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After months of back-and-forth in Congress, the One Big Beautiful Bill is finally law. While much of it reinforces or extends provisions from the Tax Cuts and Jobs Act of 2017, there are also key changes that will affect how businesses and individuals approach tax planning going forward. 

From retroactive R&D relief for small taxpayers and the return of 100% bonus depreciation starting in 2025, to updated phaseouts, deduction limitations, and new compliance requirements, this bill delivers a wide range of updates worth attention. Below is a high-level summary of some of the provisions we believe are most relevant to businesses, investors, and their advisors. Effective dates vary by provision so it will be important to track.

Business Provisions

• Section 199A QBI Deduction (available to certain pass-through entity owners): Permanently extended the 20% deduction for QBI, with increased phase-in income limitations
• Bonus Depreciation: 100% expensing for qualified property is now permanent for assets generally placed in service after January 19, 2025
• Section 179 Expensing of selected fixed assets: Deduction limit increased to $2.5M (phase-out at $4M), with annual inflation adjustments 
• R&D Expensing: Immediate deduction for domestic R&D costs beginning in 2025; foreign R&D costs still amortized over 15 years. Retroactive election to amend 2022-2024 tax returns for eligible small taxpayers. All others can deduct remaining costs over a 1- or 2-year period, beginning in 2025
• Section 1202 (QSBS) capital gain exclusion on sales of eligible C corporation stock: For new stock issued on or after 7/4/25, gain exclusion is 50% ( if held 3 years), 75% (if held 4 years), 100% (if held 5+ years). Per-issuer gain exclusion cap on new stock raised to $15M; gross assets test up to $75M
• State-level PTET (pass through entity taxes) payments remain fully deductible where elections are in place and are not subject to the SALT cap, despite initial challenges in House and Senate
• Dependent Care Assistance Exclusion: Increased from $5,000 to $7,500, starting in 2026
• Excess Business Loss Limitations (restricting business losses against certain income categories): Now made permanent
• 163J Interest Limitation: For 2025 and beyond, the income limitation to determine whether interest deduction is limited is before depreciation and amortization
• 1099-NEC Reporting: Threshold to file increased from $600 to $2,000 starting in 2026, Annual inflation increase to apply
• W-2’s of employers will be required to report (for 2025 through 2028) overtime paid but guidance is forthcoming

Individual Provisions

• No Tax on Overtime: Deduct up to $12,500 ($25,000 joint) of qualified overtime pay (2025–2028), phased out for higher incomes, likely not available to exempt employees
• No Tax on Tips: Deduct up to $25,000 in tips (2025–2028), phased out for higher incomes
•  Itemized Deduction Limitation: New formula reduces itemized deductions for high earners starting in 2026. Limits the benefit of itemized deductions to a maximum of 35%
• SALT Deduction: Cap increased to $40,000 through 2029, with a graduated phase-down to $10,000 for high incomes
• Charitable contribution deductions for itemizers are disallowed equal to the first .5% of adjusted gross income being in 2026. Non-itemizers are allowed minimum (e.g. up to $2,000 if married) contribution deductions beginning in 2026. Starting in 2027, contributions to certain scholarship granting organizations (e.g. secondary and elementary schools) supporting students in need will provide for potential federal tax credits similar to PA’s Educational Improvement Tax Credit (EITC) program 
• Car loan interest (on certain vehicles) of up to $10,000  is deductible (2025-2028) but phased out for higher incomes
• Child Tax Credit: Increased to $2,200 per child, indexed for inflation and made permanent
• Estate Tax: Exemption permanently increased to $15M starting in 2026, indexed for inflation
• Wagering Loss Limitation: Deduction for gambling losses limited to 90% of such losses, only up to wagering gains. Thus, losses must equal or exceed 111.11% of gains to avoid the new limitation resulting in income subject to tax
• Qualified Opportunity Zones: program now permanent, with zones redesignated every 10 years. Pre-2027 investments follow current rules, while post-2026 gains get a 5-year deferral and a 10% step-up income exclusion - likely to encourage many to wait until 2027 to invest in QOZ Funds

Business and Individual energy tax credits and incentives from the Inflation Reduction Act are largely being eliminated and/or phased out. They are not shown above due to the shear volume. 

Your Sisterson team will continue to work through the nuances of the legislation to identify planning opportunities. Don't hesitate to reach out to your Sisterson team members with questions or concerns.