Earlier this month, the House Ways and Means Committee passed the Trump Administration’s tax bill. Often referred to as the “Big Beautiful Tax Bill” it contains various provisions that not only extend Tax Cuts and Jobs Act (TCJA) changes, but also fulfills several Presidential campaign promises through new tax measures. It has been estimated the legislation would create a $3.3B deficit increase between 2025 and 2034 once interest and other costs are included. However, the Administration is projecting a .6% increase in the GDP over the same period leading to job growth. Since there are still several steps in the legislative process which must be passed it is likely there will be additional changes. However, the details provide insights into the Administration’s tax plans and priorities. To help clients, prospects, and others, Dermody, Burke & Brown, CPAs has provided a summary of the key details below.

Business Tax Provisions 

• Section 199a Deduction – This pass-through entity deduction of 20% on qualified business income, was introduced in the TCJA. The proposed legislation calls for an increase in the deduction to 23% and modifies limitations based on W-2 wages and capital investments for specified services and trade business. It would also make this a permanent tax provision. 

• R&D Tax Credit – Recent changes to the federal Research & Development (R&D) Section 174 changed how the benefit was received. Under prior regulations, a same year immediate deduction against eligible expenses was permitted. However, it was changed requiring business to amortize expenses and realize tax savings over a several year period. The proposed legislation calls for a return to the immediate expensing of eligible costs starting in 2025 and will likely feature a retroactive provision.  

• 100% Bonus Depreciation – This tax benefit originally included in the TCJA is currently going through a phase-out period and is expected to sunset in 2027. The proposed legislation calls for the restoration of 100% bonus depreciation for short lived investments from 2025 – 2029.

• Advanced Manufacturing Tax Credit – This tax benefit originally included in the Inflation Reduction Act of 2022, calls for a tax credit for taxpayers manufacturing energy efficient components. This includes solar and wind energy parts, inverters, battery system and certain critical minerals. The amount of the credit varies based on several factors. The legislation calls for a phase-out of the 45x Credit for wind energy components after 2026 and for all other eligible parts after 2031. 

• Repeal of Green Energy Credits – Several of these tax credits including the Clean Energy Production Tax Credit, Clean Energy Investment Tax Credit, and Nuclear Electricity Production Credit would start phasing out in 2028 ending in 2031. There would also be an immediate repeal of the Clean Hydrogen Production Tax Credit for construction beginning after 2025. 

Individual Tax Provisions

• Expanded Standard Deduction – The proposed legislation calls for an expanded standard deduction for seniors aged 65 and older. The deduction amount would be increased to $4,000 per filer starting in 2025 and sunsetting in 2028. Only those with an adjusted gross income (AGI) less than $75,000 for single filers and less than $150,000 for joint filers would be eligible.

• Child Tax Credit – This is a temporary federal tax credit available to families to help offset the cost of raising children. Currently, the credit amount is $2,000 per eligible child with no maximum for the number of eligible children which can be claimed. The legislation calls for making the credit permanent and temporarily increasing the credit maximum to $2,500 through the end of 2028. Afterwards, the $2,000 maximum would be adjusted for inflation. 

• Eliminate Tax on Tips – Currently tips are considered part of the taxpayers’ income and are subject to federal income tax. The legislation calls for a dollar-for-dollar deduction for workers in certain professions where tipping is customary, which would expire at the end of 2028.

• Estate Tax Exemption – Currently, the estate tax exemption is $13.99M for individuals and $27.98M for couples. However, at the end of this year it is scheduled to sharply reduce to $5M creating estate tax planning challenges. The legislation calls for the permanent increase in the exemption to an adjusted inflation of $15M starting in 2026. 

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The tax legislation provides important tax savings opportunities for both individuals and business. However, since it is still going through the legislative process it is likely there will be minor changes before it becomes law. If you have questions about the information outlined above or need assistance with assistance with another tax or accounting issue, Dermody, Burke & Brown, CPAs, can help. For additional information call 315-471-9171 or click here to contact us. We look forward to speaking with you soon.