NEWS

Dear Client,

On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act (OBBBA, or the Act), which essentially builds upon and expands provisions of the 2017 Tax Cuts and Jobs Act (TCJA). We will reach out to you individually should any specific planning opportunities or considerations arise in light of this new legislation.

Below are several key provisions affecting both business and individual taxpayers that we believe are particularly noteworthy:

Business

Bonus Depreciation and Code Section 179 Election

The Act makes 100% bonus depreciation permanent for property acquired after January 19, 2025. Under the TCJA, 100% bonus depreciation applied through 2022, then decreased by 20% annually, reaching 40% in 2025 and phasing out completely by 2027. The Code Section 179 dollar limitation is increased to $2.5 million, and the investment limitation is increased to $4 million for tax years beginning after 2024. These increases will be inflation-adjusted for tax year beginning after 2025.

SALT Deduction and Pass-Through Entity Elective Tax Deduction (PTET)

The SALT workaround known as the Pass-Through Entity Elective Tax (PTET) remains available, allowing partnerships, S corporations, and certain trusts to pay state taxes at the entity level, thereby providing a federal income tax benefit to individual owners by reducing their taxable income.

Qualified Business Income Deduction

The qualified business income deduction is made permanent, allowing a 20% deduction subject to limitations. Modifications are made to the phase-in of the wage and investment limitation and specified service trade or business (SSTB) limitation as well as the calculation of the threshold amount. An inflation-adjusted minimum deduction is also provided for tax years beginning after 2025.

Research and Experimental Expenditures

Taxpayers can elect whether to deduct or amortize the expenditures, though the requirement to amortize under prior law is suspended while the deduction is available. Additionally, small businesses with average annual gross receipts of $31 million or less would be able to elect to claim the deduction retroactively to 2022. Under prior law, taxpayers were required to amortize research and experimental expenditures. Prior to 2022, a direct expense election was available. The Act permanently reinstates the deduction for domestic research and experimental expenditure costs incurred after 2024.

Section 1202 – Qualified Small Business Stock

The Act introduces taxpayer-friendly enhancements to Section 1202 for Qualified Small Business Stock (QSBS) acquired after July 4, 2025, increasing the per-shareholder gain exclusion from $10 million to $15 million, with future adjustments for inflation. It also introduces a phased-in gain exclusion beginning after a three-year holding period. 

Opportunity Zones

The Act extends the QOZ program by replacing the current December 31, 2026 investment deadline. Starting July 1, 2026 the program will enter a new cycle every 10 years, and each tract remains a QOZ for a full decade. As of January 1, 2027, the Act provides enhanced incentives for investments in “Qualified Rural Opportunity Zones” including potential 30% exclusion of the original capital gain invested (compared to 10% for urban QOZ’s).

Individuals

Estate Taxes

The federal estate and gift tax lifetime exclusion was permanently increased to $15 million per individual (indexed for inflation), preventing the previously scheduled reduction set for 2026.

Standard Deduction

The new law makes the standard deduction increase of the TCJA permanent and further increases the standard deduction for tax years beginning after 2024.

State and Local Tax (SALT) Deduction

The Act increases the state and local tax deduction (SALT deduction) cap to $40,000 for 2025, with a 1% increase in the cap each year through 2029 before returning to the $10,000 limit in 2030. The cap is reduced by 30% of the amount by which the taxpayer’s modified AGI exceeds a threshold amount (generally $500,000 for 2025, with a 1% increase each year through 2029).

Qualified Tips Deduction (“No Tax on Tips”)

Individuals can claim an income tax deduction for qualified tips received in tax years 2025 through 2028. A qualified tip is any cash tip received in an occupation,

which customarily and regularly received tips on or before December 31, 2024. The deduction is limited to $25,000 per tax year, and starts to phase out when modified

adjusted gross income is above $150,000 ($300,000 for joint filers). 

Qualified Overtime Pay Deduction (“No Tax on Overtime”)

Individuals can claim an income tax deduction for qualified overtime pay received in

tax years 2025 through 2028. The deduction is limited to $12,500 per tax year ($25,000 per tax year for joint filers), and starts to phase out when modified adjusted gross income is over $150,000 ($300,000 for joint filers). 

Sincerely,

The GCP Team