The highly anticipated One Big Beautiful Bill Act (OBBBA) has officially become law, and it brings significant changes that could impact your personal and business finances. At Beacon Wealth, our goal is to provide you with clear, objective insights into these changes and their potential investment implications.
What Hasn't Changed?
First, some good news for many investors and business owners: several proposed changes did not make it into the final bill. Corporate tax rates and capital gains tax rates remain unchanged. There's no "millionaire's surcharge," no wealth tax, and no financial transaction tax. This means many of your current planning strategies can remain effective.
Key Provisions for Individuals and Families
The OBBBA makes the individual tax rates from the 2017 Tax Cuts and Jobs Act (TCJA) permanent. This includes:
Lower Marginal Tax Brackets: These remain in place, offering consistent tax treatment.
Expanded Standard Deduction: This has been locked in and will be adjusted for inflation starting in 2026. For 2025, you'll see a temporary increase: $1,000 for single filers and $2,000 for married couples filing jointly.
Repeal of Personal Exemptions: This provision from the TCJA is now permanent.
Higher AMT Thresholds: The Alternative Minimum Tax (AMT) thresholds remain elevated, reducing its impact for more taxpayers.
For small business owners, the 20% deduction for qualified business income (QBI) from pass-through entities (like S corps and partnerships) has also been made permanent.
New deductions have been introduced, many with income phaseouts or sunset provisions:
SALT Deduction Cap Increase: The State and Local Tax (SALT) deduction cap rises from $10,000 to $40,000 from 2025 to 2029, phasing out above $500,000 of modified adjusted gross income (MAGI) and reverting to $10,000 in 2030.
Senior Deduction: A new $6,000 per-person deduction for seniors (age 65+) is available from 2025 through 2028, with phaseouts for higher incomes.
Tip and Overtime Pay Deductions: Deductions of up to $25,000 for tips and $12,500 for overtime pay are available until 2028, subject to income phaseouts.
It's important to note that while these new deductions offer targeted relief and can be taken even with the standard deduction, they do not reduce adjusted gross income (AGI), meaning they won't lower your exposure to the 3.8% net investment income tax or Medicare IRMAA surcharges.
Key Provisions for Businesses
The OBBBA also brings significant changes for businesses:
100% Bonus Depreciation: This is reinstated and made permanent for qualified property placed in service after January 19, 2025.A new category, "Qualified Production Property," is also added for U.S.-based manufacturers and refiners. Both bonus depreciation and the expanded standard deduction will be adjusted for inflation starting in 2026, offering greater long-term consistency.
Increased Section 179 Expensing Limits: Now at $2.5 million, this allows businesses to immediately write off the full cost of eligible assets, providing significant tax savings and improving cash flow.
Retroactive R&D Expensing: Research and Development expenses from 2022 and 2023 are now eligible for expensing.
More Lenient Business Interest Deductibility: Section 163(j) rules have been eased, allowing for greater deductibility of interest expense, particularly beneficial for capital-intensive industries.
Bottom Line for Investors
The OBBBA represents a substantial fiscal stimulus. With the Federal Reserve also appearing ready to ease monetary policy, the combination of fiscal and monetary stimulus could create a favorable environment for equities.
While many of these provisions are temporary and will likely be debated by future Congresses, understanding their immediate impact is crucial for your financial planning. We encourage you to reach out to your Beacon Wealth advisor to discuss how these changes may specifically affect your individual or business financial strategy and investment portfolio.