One Big Beautiful Bill (Business Provision Summaries)
One Big Beautiful Bill (Business Provision Summaries)
20% Small Business Tax Deduction (Section 199A)
- 20% Small Business Tax Deduction (Section 199A)
This bill permanently extends the 20% Small Business Deduction - Allows pass-through entities to deduct up to 20% of their qualified business income
- Without Congressional action, this provision would have expired at the end of the calendar year.
- Permanency of the small business deduction allows small businesses to grow, hire, and invest in their workforce.
Marginal (Individual) Rates
- This bill permanently extends the current federal marginal rates, which were scheduled to expire and increase at the end of the year.
- Current federal marginal rates are: 10%, 12%, 22%, 24%, 32%, 35%, 37%
- If allowed to expire, they would have increased to: 10%, 15%, 25%, 28%, 33%, 35%, 39.6%.
- By permanently extending the lower marginal rates enacted in 2017 Congress is preventing a tax increase on about 33 million pass-through businesses subject to marginal rate taxes.
Estate Tax
- This bill permanently enshrines the Estate Tax exemption and increases the exemption levels of $15 million individually and $30 million jointly, and is indexed for increases with inflation.
- The estate tax is a tax on the transfer of an estate and or property upon the death of the owner.
- By making this provision permanent, it allows small business owners to maintain their business and property without having to sell or liquidate to pay the tax.
Section 179
- This bill increases Section 179 expensing cap from $1.25 million to $2.5 million and allows for increases with inflation.
- Section 179 allows businesses to deduct the full purchase price of qualifying equipment in the year it is acquired.
- The higher maximum deduction and permanency allow small business owners to significantly reduce taxable income and plan for future investments.
Form 1099-K
- This legislation increases the threshold requiring Form 1099-K from $600 to $20,000.
- Section 1099-K is an IRS report that businesses must file for any third-party payment transactions above a certain threshold during the year.
- The higher threshold minimizes burdensome IRS paperwork that small businesses must comply with while using third-party payments such as Venmo or PayPal.
Form 1099-NEC
- This legislation increases the information-reporting threshold from $600 to $2,000 in a calendar year and indexed annually for inflation after 2026.
- Form 1099-NEC is used by businesses to report payments made to non-employees, such as independent contractors, for services rendered during the calendar year.
- The higher threshold minimizes burdensome IRS paperwork for small businesses.
Form 1099-MISC
- This legislation increases the information-reporting threshold from $600 to $2,000 in a calendar year and indexed annually for inflation after 2026.
- Form 1099-MISC is used to report various payments not classified as nonemployee compensation.
- The higher threshold minimizes burdensome IRS paperwork for small businesses.
Section 168(k) (Bonus Depreciation)
- This legislation permanently restores 100% immediate expensing for eligible assets.
- Section 168(k), bonus depreciation, allows businesses to take an additional first-year deduction for qualified property in the year it is placed in service.
- Without Congressional action, businesses would have to amortize these expenses over a number of years.
- The increased expensing threshold allows businesses to fully deduct property acquired and placed in service after January 2025
Research and Development Expensing
- This legislation allows all research and development costs to be immediately deducted.
- Research and development allows taxpayers to immediately deduct domestic research or experimental expenditures paid or incurred in the tax years beginning after December 31, 2024.
- Being able to deduct research and development costs immediately allows businesses to improve, upgrade, and innovate new products and services
Section 163(j)
- This legislation reinstates the EBITDA (earnings before interest, income tax, depreciation, and amortization) limitation for the tax years beginning after December 31, 2024
- Section 163(j) limits deductions on business interest expenses
- The reinstatement of EBITDA limitations allows small businesses to make use of more interest deductions
C-Corp Rate
- The C-Corp rate permanently remains at 21%
SALT (State and Local Tax Deductions)
- This legislation increases the limit on the federal deduction for state and local taxes to $40,000 and adjusts for inflation. After 2029, this increase will expire.
- This deduction begins to phase out at $500,000 of adjusted gross income. Once fully phased out, taxpayers revert to receiving a maximum of $10,000 in SALT deduction.
- The SALT deduction allows taxpayers to deduct certain state and local taxes from their federal taxable income.
AMT (Alternative Minimum Tax)
- This legislation permanently extends the increased individual alternative minimum tax exemption amounts and reverts the exemption phaseout thresholds to $500,000 for individual filers and $1 million for married filers.
No Tax on Tips
- This legislation creates a temporary deduction, for tax years 2025 through 2028, of up to $25,000 for qualified tips received by an individual who regularly receives tips.
No Tax on Overtime
- This legislation creates a temporary deduction, for tax years 2025 through 2028, of up to $12,500 individually, and $25,000 jointly, for qualified overtime compensation received each year.
Miscellaneous Provisions
Eliminates Climate Disclosure Funding
- This legislation repeals funding for the EPA to implement greenhouse gas corporate reporting that was included in the Inflation Reduction Act (IRA).
- The Biden Administration sought to impose greenhouse gas climate disclosures for public and private businesses.
- Climate disclosures would significantly increase red tape and compliance burdens for small businesses.
Prevents Oil and Gas Methane Tax
- This legislation prevents a tax on methane emissions from oil and gas production that was included in the Inflation Reduction Act (IRA).
- This tax would increase energy production costs, which would be passed along to small businesses and consumers in the form of higher energy costs.
Health Savings Account Expansion
- This legislation allows Direct Primary Care memberships to be purchased through a Health Savings Account (HSA).
- This expansion increases health options and provides greater flexibility for small businesses to provide care for their employees.