All of us here at Blankenship CPA Group hope you and yours enjoyed a celebratory 4th of July weekend.

While the evening skies across America were lit up with fireworks, the real show for our national legislatures this year wrapped up earlier in the day at the White House when President Trump signed the One Big Beautiful Bill Act (OBBBA) he had pushed Congress to deliver.

Rewatch our Webinar Presentation on the Individual Provisions of the OBBBA

Rewatch Our Webinar Presentation on the Business Provisions of the OBBBA

In general, the OBBBA makes permanent most of the Tax Cuts and Jobs Act provisions that were set to sunset at the end of this year. It also addresses several other tax matters that have been gaining attention in recent days such as business asset expensing, taxes on tips and overtime, the now $15 million estate and gift tax exemption, and the R&D credit to name a few. While there are several notable opportunities for select taxpayers, the OBBBA does not overhaul our tax and planning framework we have implemented since 2017 for our client base.  

Marquee provisions such as Qualified Business Income, generously expanded income tax brackets and lowered rates, and a generally pro-business and taxpayer approach to the legislation resulted in significant continued long term tax savings for citizens. 

We hope you can join us on the 18th. As always, please reach out to your CPA for specific application of the new tax law to your situation. Know that we look forward to answering any questions you may have, and will be reaching out proactively in the days ahead for certain affected clients. 

Below are some highlights from the OBBBA that have the widest application. We are also including some overarching thoughts to wrap up this communication following this selective list of provisions from the 869 page Act:

Significant Provisions:

• Tax Rates – The historically low individual tax rates and brackets from the TCJA were extended permanently.
• Bonus Depreciation – 100% bonus depreciation has been restored, permanently. Applies to assets placed in service on or after January 19, 2025.
• Itemized Deduction SALT Cap - PTE deductions survived and the SALT Cap was raised to $40,000. This increased limit reverts quickly back to $10,000 for those with more than $500,000 in modified adjusted gross income (MAGI).
• Estate and Gift Tax – The exemption of $13.99 million will adjust to $15 million per person, and will continue to adjust for inflation in the coming years, instead of reverting to approximately half of the amount.
• No Tax on Tips – For the years 2025 through 2028, there will be a temporary deduction from income up to $25,000 of tip based income. This is for customary tipping industries (a list will be published within 90 days by the IRS) and phases out for individuals with more than $150k in MAGI, and joint filers with more than $300k in MAGI. Married individuals must file a joint return to receive this.
• No Tax on Overtime – For tax years 2025 through 2028, there will be a temporary above the line deduction as to overtime pay of $12,500 for single filers, and $25,000 for joint filers. The same MAGI phase outs apply as above, and the excess overtime consideration must be paid pursuant to Section 7 of the Fair Labor Standards Act of 1938.
• Trump Accounts – These new accounts for those under 18 years of age function much like nondeductible IRA accounts. Trump accounts can be established 12 months from now for minors, up to $5,000 a year can be contributed per minor in after tax money, they will grow tax free. When withdrawals are taken after age 18 there will be regulatory guidance to handle the taxation of the income portion that has accumulated in the account. Employers may contribute up to $2,500 to a Trump account of each employee (or dependent thereof) tax free under a written contribution program, and there is a pilot program for new babies born from 2025 through 2028 where the government essential provides a contribution of $1,000 per baby. All assets must be invested in index funds.
• Qualified Production Property Created – QPP is new manufacturing related real property whose construction began between January 20, 2025 and December 31, 2029, and is placed in service in the US before 2031. The property must be used in Qualified Production Activity, and meet other requirements. This special provision will allow for 100% first year depreciation deduction for such QPP.

Business Provisions:

• Section 179 Deduction – Increased to $2.5 million in deduction and phaseouts begin at $4 million for years beginning after December 31, 2024.
• Qualified Business Income – Phase in of limitation and phase out of deductions for SSTBs expanded by 50% to allow for a greater deduction for those in the “phase out zone”. Also, a small minimum deduction established for material participants of $400 under certain circumstances.
• Corporate Charitable Contributions – Corporations will now only be able to deduct donations that exceed 1% of their taxable income. The 10% of taxable income aggregate limitation still applies.
• Business Interest Limitation – Under 163(j) the adjusted EBITDA rules are back in play for determining interest expense limitation, but now they must be calculated prior to capitalization which will result in greater limitations.
• R&D Credit and Expensing Restored – R&D expenses performed domestically are now deductible in the year incurred for tax years beginning after December 31, 2024. Small businesses with average annual gross receipts of $31 million or less may be able to apply this retroactively to tax years beginning after December 31, 2021 and before January 1, 2025, and pick up the benefit over a one or two year period at their selection.
• Completed Contract Method Expanded for All Residential Construction, expanded paid leave provisions, and various other smaller provisions.

