
- Families: Consider how new deductions for tips, overtime, and charitable giving might affect your tax situation
- Seniors: Assess how the new age-based deduction might apply during its availability period
- Parents: Review how “Trump Accounts” might fit into your children’s long-term financial planning
Working Together on Implementation
As with any significant tax legislation, the details matter enormously in determining how these changes will affect your specific situation. Some provisions require regulatory guidance that’s still forthcoming, while others have complex income limitations and phase-outs that need careful analysis.
At Leelyn Smith, our integrated approach to financial planning, wealth management, and tax planning allows us to help you navigate these changes strategically. We’re already working with clients to identify immediate opportunities, like potential R&D expense amendments, while developing long-term strategies to take advantage of permanent provisions. Every situation is unique, and understanding how these new provisions interact with your existing financial plan is crucial for maximizing their benefits while avoiding potential pitfalls.
Tax planning isn’t just about minimizing taxes. It’s about optimizing your overall financial strategy to support your family’s long-term goals and values. These legislative changes provide new variables for that optimization, and they work best when integrated into a comprehensive, personalized approach to your financial future.
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