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July 4, 2025

One Big Beautiful Bill

This Tax Briefing is not intended to comprehensively cover all provisions proposed in the approximately 400-page tax portion of the Act, but rather the highlights.

For more information about the One Big Beautiful Bill Act go to Irs site: https://www.irs.gov/newsroom/one-big-beautiful-bill-provisions

 Individual extenders

Many of the provisions of the TCJA applicable to individuals are among those scheduled to expire at the end of 2025.

These include:

10, 12, 22, 24, 32, 35 and 37 percent brackets applicable since 2018;
Elimination of personal exemptions;
Increased alternative minimum tax exemption and threshold amounts;
Lower limitation on the deduction of mortgage interest;
Limitation on the casualty loss deduction;
Termination of the miscellaneous itemized deduction; and
Allowance of rollovers from qualified tuition programs to ABLE accounts.
The Act makes all of these provisions permanent, but does make some modifications. The Act permanently treats mortgage insurance premiums as qualified residence interest for which a deduction could be claimed and allows for unreimbursed educator expenses to be deducted as a miscellaneous itemized deduction. The Act also removes the last seven years of inflation adjustments from the AMT exemption phase-out threshold for joint filers, reverting the threshold to the 2018 amount. 

Also, the Act does permanently eliminate the personal exemption amount, but provides a $6,000 deduction amount for seniors age 65 and older after 2024 and before 2029. This deduction would phase out for individuals whose modified adjusted gross income exceeds $75,000 ($150,000 for joint filers).

 Standard deduction 

The TCJA nearly doubled the standard deduction for tax years beginning after 2017. For 2025 (prior to the Act), the inflation adjusted amounts were $30,000 for joint filers, $22,500 for heads of households, and $15,000 for single taxpayers and married taxpayers filing separately. These higher amounts were set to expire after 2025. The Act increases the amount of the standard deduction for tax years beginning in 2025 and subject to inflation thereafter. Under the Act, the standard deduction amounts for 2025 are $31,500 for joint filers $23,625 for heads of households, and $15,750 for single taxpayers and married taxpayers filing separately.

SALT deduction

One of the most controversial provisions of the TCJA was the imposition of a $10,000 cap on the deduction for state and local taxes. Before the ink was dry on the 2017 legislation, lawmakers in higher tax states on both sides of the aisle (the so-called “SALT Caucus”) were introducing legislation intended to increase or outright repeal the cap. The Act increases the cap to $40,000 for 2025, with a one percent increase in the cap each year through 2029 before returning to the $10,000 limit in 2030. The cap is reduced by 30% of the amount by which the taxpayer’s modified adjusted gross income exceeds a threshold amount. That threshold amount is generally $500,000 for 2025, with a one per cent increase each year through 2029. 

New individual provisions

No tax on tips

One of the big talking points for President Trump during the campaign was the elimination of tax on tip income. Historically, tip income was not subject to tax until the early 1980’s when legislation passed during the Reagan administration treated it like regular income. The Act does not provide an exclusion from income for tips, but rather provides a deduction from income for amounts received as tips. Under the Act, taxpayers are not required to itemize deductions to claim the deduction, but a Social Security number is required to claim the deduction. The deduction is capped at $25,000, and the deduction begins to phase out when the taxpayer’s modified adjusted gross income exceeds $150,000 ($300,000 for joint filers). The deduction is not allowed for tax years beginning after 2028. The Act also extends the employer credit for Social Security taxes on employee cash tips to the beauty service industry (the credit currently only applies to the food and beverage industry).

No tax on overtime

During his campaign, President Trump also proposed making overtime compensation tax free. Under the Act, taxpayers are able to claim a deduction for the amount of overtime pay received as required under section 7 of the Fair Labor standards Act of 1938. Like the deduction for tip income, taxpayers do
not have to itemize deductions to claim the deduction, but are required to provide a Social Security number. The deduction is capped at $12,500 ($25,000 for joint filers), and the deduction begins to phase out when the taxpayer’s modified adjusted gross income exceeds $150,000 ($300,000 for joint filers). The deduction is not allowed for tax years beginning after 2028. 

Estate taxes
The estate tax basic exclusion amount, which the TCJA doubled for decedents dying through 2025 (inflation adjusted to $13.99 million in 2025) would revert back to 2017 amounts if the TCJA is allowed to expire. Under the Act, the basic exclusion amount is increased again to a base amount of $15 million for decedents dying in 2026, adjusted for inflation thereafter.

