Scott Cashman of Bowditch & Dewey tells business owners what they need to know about President Trump’s megabill.
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10) Individual tax rates. OBBBA makes permanent the income tax rates for individuals, estates and trusts that were set to expire at the end of 2025.
9) State and local tax deduction cap (SALT). OBBBA increases the limitation on the deduction for state and local taxes from $10,000 to $40,000 for 2025 and $40,400 for 2026. The deduction phases out for taxpayers with modified adjusted income starting at $500,000.
8) Deduction for tip income. OBBBA creates a new deduction of up to $25,000 for qualified tip income for individuals. The deduction is limited to those in customarily tipped industries and begins to phase out for taxpayers with adjusted gross income over $150,000 ($300,000 for joint filers). This new rule applies to tax years beginning after December 2024. Employers will be required to report the qualified tip income. Additional IRS guidance is expected.
7) Deduction for overtime pay. OBBBA creates a new deduction for qualified overtime compensation of up to $12,500 for individuals or $25,000 for joint filers. The new deduction applies to tax years beginning after December 2024. A caveat is the deduction only applies to qualified overtime compensation such as “time-and-a half.” Employers will be required to report the amount of overtime. Additional IRS guidance is expected.
6) Mortgage interest. OBBBA permanently disallows the mortgage interest deduction for debt more than $750,000.
5) Charitable contribution deduction for non-itemizers. OBBBA reinstates a partial charitable contribution deduction for individual taxpayers who do not itemize of up to $1,000 ($2,000 for couples) beginning in tax years after 2025.
4) Estate tax exemption. OBBBA permanently increases the federal estate and gift tax exemption to $15 million, indexed annually for inflation, for estates of decedent’s dying after 2025.
3) Qualified business income deduction. OBBBA makes permanent the 20% deduction for qualified business income (“QBI”) and increases the phase-in income limitations beginning for tax years after 2025.
2) Form 1099 reporting. OBBBA increases the threshold for filing forms 1099-NEC, 1099-Misc. from $600 to $2,000 (indexed for inflation) beginning with payments made in tax years after 2025. This provision is intended to lessen the tax reporting burden of small businesses.
1) Bonus depreciation. OBBBA permanently extends the ability of businesses to fully expense qualifying capital assets. This new rule applies to property first placed in service after Jan. 19, 2025.
