Tax Update: Key Highlights from the “Big Beautiful Tax Bill”

The House recently passed a new tax bill—referred to as the “Big Beautiful Tax Bill”—which could have meaningful implications for individuals and business owners if enacted into law. The bill has a long way to go, but in this blog post we will explore some of the early ideas. 

Here are a few of the most talked-about highlights:

Extension of Individual Tax Cuts

The proposal calls for an extension of the Tax Cuts and Jobs Act (TCJA) individual tax rate reductions that are currently set to expire after 2025. This would maintain lower marginal tax brackets for individual taxpayers.

No Taxes on Tips or Overtime

Some new tax cuts that were popular during the campaign made their way into the bill. This includes no taxes on tips for workers in the service industry through 2028, specifically those working at restaurants and bars, or those in the beauty industry. The bill also includes no taxes on overtime through 2028. 

New Interest Deductions

Interest on up to $10,000 for auto loans on cars assembled in the U.S. would be deductible until 2029. 

State and Local Tax Deduction

The state and local tax (SALT) deduction has been capped at $10,000 since the passing of the TCJA in 2017. Since then, many business owners have found their way around this cap by utilizing the state Pass-Through Entity Tax (PTET) deduction. This mechanism has allowed business owners to deduct their state tax liability from partnership LLCs and S-Corporations by paying their state tax liability from that activity through the business. 

Advocates for increasing the SALT deduction cap argue that it disproportionately affects middle-class homeowners who live in regions where property taxes and state income taxes are high.

This bill includes an increase to the SALT deduction from $10,000 to $40,000, but only for those who have income below $500,000. 

100% Bonus Depreciation through 2029

Under the Bill, taxpayers can claim 100% bonus depreciation for qualified property acquired and placed in service after January 19, 2025, and before January 1, 2030.

Increase to the Qualified Business Income Deduction

The deduction for qualified business income under Section 199A is increased to 23% and made permanent.

Increased Child Tax Credit

The bill would increase the child tax credit from $2,000 per qualifying child to $2,500.

Trump Accounts

The legislation could create a $1,000 savings account for children born between 2024 and 2028, funded by the federal government. Parents can contribute up to $5,000 per year and the funds can begin to be distributed once the child turns 18. 

The funds are to be used for higher education, job training, and the purchase of their first home. The income on the accounts would grow tax-deferred, and distributions for qualified expenses (mentioned above) would be taxed at the long-term capital gains rate (currently 0% - 23.8% depending on your income). 

Increased Estate Tax Deduction

The estate tax deduction was set to go back to $5 million after the TCJA expired at the end of 2025. This bill updates that to be $15 million.

Has this bill become law?

It is important to note that while you will see a lot of updates on this bill on the news and social media, this bill has only passed the house and will still need to pass the Senate before being signed by President Trump to become law. 

This can make tax planning difficult since there is a level of uncertainty around what will be included in the final version of the bill. In these situations, it is important to remember to not let the tax tail wag the dog. In other words, make smart financial decisions and let tax savings be icing on the cake! 

The Senate will likely make some changes to what is outlined in this blog, and we will keep you updated as we get closer to the final version of this bill that becomes law. 

You can follow updates on https://www.congress.gov/bill/119th-congress/house-bill/1/all-actions.