We all know by now that the Big Beautiful Bill has passed, and there are some changes in the tax law that need to be addressed.
Some are good, and some are not so good. Here are some significant changes in the law.
Restoration/expansion of Bonus Depreciation
The 100 percent bonus depreciation initially allowed under the TCJA for “qualified property” acquired on or after January 20, 2025, is permanent. The previous allowed rates were 40 percent in 2025, 20 percent in 2026, and zero percent in 2027. This allows a business to grow while managing their tax li-ability at the same time.
Business Interest Deduction
It allows a more generous definition of “adjusted taxable income,” which is computed without regard to the deductions for depreciation, amortization, and depletion, which in-creases the allowed business interest deduction over the previous law. The 100 percent Floor Plan interest deduction is still available for dealers, which was a permanent provision in place under the Tax Cuts and Jobs Act in 2017, signed by Trump.
Section 199A Qualified Business Provision
It makes the 20 percent Qualified Business deduction permanent under the TCJA, which, if it were not addressed, the QBI de-duction would have expired at the end of 2025.
Expansion of Section 1202 qualified small business stock
Prior to this bill, there was no gain exclusion under Section 1202 unless the qualifying stock was held for at least five years. Now, a 50 percent gain exclusion applies to stock held for more than three years, and a 75 percent gain exclusion applies to stock held for more than four years. It also raised the cap from $10 mil-lion to $15 million. It only applies to Section 1202 stock issued after the enactment of this bill, which was January 20, 2025.
ERC
Employee retention credits refunded can now be challenged by the IRS up to six years after a particular refund claim is filed. It also imposes enhanced penalties on certain promoters of ERC refund claims.
GST Tax
The bill increases the exemption amount for gift, estate, and generation-skipping trans-fer tax to $15 million for an individual and $30 million for a married couple, and the amount is indexed annually for inflation. This change is permanent.
Education Savings Plans
The bill significantly expands the definition of expenses that qualify as higher education expenses for elementary or secondary public, private or religious schools. It now includes curriculum and curricular materials, books or instructional materials, online educational materials, and certain tutoring and education classes outside of the home, as well as fees for specified tests and other related expenses. This expansion is a clear sign of sup-port for education and can encourage individuals to invest in their learning.
Individual Income tax rates
The top tax rate under TCJA becomes permanent at 37 percent. This was going to rise to 39.6 percent in 2026, if not addressed in this bill.
Limitation on Itemized deductions
The bill permanently removes the overall limitation on itemized deductions and replac-es it with a new limitation that effectively caps the benefit of an itemized deduction at 35 percent, even if the taxpayer’s highest marginal tax rate exceeds 35 percent.
SALT Cap
The bill changes the State and Local tax deduction from a maximum of $10,000 to a cap of $40,000. It increases by 1 percent each year beginning in 2026, but reverts back to $10,000 in 2030. Also, the cap amount is reduced for taxpayers having a “modified adjusted gross income” over $500,000 filing married and $250,000 for single or married filing separately.
Standard Deduction
The bill makes permanent the standard de-duction, which was $29,200 for married and $14,600 for all other filers, to $31,500 and $15,750, respectively, for 2025.
No Tax on Tips
The bill allows a deduction of up to $25,000 annually for qualified tips received by an individual in an occupation that customarily and regularly receives tips. The deduction is an above-the-line deduction and thus is not treat-ed as an itemized deduction. However, there is a phase out when the taxpayer’s MAGI exceeds $300,000 for married and $150,000 for all other filers. This special deduction applies to the years 2025 through 2028.
Please consult your tax advisor to make sure you are getting the most from the above changes that can impact your business and personal tax returns.
Article Written By: Curt Kleoppel
CURTIS A. KLEOPPEL, (CPA, CVA) CFO, President of Equipment Dealer Consulting
