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Executive Summary

Passed on July 4, 2025, OBBBA locks in most of the 2017 TCJA individual rates, permanently restores 100% bonus depreciation (for property placed in service after Jan. 19, 2025), widens the Section 199A (QBI) phase‑out ranges beginning in 2026, raises the estate/gift exemption to $15M per person starting 2026, and creates several temporary below‑the‑line deductions (2025–2028). It also reshapes itemized deductions (including a higher, but income‑phased, SALT cap through 2029 and a new 2⁄37 limitation for only the 37% bracket beginning 2026), tightens AMT phase‑outs from 2026, expands QSBS, and reboots Opportunity Zones beginning 2027. The law adds complexity but also opens clear windows to shift income, deductions, and basis — especially over the next 12–24 months. [1][2][3][4]

What Actually Changed (and Why It Matters)

Rates, Brackets & Standard Deduction (Permanent)

TCJA brackets (10%, 12%, 22%, 24%, 32%, 35%, 37%) are permanent; the 10% and 12% brackets get an extra inflation ‘catch‑up’ in 2026. Standard deduction rises modestly in 2025 ($15,750 single / $31,500 MFJ) and remains indexed. [1]


SALT Cap (Bigger — but Watch the Cliff)

Cap rises to $40,000 for 2025, then increases 1%/yr through 2029; in 2030 it reverts to $10,000 unless renewed. A steep phasedown reduces the allowable SALT cap by 30% of MAGI above $500k (single/MFJ thresholds scale annually); by ~$600k MAGI in 2025 you are effectively back to $10,000. Planning in the $500k–$600k band is critical. [1]

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Itemized Deductions for Top Bracket Only (2026+)

Starting in 2026, if your taxable income lands in the top 37% bracket, the IRS trims the value of your Schedule A itemized deductions. In plain English: your deductions won’t stretch quite as far — they’re shaved so that each $1 of deduction saves roughly 35¢ of tax instead of 37¢. The haircut equals 2⁄37 of the smaller of (1) your total itemized deductions or (2) the amount your income exceeds the 37%‑bracket threshold. This rule does not change how the Section 199A (QBI) deduction is calculated. [1][5]


Quick example: If you have $200,000 of itemized deductions and you’re in the 37% bracket, your allowable deductions are reduced by 2⁄37 × $200,000 ≈ $10,811, leaving $189,189 to claim. The tax saved on those deductions is effectively ~35% of the original $200,000 rather than 37%.


AMT (2026+): Fewer in AMT, But a Sharper “Bump Zone”

Exemptions remain high, but the phase‑out thresholds drop to ~$500k single / $1M joint and the phase‑out rate doubles to 50%, creating a narrow zone where effective marginal rates can jump into the low‑40s. ISO exercises are the classic tripwire. [1]

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Section 199A QBI (Permanent; Wider Phase‑Outs in 2026)

The 20% deduction remains. Starting 2026, the phase‑out width expands from $50k/$100k (single/MFJ) to $75k/$150k. Specified Service Trade or Businesses (SSTBs) still phase out to $0; non‑SSTBs phase down to the wage/property (WDP) limit. Minimum $400 deduction (indexed) for ≥$1,000 of active QBI begins 2026. [1]


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Bonus Depreciation & Capex (Permanent for property placed in service after Jan. 19, 2025)

100% bonus depreciation is back and made permanent for qualifying MACRS property placed in service after 1/19/2025, eliminating the scheduled 60/40/20% step‑down. Coordinate with expanded Section 179 limits. [3]


R&D (Sec. 174) & Business Interest (Sec. 163(j))

Domestic R&D expensing returns permanently for tax years beginning after 12/31/2024; foreign R&D remains 15‑year amortization. [6]• The interest limitation reverts to the more generous EBITDA base (vs. EBIT) for tax years beginning after 12/31/2024. [4]


Auto Loan Interest, Tips & Overtime (Temporary 2025–2028)

New below‑the‑line deductions available whether or not you itemize: up to $10,000 of qualified auto loan interest on new, U.S.‑assembled vehicles; deductions for tips (up to $25k) and overtime ($12.5k single / $25k MFJ), all with income phase‑outs. These reduce taxable income but not AGI; payroll taxes still apply to wages. [1][2]


Charitable Giving

From 2026, itemizers face a new 0.5% of AGI floor on charitable deductions (with specific ordering rules and carryforward mechanics). Separately, a permanent above‑the‑line cash‑only charitable deduction for non‑itemizers begins in 2026 ($1,000 single / $2,000 MFJ). 2025 may be the better year for large gifts/DAF funding. [1]