Individual Provisions:

• Car Loan Interest – For taxpayers making less than $100k a year ($200k a year for joint filers) that purchased a vehicle after December 31, 2024 with a loan can take a tax deduction for up to $10,000 in interest paid under the terms of the qualified financing arrangement. Vehicles can only be used personally, and information returns and VIN disclosure will be a part of the reporting process.  
• New Charitable Contribution Limitation – Individuals will only be able to take charitable deductions for the amount they give away to qualified organizations that exceed 0.5% of their contribution base (income) for the year. 
• New Charitable Contribution for non-Itemizers - Single taxpayers can take a $1,000 deduction and married filers can take a $2,000 deduction for charitable gifts even if they do not itemize.
• Itemized Deduction Limitation – For taxpayers in the 37% bracket, their itemized deductions will be reduced by 2/37th of the lesser of their itemized deductions or the amount of income that exceeds the start of the 37% bracket.
• Selected limited other items: AMT has been extended, 529 plans can now pay $20k to k-12 instead of $10k; there is a new limited $1,700 credit for certain k-12 grantmaking charitable organizations; the adoption credit, child tax credit, dependent care account funding, PMI, lower income senior citizens, all experienced small windfalls; and, Gamblers now must limit losses to 90% (the house always wins)! 

General Provisions:

• Qualified Opportunity Zone Funds – The opportunity zone benefits have been resurrected effective January 1, 2027 with new rolling 10 year periods. They are limited to a 10% step up in basis and 30 year gain exclusions under qualifying conditions that have all been revitalized. Qualified Rural Opportunity Funds have also now been created with enhanced benefits. 
• Qualified Small Business Stock - QSBS holding requirements are changed and/or modified for exclusion of gain from the sale of qualified small business stock to also include phase in amounts of 50% at year 3, and 75% at year 5. Also, for new issuances of QSBS after the date of enactment, the exclusion is increased from $10 million to $15 million, and the aggregate gross asset limit is increased from $50 million to $75 million. Both are now inflation adjusted.
• 1099 Reporting changes from $600 to $2,000, 1099-Ks are back to $20k and 200 transactions, certain active farmland sale gain can be picked up over four years, international tax regime for GILTI, FDII, BEAT and Net CFC Tested Income revised/changed, most clean energy credits for businesses and individuals are being sunset early, and there is a new 1% excise tax on remittance transfers for US senders of payments to non-US countries that remittance transfer providers must collect and remit to Treasury quarterly.

All the OBBBA provisions come with a projected net negative deficit impact of around $3.4 trillion, which adds to the $37 trillion debt we have amassed to date (81% of which we accumulated over the last two decades). As expected in a reconciliation bill, there are several revenue raisers (“lasers” as we like to call them) that will have an impact on some of our client base.

Notwithstanding the long term economic and fiscal policy impact of the bill, for the first time in a very long time we have a great deal of certainty as to tax law in the coming years. It is also important to remember that as quickly as we may gain certainty with one party in office, we can lose that certainty if both Congress and the White House shift from one side of the aisle to the other. So, for the next three and a half years we look forward to a continued pro-taxpayer system thanks to the passage of the OBBBA, and no cliffs of sunsetting tax law to worry about falling over! 

We consider it an honor to serve you as our client. One of our core values at the firm is Client Vision. We make sure our CPA team strives to understand what is important to you as our client, and then to bring our expertise to bear in helping you achieve your goals. We will be processing this law in that spirit. We look forward to helping you take advantage of the OBBBA’s beneficial provisions, while working to avoid the “lasers” that may be pointed your way.

We wish you the best in the coming days, and your CPA is here to answer any and all questions you may have.

God bless you and your endeavors.

Your Team at Blankenship CPA Group, PLLC