June 2025 – Potential New Legislation Impacting Tax Laws

·     The Bill includes proposed tax benefits and revenue raisers affecting both businesses and individuals.

·     This bill is one of the most significant pieces of legislation since the Tax Cuts & Jobs Act (TCJA) of 2017.

·     Proposed timeline – senate to potentially pass The Bill by the end of June, with the goal that is signed into law July 4^th 2025.

·     Section 179 limits: The Bill would increase section 179 limits from $1,250,000 (current limit for 2025) to $2,500,000 with phase-out threshold raised from $2,500,000 to $4,000,000.

·     Business Interest Expense: effective 2025-2029, The Bill would restore the EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) calculation for the business interest expense limit, which is more favorable than the current limitation calculation based on EBIT (Earnings Before Interest and Taxes).

·     Research & Development: businesses are currently required to amortize their research and development costs over time, typically five years. The Bill would reinstate immediate expensing for domestic research and development expenses incurred during 2025-2029.

·     Qualified Business Income Deduction (199A Deduction): The Bill would increase this deduction from 20% to 23% of qualified business income, and would also make this deduction permanent. This would begin with tax year 2026.

·     Charitable donations for corporations: The Bill would place a 1% floor on corporate charitable donations/deductions, and would keep the existing 10% ceiling.

·     Employer-provided meals: The Bill would amend the current provisioning to potentially allow more businesses to expense meal-related deductions.

·     Moving Expenses: The Bill would repeal the income exclusion and deduction for this other than certain members of the armed forces.

·     PTE Elections: The Bill will disallow the PTE income tax deduction if the business doesn’t qualify to take the 199A deduction. This will impact Specified Service Trades or Businesses (SSTBs) such as law firms, consulting companies, and health practices – any business offering services.

·     Family and Medical Leave Credits: employers would be able to choose between getting a credit for paid wages while employees are on leave, or a credit for the insurance premiums providing the paid leave for employees.

·     Overtime Compensation Deductions: effective 2025-2028, The Bill would allow overtime compensation deductions regardless of whether the taxpayer itemizes. This would essentially mean overtime would not be taxed.

·     State & Local tax deduction limitation (SALT Cap): The Bill would increase the SALT cap to $40,400 (MFJ); this is up from the previous $10,000 cap. Certain phase-outs would still apply for taxpayers with more than $505,000 in income.

·     Personal Income Tax Rates: The Bill would revert to the tax rates and brackets enacted by the TCJA and make them permanent, such that all taxpayers other than those in the 37% bracket would experience tax reduction through an inflation adjustment.

·     Highest Individual Tax Rate: The Bill would make 37% the maximum rate for individuals.

·     Standard deduction: the 2025 standard deduction for MFJ filers is currently set to be $30,000. The Bill would increase the standard deduction by $1,500 for 2025 through 2028.

·     Itemized Deductions: The Bill would limit overall itemized deductions.

·     Personal Exemptions: The Bill would eliminate personal exemptions.

·     Child Tax Credit (CTC): The Bill would increase the CTC to $2,500, then back down to $2,000 in 2029. Additionally, The Bill would make the additional child tax credit permanent (will be $1,700 in 2025).

·     Charitable Donations: The Bill will allow individuals to take a partial charitable deduction even if they are not itemizing, effective 2025-2029.

·     Car Loan Interest: effective 2025-2028, The Bill would allow deduction of up to $10,000 in car loan interest, subject to phase outs for joint taxpayers earning more than $200,000. This deduction would be available regardless of whether the taxpayer itemizes.

·     Childcare credits: employer-provided childcare credits could potentially increase from 25% to 40% of qualified childcare expenses.

·     Mortgage Interest Limitations: taxpayers can currently itemize mortgage interest on up to $750,000 of their residential mortgage, after which this is subject to a phase out. The Bill would make this rule permanent.

·     Estate Planning: The Bill would permanently increase the estate, gift and generation-skipping tax exemption to $15 million, adjusted for inflation.

·     Adoption Credits: up to $5,000 of adoption credits would be refundable.

·     Tax Credit for Funding Scholarships: taxpayers could take a credit of up to 10% of their AGI (and no greater than $5,000) for the amounts they donated towards scholarship funds/organizations.

·     Expansion of Qualified Tuition Programs: the qualified expense definition would be expanded to include expenses for elementary, secondary, and home school expenses.

·     Student Loans: student loans forgiven on the basis of death or disability would be made permanent.

·     Creation of Money Account for Growth Advancement (MAGA): The Bill proposes that a tax-exempt trust account can be created for any US citizen under age 8. The funds in this account can be used for higher education or first-time home buying, and the US government would deposit $1,000 into each account for eligible children born between 2025 and 2028.

·     Excess business loss limitations: when total business deductions exceed the total business income for non-corporate taxpayers, these losses are carried forward to future years to offset future business income. The Bill would make this method permanent, and excess businesses losses will carry forward to future years capped at $626,000 allowable per year for MFJ taxpayers.

·     Casualty loss deductions: The Bill would permanently extend the 10% AGI limit on personal casualty losses as well as continue to restrict these casualty losses to presidentially-mandated disaster areas only.

·     Clean Energy Credits: The Bill would terminate most of these credits for individuals, and accelerate the phase-outs for others.

·     All of this is subject to change as it is currently under review – there is uncertainty around any of this getting through the senate and/or passing, and it is extremely likely that this proposal will change in significant ways as it continues to be scrutinized by congress.

While “The Bill” presents sweeping changes to both individual and business taxation, it remains a proposal—subject to significant revisions as it moves through the Senate. If passed, these provisions could impact tax planning strategies for years to come. We will continue to monitor developments closely and provide timely updates.

Please reach out if you have questions or would like to discuss how this may apply to your situation.