Estate & Gift Tax (2026+)

Exemption rises to $15MM per person ($30MM MFJ) in 2026 and remains indexed. Do not unwind existing SLATs/GRATs blindly; revisit goals, access, and state estate taxes. [2]


QSBS Super‑charged (for stock acquired after July 4, 2025)

Exclusion cap increases to $15M per issuer (indexed). Partial exclusions allowed at 3 years (50%) and 4 years (75%); 5 years retains 100%. The “small business” asset threshold expands from $50M to $75M, widening eligibility. Old QSBS rules still govern pre‑7/4/25 stock. [7][8][9]


Opportunity Zones 2.0 (2027+)

States can redesignate zones every 10 years starting 2026; new investments starting 2027 get deferral to the earlier of sale or 5 years and a 10% basis step‑up (30% for rural funds meeting tests). 10‑year gain exclusion on post‑investment appreciation remains. [10]


Information Reporting Relief

1099‑K threshold restored to $20,000 and 200 transactions (retroactive treatment to align with ARPA context). [11]• 1099‑NEC/MISC threshold increases to $2,000 beginning 2026 (inflation‑indexed from 2027). [12]

Planning Strategies for Business Owners & High-Net-Worth Families (Narrative Guidance)


1) Tame the New Marginal‑Rate Traps

The largest avoidable costs are now implicit. First, the SALT phasedown: between ~$500k and ~$600k MAGI (2025), every $1 of income effectively adds ~$1.30 of taxable income until the cap hits the $10k floor. In those bands, prefer above‑the‑line deductions (HSA, SEP/401(k) employer, entity‑level PTET, R&D expensing) and defer/shift income (installment sales, deferred comp, asset‑sale allocations). Second, the AMT bump zone (from 2026) can drive effective rates into the 40s. Avoid ISO exercises there; if exercising, consider doing so in 2025 while thresholds are higher. [1]


2) Capex & Cost Segregation: Make 100% Bonus Work for You

Permanent 100% bonus depreciation changes the calculus for equipment, leasehold improvements, vehicles (business use percentage applies), and eligible building components identified in a cost‑segregation study. Unlike Section 179, bonus has no dollar cap and can create NOLs. However, “all‑in bonus” isn’t always optimal — coordinate with QBI (WDP limit), state conformity, basis planning, and future exit (recapture). [3]


3) SALT Bunching with Property Taxes: Double-Up In One Calendar Year (Where Allowed)

Paying two years of real estate taxes in one calendar year can be an elegant way to fully use the temporary, higher SALT cap and then default to the standard deduction in the off‑year. This is most effective in 2025–2029 while the cap is $40,000 (indexed ~1%/yr from 2026–2029) and before it reverts in 2030.


How it works. In many jurisdictions you receive two installments each year and the next year’s bill (or first installment) is assessed before December 31. If you pay the current year’s remaining installment and the next year’s assessed installment by December 31, both payments fall into the same tax year on Schedule A, allowing you to “bunch” SALT deductions in one year and take the standard deduction in the next. You deduct real estate taxes in the year paid, but only for amounts that have been assessed by your locality. Pure prepayments of unassessed future taxes aren’t deductible. If you escrow, the deduction occurs when the servicer remits to the taxing authority. [12][13]


Guardrails & cautions

  • The SALT cap phases down by 30% of MAGI between roughly $500k and $600k in 2025 (thresholds rise ~1%/yr through 2029). In that band, each extra dollar can simultaneously reduce your cap, so model the net benefit before bunching. [1][14]

  • AMT warning: state & local taxes aren’t deductible for AMT; bunching provides no benefit in an AMT year. [1]

  • Coordinate with PTET: if your entity‑level state tax already fills the cap, property‑tax bunching may not add value.

  • Cash‑flow & timing: Confirm your county has actually assessed the second payment before year‑end; otherwise it won’t be deductible this year. [13]


Example (MFJ, 2025): MAGI $420k; expected state income tax $18k; annual property tax $24k. If they pay the 2025 and the (assessed) 2026 property tax in December 2025, Schedule A reflects $66k of SALT paid in 2025 but is capped at $40k. In 2026 they’ll have only the state income tax (~$18k) and likely take the standard deduction instead. Net: one year maximizes the SALT cap; the other avoids “orphaned” deductions below the cap. Results vary by AMT exposure and local assessment timing.

