The House of Representatives’ reconciliation bill — The One, Big, Beautiful Bill (TOBBB) — took another step forward this past week when the House Budget Committee advanced the bill by a vote of 17-16. TOBBB will now go to the House Rules Committee, where changes are expected ahead of making its way to the House floor for a vote. However, passage in the House, while a hurdle in itself, is likely not the most significant hurdle left to overcome before making its way to the president’s desk for signing.
Since the bill is still in the early stages, as TOBBB continues through the House and Senate, we certainly expect changes to various provisions. While we continue to monitor, track and have conversations with clients about these changes and their potential impact, below is a high-level overview of some of the initial key tax provisions currently on the table.
The Proposed Key Tax Provisions in the House Ways & Means Version of TOBBB Would Provide for the Following:
- Individual Tax Extenders & Tip/Overtime Income
- Permanent extension of many of the individual income tax provisions from the TCJA set to expire after 2025.
- Above-the-line deduction for certain tips and overtime income.
- Estate Tax
- Increased estate tax exclusion amount: $15 million for decedents passing away in 2026.
- Exclusion amount adjusted for inflation starting in 2027.
- State and Local Tax Cap
- Increased state and local tax deduction for individuals, from $10,000 to $30,000.
- Increased amount subject to phase-out for taxpayers with modified adjusted gross income over certain income thresholds.
- Eliminates state and local tax cap workarounds, such as the popular pass-through entity taxes many states have implemented.
- Depreciation and Expensing
- 100% bonus depreciation applicable to qualified property acquired on or after January 20, 2025, through December 31, 2029.
- Enhancements to Section 179 deduction limitations for property placed in service in taxable years beginning after December 31, 2024.
- Deduction for 100% of the cost of certain new factories, and certain improvements to existing factories and other structures.
- Business Interest Expense Limitation Change to ATI Calculation
- Adjusted taxable income would revert to being computed without taking into account depreciation, amortization and depletion deductions for taxable years beginning after December 31, 2024, and before January 1, 2030 — thus potentially increasing a taxpayer’s allowable interest expense deduction.
- Domestic R&D Expenses
- Allows for immediate deduction of domestic research and development (R&D) expenses for taxable years beginning after December 31, 2024, and before January 1, 2030.
- Section 199A Qualified Business Income Deduction
- Qualified business income deduction becomes permanent.
- Deduction percentage increases from 20% to 23% and includes changes to the phase-out calculation.
- Excess Business Loss Limitation
- Business loss limitation becomes permanent.
- Changes carryforward treatment of any losses that were disallowed in taxable years beginning after December 31, 2024.
- Clean Energy Tax Credits
- Eliminates and/or accelerates phase-out of numerous tax credits for green energy and clean energy production.
- Qualified Opportunity Zone Investment
- Initiates a second round of Qualified Opportunity Zone (QOZ) investments, beginning with 2027.
- Changes will likely expand availability of the program to rural areas.
As TOBBB progresses through the process, keep the lines of communication open with your tax adviser. While there are various provisions merely being extended and/or made permanent without major changes from current law, others could significantly impact individuals’ and businesses’ tax strategies and planning opportunities.
Contact Robert Venables or a member of your service team to discuss this topic further.
In this blog Cohen & Co is not rendering legal, accounting, investment, tax or other professional advice. Rather, the information contained in this blog is for general informational purposes only. Any decisions or actions based on the general information contained in this blog should be made or taken only after a detailed review of the specific facts, circumstances and current law with your professional advisers.