New Tax Bill-Update

Introduction

On July 4, 2025, the One Big Beautiful Bill Act became law, bringing several temporary and permanent tax changes designed to benefit individuals and business owners alike. In this update, we’ve selected the provisions most relevant to your business—focusing on areas like state and local taxes, deductions, credits, and new savings vehicles. As always, Toran Accounting will continue to monitor and interpret these changes to help you plan proactively.

Temporary Tip Income Deduction

From 2025 through 2028, individuals in tipped occupations—employees reporting on Form W‑2 and contractors on Form 1099—can deduct up to $25,000 of qualified tips as an above‑the‑line adjustment. It phases out for MAGI above $150,000 (single) and $300,000 (joint).

Temporary Overtime Deduction

Also through 2028, qualified overtime pay reported separately on Form W‑2 (or Form 1099) yields an above‑the‑line deduction of up to $12,500 (single) or $25,000 (joint). Phase‑outs mirror the tip deduction thresholds. It phases out for MAGI above $150,000 (single) and $300,000 (joint).

This change can lower taxable income for employees and contractors working overtime.

Trump Accounts—New IRA for Minors

The Act establishes “Trump accounts” as Section 408(a) IRAs for individuals under 18. Contributions (up to $5,000 annually, inflation‑adjusted after 2027) are limited to pre‑18 years, with distributions beginning at age 18.

State and Local Tax Cap Increase (SALT Cap)

For individuals that pay real estate taxes, and state income tax outside of Wyoming, the bill raises the federal deduction limit for state and local taxes from $10,000 to $40,000, adjusted for inflation. Starting January 1, 2030, the deduction limit returns to $10,000.

This temporary boost can significantly lower taxable income for individuals with substantial real estate or income taxes. We anticipate this provision will ease cash flow pressures through 2029.

Permanent QBI Deduction

Good news for pass‑through businesses: the Section 199A qualified business income (QBI) deduction remains at 20% permanently. Although the House had proposed a 23% rate, this bill maintains the current percentage.

We’ll continue to guide your business structure and income planning to maximize QBI benefits, taking into account wage and property limitations where applicable.

Senior Deduction

The Act introduces a new senior deduction of $6,000 under Section 151 for taxpayers age 65 or older. The deduction phases out when modified adjusted gross income (MAGI) exceeds $75,000 for singles and $150,000 for joint filers.

Effective 2025 through 2028, this measure will offer relief.

Enhanced Child Tax Credit

Beginning in 2025, the nonrefundable child tax credit increases to $2,200 per qualifying child and is indexed for inflation. The refundable portion remains at $1,400, also indexed, with income phase‑outs set at $200,000 (single) and $400,000 (joint). Dependents other than qualifying children retain a $500 nonrefundable credit.

These permanent enhancements will improve after‑tax income for families. We’ll review filing strategies to ensure you receive the full credit available and coordinate with any state-level provisions you may qualify for.

Permanent Bonus Depreciation Extension

Section 168 bonus depreciation is now permanently fixed at 100% for property placed in service on or after January 19, 2025, including qualifying plants. This allows immediate expensing of new equipment purchases and investments.

We’ll review your fixed‑asset acquisition plans and ensure your depreciation schedules reflect the full first‑year write‑off, optimizing cash flow and tax savings.

Expanded Section 179 Expensing

The maximum Section 179 expensing deduction increases to $2.5 million, subject to a phase‑out when qualifying property costs exceed $4 million. This change improves the ability to deduct capital expenses in the year of purchase.

Our team will coordinate to capture eligible assets under Section 179, maximizing upfront deductions and aligning with your long‑term investment strategy.

Questions? Reach out to your Toran Accounting team anytime.

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