Automobile loan interest

Previously, interest on an individual’s automobile loan was treated as nondeductible personal interest. The Act includes a deduction of up to $10,000 for interest paid on an automobile loan in 2025 through 2028 for a car purchased after 2024. The deduction is available for both itemizers and non-itemizers.

Trump accounts

The Act also includes provisions for the creation of tax-favored accounts for newborn children, called “Trump Accounts.” The accounts are seeded with $1,000 for newborn children. From a tax standpoint, they operate under rules similar to those applicable to individual retirement accounts, but are available to children.

Additional provisions

The Act also includes:

A tax credit for contributions to scholarship-granting organizations;
An expansion of 529 programs to include elementary, secondary, and home schooling expenses; and
The resurrection of the COVID-era allowance of a charitable contribution deduction for non-itemizers. 

Business provision

Bonus depreciation

The TCJA provided for 100 percent expensing of certain business property through 2022, with a 20 percent stepdown each year after before reaching 0 percent in 2027 (currently set at 40% in 2025). The Act makes 100 percent bonus depreciation permanent for property acquired after January 19, 2025.

Research and experimental expenditures

Under current law, taxpayers are required to amortize research and experimental expenditures. Prior to 2022, a direct expense election was available. The Senate bill would permanently reinstate the deduction for domestic research and experimental expenditure costs incurred after 2024. Taxpayers can elect whether to deduct or amortize the expenditures, though the requirement to amortize under current law is suspended while the deduction is available. Additionally, small businesses with average annual gross receipts of $31 million or less would be able to elect to claim the deduction retroactively to 2022.

Qualified business income deduction

The TCJA’s qualified business income deduction under Code Sec. 199A is set to expire for tax years beginning after 2025. Under the Senate bill, the qualified business income deduction would be made permanent. Additional changes are proposed modifying the limitations and qualification for the deduction.

Additional provisions

The Act also includes:

An increase in the 179 deduction limitations after 2024
An exclusion of interest received by qualified lenders secured by rural or agricultural real property
Modifications to the low-income housing credit.

March 26, 2025

The Financial Crimes Enforcement Network (FinCEN) published an interim final rule (“Rule”) in the Federal Register on March 26, 2025 (Federal Register :: Beneficial Ownership Information Reporting Requirement Revision and Deadline Extension), that removes the requirement for U.S. companies and U.S. persons to report beneficial ownership information (BOI) to FinCEN under the Corporate Transparency Act (CTA). As you may recall, this comes on the heels of the Department of Treasury’s (“Treasury”) announcement on March 2, 2025, that it will not enforce any penalties or fines associated with the beneficial ownership information reporting rule under what had been the existing regulatory deadlines, nor will it enforce any penalties or fines against U.S. citizens or domestic reporting companies or their beneficial owners after the forthcoming rule changes take effect.

The Rule revises the regulatory definition of “reporting company” to mean only those entities that are formed under the law of a foreign country and that have registered to do business in any U.S. State or Tribal jurisdiction by the filing of a document with a secretary of state or similar office. In addition, the Rule exempts foreign reporting companies from having to report the BOI of any U.S. persons who are beneficial owners of the foreign reporting company and exempts U.S. persons from having to provide such information to any foreign reporting company for which they are a beneficial owner.

For firms that have foreign entity clients, it is important to note that under the Rule, foreign entities that meet the new definition of a “reporting company” and do not qualify for an exemption from the reporting requirements must file a BOI report with FinCEN in accordance with the following deadlines:

• Foreign entity reporting companies registered to do business in the U.S. before March 26, 2025, must file on or before April 25, 2025.
• Foreign entity reporting companies registered to do business in the U.S. on or after March 26, 2025, have thirty (30) calendar days from the date they receive notice that their registration is effective to file an initial BOI report.

As a reminder, updated BOI reports are due within 30 calendar days after a change occurs. Corrected BOI reports are due within 30 calendar days after the reporting company becomes aware of, or has reason to know of, an inaccuracy.

Foreign entity reporting companies that fail to comply with the CTA’s reporting requirements may face significant penalties including civil penalties up to $606 per day for each day the violation continues, as well as criminal penalties up to $10,000 and/or imprisonment for up to two years for willful violations.

For Frequently Asked Questions and additional information regarding the beneficial ownership reporting requirements under the CTA, refer to FinCEN’s Frequently Asked Questions document at https://www.fincen.gov/boi-faqs.

TONG & FONG CPAS

 Reminder: This communication does not constitute tax or legal advice. For more information, please speak with your legal counsel / Advisor.

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Tong & Fong CPAs