Big Beautiful Clarity
The One Big Beautiful Bill Act (OBBBA) passed by Congress and signed into law by President Trump in 2025 has significant changes for both individual taxpayers and businesses. While the IRS will provide additional guidance and clarifications on these changes in the months ahead, the team at Macfarlane CPA is ready to help you understand and plan ahead for these important changes.
Biggest Changes Impacting
Macfarlane CPA, PC Clients
Increased State & Local Tax Deductions
The $10,000 deduction for state and local taxes ("SALT Cap") has been raised to $40,000 for tax years 2025-2029. This greatly benefits California taxpayers where state income taxes and property taxes are high.
Tax Bracket and Standard Deduction Changes from 2017 made Permanent
The tax rates that were reduced as part of the Tax Cuts and Jobs Act (TCJA) of 2017 were made permanent in the One Big Beautiful Bill. The higher standard deduction was also made permanent.
Ending of EV and Solar Tax Credits
The $7,500 electric vehicle credit ends on September 30, 2025, while the 30% residential energy credit for solar systems ends on December 31, 2025.
No Tax on Tips or OT
Tips received from customers in specific industries are temporarily deductible up to $12,500 ($25,000 for MFJ) (subject to income phaseout limitations).
For overtime, the "half" portion of "time and a half" (in other words, the 50% increase in the hourly rate for OT) can be deducted.
Bonus Depreciation made Permanent
The bill makes permanent the 100% bonus depreciation for qualifying property placed in service after January 19, 2025. This will greatly benefit business owners who can now receive the full tax deduction immediately upon purchase for
capital assets.
Qualified Business Income Deduction (QBI)
The bill makes permanent the 2017 change that allowed a 20% deduction of qualified business income. This allows sole proprietors and owners of s-corps and partnerships to deduct up to 20% of business net income on their personal tax return (subject to limitations).
Car Loan Interest now Deductible
Individuals can deduct up to $10,000 in vehicle interest for new personal-use vehicles from 2025-2028 even if they take the standard deduction (subject to income phaseout limitations).
Increased Senior Citizen Deduction
For tax years 2025-2028, individuals age 65 or older can claim an increased deduction of $6,000 ($12,000 for MFJ) on top of the current standard deduction (subject to income phaseout limitations).
Increased Child Tax Credit
The child tax credit is increased from $2,000 to $2,200 for 2025 and will be adjusted annually for inflation.