Tips to Take Advantage of the Bill

This Article is an Update From Previous Guidance: https://abacuspro.com/10-ways-the-proposed-new-tax-cuts-could-affect-your-taxes-this-year/

The “One Big Beautiful Bill Act” (OBBBA) is a sweeping tax and economic package that seeks to extend or make permanent many provisions of the 2017 Tax Cuts and Jobs Act, while introducing a host of new tax rules and incentives. For business owners and individual taxpayers, OBBBA proposes major changes to income tax rates, deductions, credits, and compliance requirements, including substantial modifications to the state and local tax (SALT) deduction regime, business expensing, and the research and development deductions. The bill passed through the House July 3 and was signed by President Trump July 4.

 

Here we focus on provisions that could impact your business or individual tax strategies.

Business Tax Key Points

Section 199A Deduction Increased and Made Permanent

The qualified business income (QBI) deduction for passthroughs (like S corps, partnerships, and sole proprietors) is now permanent. If you own a business, this is a big deal! You don’t have to worry about it expiring after 2025.

Tip: If you’re self-employed or have a passthrough, check with your tax pro to make sure you’re maximizing this deduction.

 

100% Bonus Depreciation Extended

Businesses can keep writing off the full cost of qualifying property (like equipment and machinery) in the year it’s placed in service, through at least 2029.

Tip: If you’re thinking about buying business assets, you can still expense the whole thing up front. Great for cash flow.

 

Section 179 Expensing Limits Increased

The maximum amount you can expense for certain business property jumps to $2.5 million, with the phaseout starting at $4 million, both indexed for inflation.

Tip: This is especially helpful for small businesses making big investments in equipment.

 

Research & Development (R&D) Expensing Restored

You can immediately deduct domestic R&D expenses instead of amortizing them over five years, at least through 2029.

Tip: If you’re in tech, manufacturing, or any R&D-heavy field, this is a huge cash benefit.

 

Business Interest Deduction Limitation Loosened

For 2025–2029, the 30% limit on business interest expense is calculated using EBITDA (earnings before interest, taxes, depreciation, and amortization), not just EBIT.

Tip: If your business is leveraged, you can deduct more interest for a few more years.

 

Special 100% Depreciation for Qualified Production Property

There’s a new, supercharged 100% write-off for certain nonresidential real property used in manufacturing, production, or refining.

Tip: If you’re in manufacturing or production, this could be a game-changer for facility upgrades.

 

Expanded Child Care and Paid Leave Credits for Employers

The employer-provided child care credit is juiced up (up to 50% of expenses for small businesses), and the paid family/medical leave credit is extended and enhanced.

Tip: If you offer these benefits, you’ll get a bigger tax break. Worth considering if you want to attract/retain employees.

 

Individual Income Tax Key Points

 

Lower Individual Tax Rates Extended

The 2017 tax rates (with the top rate at 37%) are made permanent.

Tip: Your tax bracket isn’t going up after 2025. Good news for planning.

 

Standard Deduction Stays High

The higher standard deduction is permanent, with a temporary extra bump for 2025–2028.

Tip: Most people will keep taking the standard deduction, so fewer will need to itemize.

 

Personal Exemptions Stay Gone

The personal exemption remains eliminated.

Tip: If you’re used to claiming dependents for extra deductions, that’s still not coming back.

 

Child Tax Credit Increased and Extended

The child tax credit is extended with a boost to $2,200 and inflation adjustments after that.

Tip: If you have kids, you’ll get a bigger credit. Plan accordingly.

 

Section 199A Deduction for Individuals

If you have self-employment or passthrough income, you get a 20% deduction (see above).

Tip: This is a big deal for freelancers, consultants, and small business owners.

 

SALT Deduction Cap Extended (But Higher for 2025)

The cap on state and local tax (SALT) deductions is extended. The cap temporarily raised to $40,000 ($20,000 if married filing separately) for 2025, $40,400 in 2026, and by an additional 1% in 2027-2029. The cap would revert to the current $10,000 in 2030.

Tip: If you live in a high-tax state, you get a break from 2025 through 2029, but after that, the cap returns to $10,000.

 

No Tax on Tips and Overtime (Temporarily)

For 2025–2028, up to $25,000 of tips and $12,500 of overtime pay up are deductible (effectively tax-free) for most workers, with some income limits.

Tip: If you work in hospitality or get a lot of overtime, you’ll pay less tax for a few years. Keep your records!

 

Home Mortgage Interest Deduction Limits Extended

The $750,000 cap on mortgage interest for new loans is made permanent.

Tip: If you’re buying a home, know that the old $1 million limit isn’t coming back.

 

No Deduction for Home Equity Loan Interest

The suspension of the home equity interest deduction continues.

Tip: Interest on home equity loans is still not deductible unless used for home improvements.

 

Enhanced Deduction for Seniors

For 2025–2028, seniors get an extra $4,000 standard deduction, phased out for higher incomes.

Tip: If you’re 65+, you’ll get a bigger deduction for a few years. This could lower your tax bill.

 

Charitable Deduction for Non-Itemizers Returns (Temporarily)

For 2025–2028, you can deduct up to $1,000 ($2,000 joint) in charitable gifts even if you don’t itemize.

Tip: If you give to charity, you’ll get a little extra tax break even if you take the standard deduction.

 

Expanded 529 and ABLE Account Benefits

More education and disability-related expenses qualify, and rollovers from 529s to ABLE accounts are allowed.

Tip: If you’re saving for education or for a disabled family member, you have more flexibility.

 

Trump Accounts for Kids

New tax-advantaged “Trump Accounts” for kids under 18, with government seed money for babies born 2025–2028.

Tip: If you have a new baby, you might get a $1,000 government contribution. Look into it!

 

No Tax on Car Loan Interest (Temporarily)

For 2025–2028, you can deduct up to $10,000 of interest on new car loans, with income limits.

Tip: If you’re buying a car, you might get a tax break on the interest for a few years.

 

Bottom Line:

If you own a business or are self-employed, the QBI deduction and bonus depreciation are huge wins. Talk to your Abacus Professional about how to take full advantage.

If you’re a W-2 employee, the lower rates, higher standard deduction, and expanded child tax credit are all staying, so your tax bill should stay about the same or go down.

If you’re in a high-tax state, watch the SALT cap for 2025. It’s a 5 window to deduct more.

If you’re a parent, senior, or planning a big purchase (car, home, business equipment), there are some temporary sweeteners, so plan your timing!

If you’re a tip earner or get a lot of overtime, you’ll pay less tax for a few years. Keep good records and talk to your tax pro.

 

If you have any other questions about what this means for you, reach out to the team of Abacus Professionals at info@abacuspro.com or (417) 823-7171.