One Big Beautiful Bill Act: What You Need To Know

• Deduction for Domestic Research and Experimental Expenditures – Section 174
  Many businesses were required to capitalize and amortize certain domestic research and experimental costs incurred starting in 2022 due to a technical glitch in tax law. The new legislation now allows businesses to deduct these costs when incurred starting in 2025. However, there are also provisions that address deducting the previous unamortized costs incurred between 2022 and 2024 that may benefit your business.
• Tax depreciation – Section 179 and “Bonus” Depreciation
  Bonus depreciation on qualifying assets reverts back to allowing a 100% immediate deduction for property placed in service after January 19, 2025, and is now permanent law. Section 179 was also expanded to allow a maximum annual deduction of up to $2,500,000 for property placed in service on January 1, 2025, and later. The annual limit will also be indexed for inflation.

• Permanent extension of 2017 TCJA individual tax rates
  No expiration scheduled—ensuring long-term clarity on tax brackets for individual taxpayers.
• Individual SALT cap temporarily raised to $40,000 for 2025 through 2029
  This provision could increase your state tax itemized deduction beginning in 2025.  However, there is a phase-out range for those with adjusted gross income between $500,000-$600,000 that reduces the deduction by 30%. Those taxpayers that are at or above $600,000 will still be limited to a maximum $10,000 deduction.
• Higher estate and gift tax exemption
  Starting in 2026, the lifetime exemption amount for estates and gifts will be raised to $15,000,000 per taxpayer (or $30,000,000 for married couples), indexed for inflation.  This provision was also made permanent.
• Enhanced Qualified Small Business Stock (QSBS) Exclusion
  For those who invest in certain qualifying businesses, the potential exclusion of capital gain has been increased from the greater of $10,000,000 or ten times tax basis to now being the greater of $15,000,000 or ten times tax basis. In addition, the gross asset test that must be applied to qualifying business has been increased from $50,000,000 to $75,000,000. Finally, there was also an enhancement to allow a possible exclusion of the gain for those who may not meet the five-year required holding period. The exclusion is now allowed for 50% of the gain for those who only have a three-year holding period and 75% of the gain for those who have a four-year holding period.
• Temporary deduction for tip and overtime income for 2025 through 2028
  Individuals who earn overtime pay or taxable tip income may be able to claim a deduction of up to $12,500 for single filers and $25,000 for joint filers. The deduction is available to those who may not itemize and can add to the standard deduction allowed. The deduction does phase-out for those single filers with income above $150,000 and joint filers with income above $300,000.
  • For employers, there will be a reporting requirement to show the amount of
    overtime and/or tips paid on an employee’s annual Form W-2 or Form 1099.

 

On top of these highlights, there are many other provisions that were included in the bill. We are here to discuss these with you to determine the impact and how we can help you plan to maximize the benefits of any items.

Please don’t hesitate to reach out to your relationship manager at Froehling Anderson. We are here to help you navigate the new changes with ease and clarity!