Big Beautiful Bill
WHAT TO KNOW ABOUT THE BIG, BEAUTIFUL BILL
Congress passed one of the most sweeping tax reform acts in recent history in 2025 with significant changes that will affect taxpayers beginning with this filing season. Some of the most important changes are summarized below.
INDIVIDUAL CHANGES
Tip Income Deduction
Taxpayers may deduct up to $25,000 in qualifying tip income. The deduction applies to both W-2 and 1099 workers, and the tips must be reported as income. A phase out applies to higher income taxpayers.
Overtime Pay Deduction
Taxpayers may deduct $12,500 ($25,000 on a joint tax return) in qualified overtime pay. Include definition of qualified overtime and where it can be found in 2025.
Senior Deduction
Taxpayers 65 and over will receive a $6,000 deduction on a single return or $12,000 on a joint return.
SALT Deduction
The limit on deducting state and local taxes is raised from $10,000 to $40,000. There is a phase-down for higher income taxpayers.
Charitable Deductions
Standard deduction tax filers receive a $1,000 deduction for qualified cash gifts: $2,000 on a joint return. Deduction limits are imposed on itemized deductions.
Car Loan Interest Deduction
Taxpayers may deduct up to $10,000 in interest on loans for qualifying new personal use vehicle.
Gambling Losses
Deductions are limited to 90% of gambling losses, up to the amount of winnings.
Increased limit for tax deductions for state and local taxes
From January 1, 2025, to December 31, 2029, individuals may take a tax deduction for up to $40,000 of state and local taxes ($20,000 if married filing separately), which is an increase from $10,000 previously. There is a reduction to the limit for the tax deduction for individuals whose modified adjusted gross income is over $500,000 ($250,000 for married filing separately) but it never goes below $10,000.
Child Tax Credit
The law increases the maximum amount of the child tax credit from $2,000 to $2,200 per child, and indexes the amount of the credit to inflation and only applies to U.S citizens or qualifying noncitizens. The refundable portion of the credit is also indexed to inflation, but is not increased, meaning that tax credit beneficiaries would not see a net increase in the credit, when adjusted for inflation.
Adoption Tax Credit
The law changes the existing nonrefundable tax credit for up to $17,280 of qualified adoption expenses. As of January 1, 2025, up to $5,000 of the adoption tax credit is a refundable tax credit.
https://en.wikipedia.org/wiki/One_Big_Beautiful_Bill_Act#References
BUSINESS CHANGES
Bonus Depreciation
Qualifying assets may be expensed 100% (for assets bought after 1/19/25.) This is a permanent change.
Section 179 Depreciation
The limit for Section 179 depreciation is $2.5 million. It phases out at $4 million. Those limits will be indexed for inflation.
Qualified Business Income Deduction
The 20% deduction for business profits is retained and made permanent.
Research and Development Costs
R & D expensing is allowed for costs after 12/31/24.
Pass Through Entity Tax
The federal tax deduction for PTE tax is retained.
Deductions for certain workers’ meals
The law allows a tax deduction for restaurants and caterers for the cost of providing a free meal to workers while on shift.
There are numerous other changes in the Act and lots of rules and regulations that apply to the new laws. Our tax professionals have received special training on the provisions of the Big, Beautiful Bill. We are happy to help clients navigate the many important changes made by this Act.