 

4) QBI: Re‑underwrite Compensation & Wages/Property

From 2026, wider phase‑outs extend the range where planning matters. S‑corp owners should revisit reasonable comp to balance FICA, QBI (only on pass‑through profits), and the WDP limit. SSTBs should model income deferral/acceleration across years to avoid falling into a full wipe‑out in high‑income years. [1]


5) Liquidity Events: QSBS & Entity Choice

If you can credibly operate as a C‑corp, the expanded QSBS regime (new $15M cap, 3/4/5‑year tiers, $75M asset ceiling) strengthens the case for new ventures issuing post‑7/4/25 stock. Scrub Section 1202 eligibility early (active business tests, asset mix) and paper original issuance/holding period tracking. For partnerships/S‑corps contemplating roll‑ups or spin‑outs, consider whether a C‑corp “newco” for growth assets is warranted. [7][8][9]


6) Philanthropy: 2025 Is a Gift Year

Because the new 0.5% AGI floor begins in 2026, front‑load large gifts in 2025 (including DAF funding and appreciated securities). Thereafter, bunch gifts to exceed floors and AGI caps so disallowed amounts (and their associated floor reductions) carry forward rather than being lost. Non‑itemizers can use the new above‑the‑line cash deduction from 2026. [1]


7) Family Wealth & Estates

The 2026 exemption ($15M PP) reduces urgency but doesn’t eliminate planning. Keep portability/GST elections current; review SLATs and sales to IDGTs to ensure cash‑flow and governance still fit. State estate/inheritance taxes may still bite, regardless of Federal relief. [2]

Implementation Checklist (Next 90-180 Days)


  1. Project 2025 & 2026 MAGI, taxable income, and AMT; flag SALT‑cliff and AMT bump‑zone risks.

  2. Charitable timing: execute 2025 gifts/DAF funding if appropriate; map 2026+ bunching cadence.

  3. Equity comp: evaluate ISO exercises in 2025 vs. deferral; favor NSOs/RSUs if AMT persists.

  4. Capex: align placed‑in‑service dates with income/QBI goals; order cost‑seg studies.

  5. Entity taxes: re‑evaluate PTET elections and estimated payments.

  6. Comp design: revisit S‑corp reasonable comp; model QBI under 2026 phase‑outs.

  7. Estate plan: refresh docs; confirm portability/GST allocations; check state regimes.

  8. Information reporting: update A/P and platforms for the $2,000 1099‑NEC/MISC rule (2026) and restored 1099‑K thresholds. [11][12]


References

[2] HCVT. “One Big Beautiful Bill Act — Summary.” (Jul. 11, 2025). https://www.hcvt.com/alert-One-Big-Beautiful-Bill-Act-Summary

[3] Thomson Reuters. “The OBBBA Awards: Bonus Depreciation Made Permanent.” (Jul. 2025). https://tax.thomsonreuters.com/blog/the-obbba-awards-recognizing-the-biggest-hits-and-misses-of-the-bill/

[6] Barnes Dennig. “Immediate R&D Expensing under OBBBA §174(a).” (Jul. 14, 2025). https://www.barnesdennig.com/obbba-rd-expenditure-relief/

[9] Nelson Mullins. “QSBS Gets a Makeover: Key Changes under OBBBA.” (Aug. 2025). https://www.nelsonmullins.com/insights/insights/qsbs-gets-a-makeover-key-changes-under-the-obbba

[10] Balcones CPA. “OBBBA and Opportunity Zones (2027+ changes).” (Jul. 2025). https://balconescpa.com/blog/obbba-and-opportunity-zones/

[11] Avalara. “OBBBA restores 1099‑K to $20,000/200.” (Jul. 15, 2025). https://www.avalara.com/blog/en/north-america/2025/07/one-big-beautiful-bill-act-1099-reporting-threshold.html

[12] CPA Practice Advisor. “OBBBA Changes 1099 Thresholds (NEC/MISC to $2,000).” (Jul. 30, 2025). https://www.cpapracticeadvisor.com/2025/07/30/one-big-beautiful-bill-act-changes-1099-thresholds/165863/

[13] IRS Schedule A Instructions (assessed-and-paid rule for property tax prepayments). https://www.irs.gov/pub/irs-pdf/i1040sca.pdf

[14] Bipartisan Policy Center. “SALT Deduction Changes in the One Big Beautiful Bill Act.” (Jul. 30, 2025). https://bipartisanpolicy.org/explainer/salt-deduction-changes-in-the-one-big-beautiful-bill-act/


Important Disclosures

Avail and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

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