TL;DR
- Permanent TCJA tax rates and standard deductions.
- Child tax credit increased to $2,200 per child.
- New deductions for tips, overtime, auto loans, and seniors.
- Phasing out clean energy credits; extending Opportunity Zones.
- Action: Audit clients and educate via webinars.
Signed into law on July 4, 2025, H.R. 1, the One Big Beautiful Bill Act, is a beast of a reconciliation package, shaking up the tax landscape. If you’re a CPA, accountant, or any other financial or tax professional guiding clients through these shifts, you probably feel that mix of excitement and “what now?” anxiety. So let’s talk about it.
This act locks in many of the 2017 Tax Cuts and Jobs Act (TCJA) provisions due to sunset. But it’s not just an extension, it’s loaded with new deductions, credits, tweaks, and phase-outs that could save (or cost) your clients big time. The emotional kicker? These changes might be a lifeline for middle-class families and small businesses who’ve been pinching pennies. Yet, for higher earners or energy enthusiasts, it’s an opportunity to rethink strategies.
Permanent Tax Relief
First, the bill cements those individual tax rates: 10%, 12%, 22%, 24%, 32%, 35%, and 37%, for good, starting after 2025. With inflation adjustments, the standard deduction jumps to $15,750 for singles, $23,625 for heads of household, and $31,500 for joint filers.
Action step: Run projections for clients now. If they’re on the bubble between itemizing and standard, this could simplify filings and boost refunds.
Family and Worker Boosts: Credits and Deductions That Hit Home
Families win with the child tax credit bumping to $2,200 per kid (up from $2,000), indexed for inflation from 2026, effective post-2025. Phase-outs stay at $200K single/$400K joint, but work-eligible SSNs are required, which is a nod to tightening eligibility.
New deductions spark savings: Tips and overtime pay under $150K income are deductible up to $12,500 each, temp through 2028. Auto loan interest? Deduct up to $10K/year for U.S.-assembled cars bought 2025-2028. Seniors snag a $6K exemption through 2028, phasing out over $75K/$150K income.
For businesses, the qualified business income (QBI) deduction is permanent, with expanded phase-ins. Estate tax exemption rises to $15M, easing inheritance worries for wealthier clients.
The Qualified Business Income (QBI) Deduction allows individual taxpayers and some trusts and estates to deduct up to 20% of their net QBI from a trade or business (including pass-through entities but not C corporations), plus 20% of qualified REIT dividends and PTP income, limited to 20% of taxable income before the deduction minus net capital gain. – IRS.gov
Pro tip: Update client intake forms to capture tip/overtime data early. This could mean thousands in savings. Turn it into a client retention goldmine by sending personalized “what this means for you” emails.
Business and Investment Shifts: Opportunities and Hurdles
Small biz owners, rejoice: 1099-K reporting thresholds revert to $20K/200 transactions for 2025, ditching the $600 headache from the American Rescue Plan. Opportunity Zones get a permanent extension with basis step-ups, perfect for real estate clients.
But here’s the pivot—clean energy credits are phasing out fast: EV credits end by Sept 2025, charging stations by June 2026. New 1% remittance and higher endowment taxes (up to 8%) could sting international or education-focused clients.
Transition smoothly: If your clients invested in green tech expecting credits, advise on accelerated claims or pivots to extended biofuel incentives through 2031.
Implications for the Tax Filing Season
While many changes kick in for tax years after 2025 (think 2026 filings), some hit now: Adjusted 1099-Ks for 2025 payments, partial clean energy phase-outs, and temp deductions like tips/overtime. The CBO projects a $2.8T deficit hike, so brace for potential IRS scrutiny on new claims.
As costs have risen worldwide, these reforms empower experts like you to be heroes, helping clients keep more of their hard-earned money while dodging pitfalls.
Actionable Takeaways for CPAs & Financial Professionals
- Audit Client Portfolios: Flag those relying on expiring green credits and suggest alternatives like Trump Accounts ($1K gov deposit for kids born 2025-2028, tax-deferred for education/home buys).
- Educate Proactively: Host webinars on SALT cap hikes ($40K for under $500K earners, temp 5 years) to build trust.
- Leverage Tools: Use Reach Reporting’s dashboards to visualize scenarios—track QBI impacts or deduction caps in real-time.
- Stay Compliant: With AMT exemptions up and mortgage interest limits permanent at $750K, recalibrate high-net-worth strategies.
This bill isn’t just policy, which demands agility. Preparation turns challenges into opportunities.
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