Major Tax Reform Package: Key Provisions for Individuals and Businesses – Robert Bell, CPA, Partner

A sweeping tax reform bill has been advanced, building upon and making permanent many provisions originally enacted in the 2017 Tax Cuts and Jobs Act (TCJA). The bill includes significant updates for individuals, small businesses, and corporations, with a mix of permanent changes and temporary incentives designed to support working Americans and economic growth. This is not an exhaustive list but a summary of some of the bill’s major provisions.

Key Business Provisions

  • Permanent Section 199A(g): The deduction for agricultural and horticultural cooperatives under IRC Sec. 199A(g) is made permanent.
  • Bonus Depreciation: 100% bonus depreciation is made permanent for qualifying property acquired and placed in service after Jan. 19, 2025.
  • Section 179 Expensing: Expensing cap raised to $2.5 million (phaseout begins at $4 million).
  • Interest Deduction (Sec. 163(j)): EBITDA standard reinstated for determining business interest limitations beginning in 2025.
  • R&D Expenses: Immediate deduction allowed for domestic research expenses beginning in 2025. Small businesses may apply changes retroactively to 2022.
  • New Production Incentive: 100% first-year depreciation for certain qualified production property (primarily used in manufacturing).
  • Form 1099 Threshold: Reporting threshold increased from $600 to $2,000 (indexed for inflation after 2026).

Highlights for Individuals

  • Tax Rates & Standard Deduction: TCJA-era individual tax rates are made permanent, with continued inflation adjustments. The standard deduction increases in 2025 to $15,750 (single), $23,625 (head of household), and $31,500 (married filing jointly), with future inflation adjustments.
  • SALT Cap: The state and local tax deduction cap rises to $40,000 through 2029, indexed annually, before reverting to $10,000 in 2030.
  • Child Tax Credit: Increased to $2,200 per child in 2025 (indexed for inflation), with the refundable portion ($1,400) and phaseout thresholds ($200K/$400K) made permanent.
  • Qualified Business Income (QBI) Deduction: The 20% QBI deduction is made permanent, with expanded phase-in thresholds and a new $400 minimum deduction for active participants in qualified businesses.
  • Estate and Gift Tax: Exemptions are permanently increased to $15M ($30M joint) beginning in 2026, indexed for inflation.
  • New Deductions:
    • No Tax on Tips: Temporary above-the-line deduction for up to $25,000 in reported tip income (2025–2028).
    • No Tax on Overtime: Temporary deduction of up to $12,500 ($25,000 joint) for qualified overtime compensation (2025–2028).
    • Car Loan Interest: Interest on U.S.-assembled personal-use car loans becomes deductible (2025–2028).
  • Trump Accounts: New tax-advantaged savings accounts for minors, structured as traditional IRAs with a $5,000 annual contribution limit, intended to promote long-term savings.
  • Charitable Giving: Non-itemizers may deduct up to $1,000 ($2,000 joint). Itemizers are subject to a 0.5% AGI floor; corporations face a 1% floor (within the 10% limit).
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