The Big Beautiful Bill & How it Will Impact Your Business
The “Big Beautiful Bill Act” Is Here — And It’s Shaking Up the Tax Code
On July 4th, the Big Beautiful Bill Act (OBBBA) was officially signed into law—and no, it’s not just a catchy name. This sweeping legislation introduces several major updates to the tax code that could have a significant impact on individuals and small business owners alike.
Below are some of the key changes we believe will matter most to our clients:
100% Depreciation Restored
Starting January 20, 2025, businesses will be able to immediately deduct 100% of the cost of eligible new and used property. That’s a major jump from the previous 40% limit, giving business owners more incentive to invest in equipment and assets.
Immediate R&D Deduction in the U.S.
If your business invests in research and development (R&D) within the United States, those costs are now fully deductible under the new Section 174A. Foreign R&D expenses must still be amortized over a 15-year period. Additionally, if your business capitalized U.S.-based R&D expenses between 2022 and 2024, you’ll have the opportunity to claim a retroactive deduction in 2025. This change could provide meaningful relief for innovation-driven businesses.
Tax-Free Tips (Up to $25,000)
Eligible workers, as defined by the IRS, can now deduct up to $25,000 in tips from their taxable income. However, this deduction phases out once an individual's adjusted gross income (AGI) exceeds $150,000, or $300,000 for joint filers.
Your Overtime Pay Is No Longer Taxed!
Overtime just became more rewarding. Qualifying overtime wages are now deductible—up to $12,500 for individuals and $25,000 for joint filers. Like the tip deduction, this benefit phases out at higher income levels based on AGI.
SALT Cap Increased
Many small business owners file taxes as individuals (Schedule C, partnerships, S-corps).
If they live in high-tax states like NJ, NY, or CA, the increase in the SALT cap from $10,000 to $40,000 means a much larger personal deduction.
Who Benefits: Business owners with an adjusted gross income (AGI) under $500,000.
Vehicle Loan Interest Deduction
Many small business owners file taxes as individuals (Schedule C, partnerships, S-corps).
If they live in high-tax states like NJ, NY, or CA, the increase in the SALT cap from $10,000 to $40,000 means a much larger personal deduction.
Who Benefits:
Business owners with an adjusted gross income (AGI) under $500,000.
What This Means for You
These changes could translate into real savings—whether you’re running a business, working extra hours, or relying on tip-based income. If you’re wondering how the OBBBA applies to your specific situation, KPM is here to help.
