On July 4th, significant tax legislation, known as the “One Big Beautiful Bill Act” (“OBBBA”), was enacted into law. This bill indefinitely extends many of the tax provisions set to expire at the end of the year and enhances numerous provisions of the 2017 Tax Cuts and Jobs Act.
Here are some of the key provisions of this Act:
- Estate and Gift Tax Exemption: Starting in 2026, the $15 million estate and gift tax exemption per taxpayer is extended indefinitely. This amount will also be indexed for inflation and increase annually.
- Research & Development (R&D) Expensing: Effective January 1, 2025, immediate expensing for R&D costs is restored. The law also allows certain small businesses to amend or accelerate previously capitalized R&D expenses.
- Bonus Depreciation: The 100% bonus depreciation for qualifying assets purchased after January 19, 2025, is now extended indefinitely. Previously, bonus depreciation was in the process of being phased out. This provision, also known as additional first-year depreciation, is a favorable taxpayer incentive for businesses to invest in qualifying property. Under the law, qualifying property includes property used in a trade or business or for the production of income, and falls within any of the following categories:
- MACRS property that has a recovery period of 20 years or less
- Qualified improvement property, which includes improvements made to the interior of commercial (“nonresidential”) property after the property was initially placed in service for tax purposes
- Computer software.
- Section 199A Deduction: Extends indefinitely the Section 199A deduction for businesses at 20% of net income
- Opportunity Zones: Extends indefinitely and enhances Opportunity Zones.
- Clean Energy Credits Termination: Terminates the Clean EV Tax Credit effective September 30th, 2025, and other clean energy related credits.
- State and Local Tax (SALT) Deduction: Increases the SALT Deduction (State and Local Tax Deduction for Schedule A filers) to $40,000 for Individual Taxpayers with AGI less than $500,000.
- Section 1202 Qualified Small Business Stock Exclusion: Expands Section 1202 Qualified Small Business Stock Exclusion.
- No Tax on Tips and Overtime: Provides for new “No Tax on Tips” and “No Tax on Overtime” provisions as promoted in the political campaigns. The exclusion of tipped income will apply to cash tips or other tips received under a tip-sharing arrangement received within certain industries. Up to $25,000 of tipped income for taxpayers earning less than $300,000 will be available for exclusion, with any remainder being taxable. The Secretary of the Treasury intends to publish a list of what businesses qualify for the employee tip exclusion within 90 days. Restaurant businesses will certainly be on this list. Under the “No Tax on Overtime” provision, employees with modified AGI below $150,000 if single or $300,000 if married filing jointly may deduct overtime wages of up to $12,500 per taxpayer.
Staying informed about these complex tax law changes is crucial for effective financial planning. To understand how the One Big Beautiful Bill Act specifically impacts your individual or business tax situation, we encourage you to contact an experienced tax attorney at Manning Fulton & Skinner, PA. Our team is dedicated to providing tailored guidance and helping you navigate these new provisions.
