Written by: Cesar Grullon, CPA & Spencer Feng, CPA
President Trump’s tax legislation, dubbed “The, One, Big, Beautiful Bill,” introduces significant tax reforms affecting both businesses and individuals. Key provisions include:
- Enhanced Business Incentives: Restores bonus depreciation to 100% (currently scheduled to phase down from 60% in 2024 to complete elimination by 2027)
- R&D Investment Support: Reinstates 100% immediate expensing for research and development costs, replacing the current requirement to capitalize domestic R&D over 5 years and foreign R&D over 15 years
- Energy Credit Modification: Implements a gradual phase-out of the clean electricity investment credit by 2032, modifying the current 30% investment credit structure
- Small Business Impact: Permanently extends the qualified business income (QBI) deduction and increases the deduction rate from 20% to 23%, for tax years beginning after December 31, 2025
- No Tax on Supplemental Wages: Eliminates taxation on tips and overtime income
- Higher SALT deduction: Now $40,000, up from the current deduction of $10,000
- Child Tax Credit: Increased to $2,500 from 2025 to 2028
- Automotive Incentive: Creates a new tax deduction for interest paid on American-manufactured vehicles
- Private Foundation Tax Rate: Increases the excise tax rate for private foundations from 1.39% to 2.79% for foundations with assets with $50 million or more in assets
- Information Reporting Threshold: Increases the threshold for information reporting for services performed by independent contractors and other payments from $600 to $2,000
The legislation has passed the House and now advances to Senate. Wolf & Company will continue monitoring developments and provide updates as the bill progresses through the legislative process.
