| On July 4, President Donald Trump signed into law the One Big Beautiful Bill Act, OBBBA. With so many changes packed into one bill, understanding the immediate and long-term effects is essential. Below, we’ve outlined some of the most impactful provisions and what they could mean for you or your business.
Key Takeaways at a Glance
- TCJA extensions made permanent, including bonus depreciation and qualified business income deductions.
- Enhanced tax relief for businesses – particularly around interest deductions, R&D, and pass-through income.
- Significant international tax reforms, affecting GILTI, FDII, and foreign tax credits.
- Clean energy incentives scaled back, with phaseouts on many recent credits.
- Major changes for individuals, including updates to the SALT cap, standard deduction, and child tax credit.
- Estate exemption increased to $15 million and made permanent.
- New planning opportunities for qualified opportunity zones, small business stock, and charitable giving.
What Businesses Need to Know Now
If you own or manage a business, several provisions in the OBBBA could immediately improve cash flow and reduce tax liabilities:
- 100% Bonus Depreciation Returns: Businesses can again fully expense qualified assets in the year they’re placed in service, beginning Jan. 20, 2025.
- Business Interest Deduction: Reverts to the more generous EBITDA-based limitation calculation.
- R&D Expensing: Domestic research costs can now be expensed immediately, and previously capitalized amounts from 2022–2024 can be accelerated.
- Pass-Through Deduction (199A): Made permanent, with a wider phase-in range for income thresholds.
- Charitable Giving Limits: A new 1% floor for corporations means only contributions above 1% of taxable income are deductible.
Businesses should re-evaluate capital expenditures, R&D planning, and entity structure decisions in light of these changes.
Global Tax Rules See Major Overhaul
OBBBA overhauls the U.S. approach to international taxation:
- GILTI and FDII Renamed and Adjusted: Lower deduction rates and tightened eligibility.
- Foreign Tax Credits: Significant changes to how FTCs are calculated and sourced.
- BEAT Changes: New permanent 10.5% rate, but some R&D and renewable credits remain protected.
- Downward Attribution Restored: Impacts CFC status and reporting obligations for many multinational structures.
Major Clean Energy & Sustainability Credits Winding Down
The OBBBA substantially scales back clean energy incentives introduced by the Inflation Reduction Act (IRA):
- EV, Solar, Wind, and Home Energy Credits are scheduled to terminate between 2025–2027.
- Hydrogen and Carbon Capture Credits are narrowed, with stricter qualification rules.
- New Transferability Rules for remaining credits give businesses more planning options.
What the Tax Changes Mean for Individuals
Key updates for individuals include:
- SALT Cap Increased: Now $40,000 for joint filers through 2029, with phase-outs for high earners.
- Standard Deduction & Tax Brackets Made Permanent: Increased for inflation, bringing stability to long-term planning.
- Child Tax Credit: Increased and partially refundable, with further expansion in 2026.
- Above-the-Line Deductions for Tips and Overtime: Temporary but potentially valuable for certain workers.
- New “Trump Accounts”: Tax-advantaged savings accounts for children, including a $1,000 government-funded deposit for qualifying births.
Now is the time to revisit your personal tax and wealth strategy, especially if you own a business, anticipate large charitable contributions, or are considering estate planning moves.
Estate and Succession Planning Gets a Boost
- Estate/Gift Tax Exemption Raised to $15 Million (per individual) and made permanent.
- QSBS Gains Exclusion Enhanced: Potential for 100% exclusion now starts after 5 years of holding.
- New Opportunity Zone Rules: Expanded benefits for long-term rural and urban investments, but with new requirements.
MKA is committed to supporting your business’s success. Our team of experienced professionals are ready to assist you in navigating the complexities of managing your business. |
