Dear Spartan Wealth Management Clients,
On July 4, 2025, the One Big Beautiful OBBBA Act (“OBBBA”) a sweeping federal legislative package, was signed into law. This new legislation carries significant implications for individuals, families, and business owners, particularly in the areas of tax planning, corporate structuring, and estate planning.
Below, we’ve summarized the key tax provisions relevant to many of our clients:
I. Business Tax & Corporate Planning
1. Bonus Depreciation Permanently Restored and Expanded
The OBBBA permanently restores 100% bonus depreciation for “qualified property” acquired on or after January 20, 2025. This includes tangible personal property with a recovery period of 20 years or less, as well as certain qualified improvement property.
Additionally, a new 100% bonus depreciation applies to qualified production property – nonresidential real estate used in manufacturing, production, or refining—if construction begins after December 31, 2024 and is placed in service before January 1, 2034.
Planning Note: Businesses should consider accelerating eligible acquisitions and construction projects to benefit from these enhanced expensing rules.
2. Expanded Business Interest Deduction
The OBBBA reinstates the more favorable definition of Adjusted Taxable Income (ATI) under Section 163(j), excluding depreciation, amortization, and depletion. This applies beginning in 2025 and beyond, enabling taxpayers to deduct more business interest expense.
Planning Note: Businesses using debt financing should revisit capital structures to take advantage of increased interest deductibility.
3. Qualified Business Income (QBI) Deduction Made Permanent and Expanded
The 20% QBI deduction under Section 199A is now permanent. Additionally, the income thresholds at which limitations apply to certain service businesses are increased to $75,000 (single) and $150,000 (joint) above the applicable thresholds.
Planning Note: Professional and service-based businesses may now qualify for deductions that were previously phased out under lower income thresholds.
4. Deduction for Domestic Research and Experimental (R&E) Expenditures Restored
Beginning in 2025, businesses may again immediately deduct domestic R&E expenses.
Small businesses with average annual gross receipts under $31 million can apply this rule retroactively to 2022–2024. Other taxpayers can elect to accelerate prior amortized R&E costs over a one- or two-year period beginning in 2025.
Planning Note: If your business incurred domestic R&D expenses over the past three years, you may now recoup significant deductions.
5. Excess Business Loss Limitation Made Permanent
The limitation under Section 461(l) on the deductibility of excess business losses by non-corporate taxpayers (generally $500,000 for joint filers) is now permanent. Disallowed losses will be treated as net operating losses (NOLs) in the following year.
Planning Note: This change reinforces the importance of entity selection and coordinated tax-loss strategies for closely held businesses.
6. Qualified Small Business Stock (QSBS) Enhancements
Several favorable changes apply to QSBS issued after enactment of the OBBBA:
- Gains on stock held over three years now qualify for a 50% exclusion; stock held over four years qualifies for a 75% exclusion.
- The per-issuer gain exclusion cap increases from $10 million to $15 million (indexed for inflation starting 2027).
- The maximum allowable assets of a QSBS-eligible corporation increase from $50 million to $75 million (also indexed).
Planning Note: Founders, investors, and startup advisors should evaluate equity structures to maximize long-term tax exclusions under Section 1202.
7. Opportunity Zones (OZs) Made Permanent
The Opportunity Zone regime is now permanent. New OZ designations will be issued every 10 years (next in 2026, effective in 2027). As before, investors who hold their Qualified Opportunity Fund (QOF) investments for 10 years may exclude gains entirely. However, under the new rules, disposition must occur within 30 years of the original investment to qualify for full exclusion.
Planning Note: With permanence and new designations on the horizon, this remains a powerful vehicle for tax-deferred and tax-free investing in targeted communities.
8. Employee Retention Credit (ERC) Limitations and Enforcement
The IRS is barred from issuing refunds on ERC claims for Q3 2021 unless filed before January 31, 2024.
The IRS may now audit ERC claims for up to six years, and the OBBBA authorizes enhanced penalties for abusive ERC promoters.
Planning Note: Clients who claimed ERCs should prepare for increased scrutiny and should ensure documentation is audit-ready.
II. Individual Tax Updates
Individual Tax Rates and Deductions
The OBBBA makes permanent the individual tax brackets and standard deduction levels first introduced under the TCJA. Effective 2025, the standard deduction is indexed at $15,750 (single) and $31,500 (joint filers).
State and Local Tax (SALT) Deduction Increased
The SALT deduction cap increases to $40,000, phasing out for incomes above $500,000.
Child Tax Credit Expanded
The child tax credit is increased to $3,000 per child, with expanded eligibility and partial refundability.
Planning Note: Taxpayers should update withholding and estimated payments to reflect the new deduction and credit rules for 2025.
- IRS Enforcement and Cryptocurrency Reporting
- The IRS receives significant new funding to expand enforcement, with a focus on high-income individuals and closely held businesses.
- New, mandatory digital asset reporting requirements take effect in 2026, requiring more detailed disclosures for cryptocurrency and other blockchain-based assets.
Planning Note: Now is the time to bring records current and proactively address tax compliance related to digital assets and private business holdings.
Additional Standard Deduction for Seniors
Qualifying taxpayers age 65 and older receive an additional $6,000 per person standard deduction. Phases out for AGI above $75,000 (individual) and $150,000 (joint); fully phased out at $175,000 / $250,000. Applies through 2028.
Temporary Deduction for Reported Tips
Workers earning under $150,000 (or $300,000 joint) may deduct up to $25,000 annually in reported tips from federal income taxes. Available through 2028.
Temporary Deduction for Overtime Pay
Taxpayers earning under $150,000 (or $300,000 joint) may deduct up to $12,500 (single) or $25,000 (joint) of overtime wages. Also available through 2028.
Trump Accounts for Children
Creates tax-deferred “Trump Accounts” for children born between 2025–2028, automatically seeded with $1,000 federal contribution. Annual contributions capped at $5,000, with employer matching of up to $2,500 (non-taxable) per employee. Funds grow tax-deferred; withdrawals allowed at age 18.
Temporary Auto Loan Interest Deduction
Deduction of up to $10,000 per year of auto loan interest for U.S.-assembled vehicles (non-commercial only). Phase-out begins at $100,000 AGI (single) / $200,000 (joint). Applies to purchases made between 2025–2028.
III. Estate and Wealth Transfer Planning
Estate and Gift Tax Exemption Increased
The federal estate and gift tax exemption will increase to $15 million per person ($30 million per couple) in 2026, and will be indexed for inflation thereafter.
Grantor Trust Provisions Remain Unchanged
Proposed restrictions on grantor trusts and certain valuation discounts were excluded from the final legislation.
Planning Note: Review your personal financial statement with your Spartan Wealth Management financial advisor to see how you can maximize the current estate tax exemption, as increased for inflation.
Need Assistance?
We’re here to help you navigate these complex issues. Contact us to learn more. at info@spartanwealth.com or at 248-297-6600.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
Dollar cost averaging involves continuous investment in securities regardless of fluctuation in price levels of such securities. An investor should consider their ability to continue purchasing through fluctuating price levels. Such a plan does not assure a profit and does not protect against loss in declining markets.
