Happy 4^th of July weekend! I hope your holiday weekend has been as relaxing as mine. So relaxing I got a little antsy this afternoon and am writing this to walk through the One Big Beautiful {Tax} Bill as it was signed into law on Friday.

Politics aside, this bill is a big deal for business owners. The prior tax code enacted in 2001 was set to expire in 2026 with some nasty consequences for what I would consider “middle income” business owners. The new bill is mostly an extension of some of those measures with a few adjustments. Here’s what you need to know:

1.     QBI was made permanent. This is the biggest win for many businesses I work with. QBI or the Qualified Business Income deduction is a 20% discount on business income that sits smack dab in the middle of your 1040. 2025 business owners are eligible for QBI if their AGI (adjusted gross income) is less than $197,300 for single taxpayers and less than $394,600 for joint taxpayers.

2.     Bonus depreciation is back for tax years 2025 to 2030. This is the ability to fully depreciate a new piece of equipment in the first year of service, a potentially handy way of managing a tax bill when done correctly. This deduction regresses back to $10,000 in 2030.

3.     SALT limits were raised. The SALT deduction, or state and local income tax deduction was increased from $10,000 to $40,000, allowing taxpayers to deduct state taxes owed on their federal return. It phases out at $500,000 in Adjusted Gross Income. It goes back to $10,000 in 2030.

For all taxpayers there are a few things you should know:

1. Current tax brackets were made permanent. Before the bill tax rates were set to increase slightly but more importantly, income bands were set to decrease pretty significantly which would affect most taxpayers adversely.
2. The standard deduction increased starting in 2025 and will adjust with inflation permanently.
3. The estate tax exemption was permanently set at $15 million per person to index annually with inflation with portability laws in tact (meaning you can use a spouse’s exemption for a total of $30 million)
4. There is a temporary deduction for those aged 65+ taking social security of $6,000, which should reduce the taxability of social security for tax payers with an AGI less than $75,000 (single taxpayer) and $150,000 (married taxpayer)
5. Having babies? There’s a quirky provision called Trump accounts where children born between 2025 and 2028 get a federal account similar to an IRA funded with $1,000 (but can be funded with $5,000 per year). This one threw me for a bit of a loop but you can read more HERE if it applies to you.

Want to learn more? This was the most comprehensive publicly available article I found as it relates to the bill. READ MORE HERE

Happy 4th! Enjoy the rest of your weekend-

Natalie

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