If you’ve been waiting to see how Washington would shake things up with taxes, the wait is over.
President Trump just signed the Big Beautiful Bill, officially called the 2025 Tax Relief Act, and it brings big changes for both individuals and business owners.
Let’s break down what’s in it, what it means for your finances, and how to start planning now.
Note: Most of these changes apply to tax years starting in 2026, unless otherwise noted.
First Things First: What’s Actually in the Bill?
This is a big one. Think sweeping reform with permanent changes to the Tax Cuts and Jobs Act (TCJA), plus new perks for business owners, real estate investors, and 1099 earners.
Here are the headline updates:
For Individuals
Tax Brackets Stay Lower
The reduced tax brackets from the 2017 TCJA (like 10%, 12%, 22%, 24%) are now permanent starting in 2026.
What that means:
You’ll keep more of your income. For example, someone making $180,000 as a married couple will stay in the 24% bracket, instead of jumping up to 28% like they would have under old rules.
Bigger Child Tax Credit
The credit goes from $2,000 to $2,200 per child, with up to $1,700 of that refundable. Both amounts will increase with inflation. You’ll need to meet income and Social Security number requirements to qualify.
Larger Standard Deduction
The higher standard deduction amounts from the TCJA will also be made permanent. For 2025, it’s $31,500 for married couples.
Temporary Breaks for Overtime and Tips
From 2025 through 2028, taxpayers can deduct up to $12,500 of overtime income and up to $25,000 in tips (double those limits if you’re married filing jointly). These deductions phase out if your income is above $300,000 (married) or $150,000 (single).
New Deduction for Seniors
Taxpayers age 65 and older will get a new $6,000 deduction, as long as their income is below $150,000 (married) or $75,000 (single). This one also applies only from 2025 through 2028.
SALT Deduction Expanded (Temporarily)
The state and local tax deduction cap jumps from $10,000 to $40,000 in 2025, then gradually phases back down to $10,000 by 2030. The deduction phases out for incomes above $500,000 (married) or $250,000 (single).
Why it matters:
This is a big win for taxpayers in high-tax states like California, New York, and New Jersey. The timing of your property tax and estimated state income tax payments could impact how much you deduct.
New Use Cases for 529 Plans
You can now use 529 plans to pay for certain credentialing expenses, including CPA licensing fees, job training certifications, and more, not just traditional college costs.
Why it matters:
This creates more flexibility for families saving for non-college education, and for professionals who want to use tax-advantaged funds to pay for required licenses or exams.
Auto Loan Interest Deduction (2025–2028 Only)
There’s a temporary deduction for up to $10,000 of interest paid on new auto loans, but only if the car was assembled in the U.S. This deduction phases out at $200,000 (married) or $100,000 (single).
Why it matters:
If you’re planning a vehicle purchase in the next few years, this might be worth factoring into your financing decision.
Excess Business Loss Limitation Becomes Permanent
If you own a business and experience a large loss, you can no longer deduct all of it at once. There’s a permanent cap on how much you can write off in a single year. The rest carries forward as a net operating loss.
Why it matters:
This mostly affects real estate professionals and owners of pass-through businesses. It limits how much one year’s loss can reduce your tax bill.
For Business Owners
100% Bonus Depreciation is Back
Businesses can now immediately deduct the full cost of qualified purchases like equipment, leasehold improvements, and certain building components.
Why it matters:
Let’s say you spend $200,000 upgrading your office. You can write off the entire amount right away, possibly saving $60,000 or more in taxes.
What to do:
If you’re planning upgrades or equipment purchases, this is the year to act. You’ll want to plan around income and financing to make the most of it.
20% QBI Deduction Made Permanent
The deduction for S Corps, partnerships, and sole proprietors is here to stay, with higher income limits. But phaseouts still apply.
What to know:
For 2026 and beyond, service-based businesses (like law, medicine, consulting) will still see their QBI deduction phase out starting at around $400,000 in taxable income (married).
What to do:
Entity structure matters. An S Corp may help you reduce self-employment tax and keep income under QBI limits.
Research & Development Deductions Reinstated
Businesses can now deduct domestic R&D expenses immediately again, rather than spreading them out over five years.
Why it matters:
This is especially useful for startups or product-focused businesses. If you paid for software development or product testing in recent years, you might be able to amend old returns and get a refund.
What to do:
Review expenses from 2022 to 2024 to see if you qualify. Smaller businesses may have a refund window. Larger ones can take catch-up deductions starting in 2025.
Section 179 Limit Increased
The limit for immediate expensing of qualifying equipment rises to $2.5 million, with phaseouts starting at $4 million.
Why it matters:
More businesses can now write off more of their purchases. This works well for used equipment and doesn’t require as much income to qualify, unlike bonus depreciation.
What to do:
Coordinate this with bonus depreciation to maximize deductions across several years.
SALT Deduction Workarounds Made Stronger
In states that allow it, pass-through entities can pay state taxes at the entity level to bypass the $10,000 cap on personal deductions.
Why it matters:
This is now a key strategy for high-income S Corp and partnership owners in high-tax states. It lowers your personal tax liability without needing to itemize.
What to do:
Elect PTET if available in your state, and plan around the estimated payment deadlines. This strategy can save thousands, but only if done correctly.
1099 Reporting Thresholds Increased
Starting in 2026, the reporting thresholds for 1099-NEC and 1099-MISC will rise from $600 to $2,000. These thresholds will also adjust for inflation starting in 2027.
Why it matters:
This may reduce the number of 1099s businesses are required to send to contractors and vendors, but you still need to track payments closely.
Real Estate Owners: Here’s Where It Gets Interesting
If you own the building where your business operates, or you’re thinking about investing in real estate like a short-term rental, this bill gives you more ways to save on taxes.
Here’s how:
Bonus depreciation is back at 100%. That means you can immediately deduct the cost of eligible real estate improvements like:
- New HVAC systems or roofs
- Interior buildouts and renovations
- Certain structural components of a building you own and use for your business
Let’s say you spend $150,000 renovating your warehouse or office. With bonus depreciation fully restored, you can deduct the entire $150,000 right away, instead of spreading it out over many years. That could save you $50,000 or more in taxes in the year you do the work.
You can also use those depreciation losses to offset other active income.
If you’re an active participant in a short-term rental or your professional practice, those paper losses (from depreciation) can reduce your income tax bill, even if the property is generating positive cash flow.
Why this matters right now:
If interest rates drop later this year, we may see a resurgence in real estate activity. That could drive up prices. But right now, with bonus depreciation fully back in play and prices still relatively stable, there’s a short window to buy, renovate, and capture big tax deductions before the market heats back up.
Estate and Gift Tax Planning Gets a Lifeline
The unified estate and gift tax exemption was set to drop in 2026, but this bill makes the higher limits permanent.
What to know:
The exemption is now locked in at $15 million per person, or $30 million per married couple (indexed for inflation).
Why it matters:
This is a big opportunity for families with significant assets, business owners planning succession, and anyone who wants to gift large amounts without triggering estate tax.
What to do:
If you’re considering gifting or transferring ownership of a business or property, now is a great time to revisit your estate plan.
Final Thoughts
This bill is more than just tax cuts. It opens new planning opportunities for almost every kind of taxpayer.
But knowing the law is just step one. You have to apply it in a way that helps your specific situation.
That’s where we come in. At Affinity Accounting, we don’t just explain the law. We show you how to use it to save money, reinvest in your business, and move forward with confidence.
If you want to talk through how this bill affects you or your business, get in touch with our team. We’re always here to help.
Simply head over to our contact page to book an introductory call.
Until next time!
