One Big Beautiful Bill – An Introduction by Mike Greenwald, CPA
In a week when airports across the country saw flight delays, some of which made it difficult for members of Congress to return to Washington, DC, President Trump’s One Big Beautiful Bill (the “Bill” and more formally known as “An Act to provide for reconciliation pursuant to title II of H. Con. Res.14) arrived right on time for the President to sign it by his self-imposed July 4th deadline. The Bill extends permanently many of the provisions of the 2017 Tax Cuts and Jobs Act, adds new provisions to meet the President’s campaign promises, and eliminates many of the clean energy provisions enacted by the previous Congress.
The tax professionals at Berkowitz Pollack Brant have been following the Bill from its initial version in the House Ways and Means Committee through the Senate and now to the President’s desk. And, while most observers believe the Bill does little more than continue the current tax regime, we see new planning opportunities in almost every section of the tax title. We will be issuing white papers over the coming weeks covering, among others:
- New C corporation planning ideas including the expansion of qualified small business stock savings
- Estate and gift planning ideas including the use of trusts to maximize the new state and local tax deduction cap
- Why now is the time to do Roth conversions
- When to make your Opportunity Zone investment
- New tax planning opportunities for home builders
We have outlined below the major tax provisions of the Bill, highlighting which are permanent and which are temporary. We will be holding a webinar on July 31st to continue our discussion of these and other planning ideas. You can register here. In the meantime, we encourage you to reach out to a Berkowitz Pollack Brant tax professional to explore what these new opportunities mean for you, your family, and your business.
Individual Provisions
Itemized Deductions:
- Limitation – itemized deductions reduced by 2/37 of the lesser of itemized deductions or taxable income over the 37% bracket threshold
- Casualty losses – permanently limited to federally declared disasters
- Miscellaneous itemized deductions – permanently terminated
Interest on New Car Loans:
Up to $10,000 deduction for interest on new car loans for vehicles made in the US and acquired and placed in service in taxable years beginning after December 31, 2024, and before January 1, 2029 (limited based on modified adjusted gross income – $100,000 for single taxpayers, $200,000 for married filing jointly)
Personal Exemption:
Permanently eliminated
Senior Exemption:
A new provision for taxable years beginning after December 31, 2024 and before January 1, 2029, provides a $6,000 deduction for taxpayers aged 65 or over
(limited based on modified adjusted gross income – $75,000 for single taxpayers, $150,000 for married filing jointly)
State and Local Tax Deduction:
Cap increased to $40,000 (except for MFS who are entitled to $20,000) for tax years beginning in 2025 increasing incrementally each year until 2029 after which the cap returns to $10,000
There is a phaseout of the increased cap starting for modified adjusted gross income greater than $500,000 but not below $10,000.
Increased Standard Deduction:
The TCJA increased standard deduction is made permanent with new amounts beginning for tax years after 2024 – $15,750 for single filers, $23,625 for those filing as head of household, and $31,500 for married taxpayers filing jointly.
Mortgage Interest Deduction:
The TCJA reduction in the mortgage interest deduction limit to $750,000 is made permanent. Certain mortgage insurance premiums are now deductible as interest.
Tax Credit for Contributions to Scholarship Granting Organizations:
A new tax credit of up to $1,700 per year for contributions to organizations providing scholarships to qualified elementary and secondary school students. States must opt-in to the program and there is a coordination of benefits limitation for state credits allowed for the same contribution.
Opportunity Zones:
Opportunity Zones are now permanent with new provisions:
- Qualifying gains invested after December 31, 2026, are deferred for five years
- Standard investments get a 10% basis step-up. Rural investments get a 30% basis step-up
There is no extension of the current program
Non-gain investments are still ineligible for any of the tax benefits.
Excess Business Losses:
The Code Section 461(l) limitation on excess business losses is made permanent. Other changes that were proposed to further limit deduction of losses were not enacted.
Qualified Small Business Stock:
The Bill makes significant changes to Section 1202. Effective as of the date of enactment:
- The gain exclusion is 50% for stock held three years, 75% for four years, and 100% for five years
For stock acquired after the effective date, the per issuer annual limit is increased from $10 million to $15 million and the aggregate gross asset limitation is increased from $50 million to $75 million, both adjusted for inflation
Estate and Gift Provisions
The TCJA increased exemption is made permanent at $15 million (adjusted for inflation) for estates of decedents dying and gifts made after December 31, 2025.
Business Provisions
Qualified Business Income (199A):
The bill makes this provision permanent while keeping the deduction rate at $20%. The phase-in range limits now start at $75,000 for non-joint tax returns and $175,000 for joint returns.
There is also now a minimum deduction of $400, adjusted for inflation, for taxpayers with $1,000 of Qualified Business Income from one or more active trades or businesses in which they actively participate.
Bonus Depreciation:
100% bonus depreciation is reinstated for property acquired and placed in service after January 20, 2025, through December 31, 2030.
Qualified Production Property:
A new provision allows 100% bonus depreciation property used by the taxpayer as an integral part of manufacturing, producing, or refining certain tangible personal property in the United States. Must be original use property (with some exceptions) placed in service before January 1, 2033. Construction must begin after January 19, 2025, and before January 1, 2029.
Section 179 Expensing:
The cap is increased to $2.5 million starting in 2025. The phase out threshold starts at $4 million. Both are adjusted for inflation.
Research and Experimentation Expenses:
The Bill permanently restores full expensing of domestic research costs for tax years beginning after December 31, 2024.
- Foreign research costs must continue to be capitalized and amortized over 15 years.
The new treatment is considered an automatic accounting method change. There are two alternative transition rules:
- Unamortized amounts capitalized in 2022 through 2024 may be recovered in either the first tax year after 2024 or ratably over two tax years beginning after 2024.
Eligible small business taxpayers may file amended returns for 2022 through 2024.
Business Interest Deduction:
The adjusted taxable income limitation based on EBITDA is restored effective for tax years beginning after December 31, 2024.
Employee Retention Credit:
The Bill eliminates allowance of a credit or payment of a refund with respect unless a claim for the credit or refund was filed by the taxpayer on or before January 31, 2024.
In addition, the statute of limitations is now 6 years after the latest of:
- the date on which the original return which includes the calendar quarter with respect to which such credit is determined is filed,
- the date on which such return is treated as filed, or the date on which the claim for credit or refund with respect to such credit is made.
Energy Efficient Commercial Buildings Deduction:
The Bill eliminates the Section 179D deduction for property which begins construction after June 30, 2026.
Energy Credits
The Bill generally terminates most of the renewable energy credits.
- The electric vehicle credit is repealed for vehicles acquired after September 30, 2025
- The credit for charging infrastructure is repealed for property placed in service after June 30, 2026
- Residential energy and home improvement credits are repealed for property placed in service after December 31, 2025, except for the New Energy Efficient Home Credit which is repealed with respect to homes acquired after June 30, 2026
- Eliminates the designation of solar or wind property as five-year property for depreciation purposes for property which begins construction after December 31, 2024
The Bill accelerates the termination of credits for various commercial energy projects, particularly those involving wind and solar generation, to no later than December 31, 2027
Residential Construction
The home builder exception to the Percentage of Completion method was expanded to include all residential construction.
The same provision excludes all residential construction from the uniform capitalization rules for home builders who qualify for the small business exception.
Finally, the allowable construction period is changed from two to three years.
The provision is effective for taxable years beginning after July 4, 2025.
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