A new tax proposal for business owners – the “One Big Beautiful Bill” – is working its way through Congress. It passed the House in May and is now in the hands of the Senate, where it’s facing revisions, debate, and negotiation. Nothing is final yet.
Still, if the bill (or even parts of it) becomes law, it could bring major tax changes for business owners, working families, and retirees.
We know you don’t have time to read a few hundred pages of tax code, so here are the Cliff Notes. Here’s what’s currently in the proposal and why it might matter.
Bonus Depreciation May Be Returning
The bill proposes reinstating 100 percent bonus depreciation for four years. That means you could deduct the full cost of qualifying equipment, machinery, or assets in the year you place them in service, instead of depreciating them over time.
This could lower your tax bill and free up cash, especially if you’ve already made big purchases this year.
The provision applies to purchases made after January 19, 2025, so most purchases in 2025 would qualify, assuming they’re in use.
A Higher SALT Cap (But It’s in Limbo)
The House version raises the state and local tax (SALT) deduction cap from $10,000 to $30,000 for individuals earning under $400,000. The Senate version goes further, proposing a $40,000 cap through 2029.
But those numbers are still under negotiation, and the final version could look very different.
A Shift in How Business Losses Are Treated
Currently, excess business losses can be carried forward to offset future income. The proposal would require you to apply those losses to the very next year instead, which could change long-term tax planning.
A Slight Boost to the QBI Deduction
For pass-through businesses, the Qualified Business Income (QBI) deduction would increase from 20% to 23%, and be made permanent starting in 2026.
That might mean a slightly lower tax bill for some business owners, though service-based businesses may still face limitations. Corporate tax rates remain unchanged.
R&D Deductions Would Be Back
If your business incurs research and development costs, you’d once again be able to deduct those expenses fully in the year they occur, from 2025 through 2029. This reverses recent rules that required spreading those deductions over multiple years.
The change isn’t retroactive, meaning expenses from 2022 to 2024 would remain under the current rules.
End of the PTET Workaround?
Some business owners have used the Pass-Through Entity Tax (PTET) election to work around the SALT cap. The bill proposes eliminating this strategy, especially for service businesses. If you’re using it now, it’s time to revisit your approach.
New (and Unusual) Deductions
The bill includes some lesser-known deductions:
- Tips: Some qualified cash tips could be deductible above the line.
- Overtime: A deduction for certain overtime pay, up to 1.5x the employee’s normal wage.
Details are still fuzzy and may change in the final version.
Social Security Deduction for Seniors
Retirees aged 65+ could deduct up to $4,000 of Social Security income. This wouldn’t change Social Security itself, but it would reduce taxable income for many seniors.
Deduction for Auto Loan Interest
If you finance a business-use vehicle assembled in the U.S. between 2025 and 2028, you could get up to a $10,000 deduction on the interest. The vehicle must be used for business.
Section 179 Expensing Gets a Lift
Section 179 expensing—the rule that lets businesses deduct the full cost of eligible purchases in the year they’re made—would go up to $2.5 million, with a phaseout beginning at $4 million.
Changes to 529 Plans and New Savings Accounts for Kids
The bill expands 529 plan uses to include:
- Private school and homeschooling expenses
- Licensing costs, like the bar exam or CPA certification
It also proposes new “MAGA Accounts” for kids born after 2025, with a $1,000 government contribution and $4,000 in allowed annual contributions. These would end after 2029.
Gym Memberships Could Become HSA-Eligible
The House version includes a provision allowing HSA funds to be used for gym memberships, capped at $500 for individuals and $1,000 for couples. The Senate version omits this, so it may not make the final bill.
A Few More Highlights
- Charitable deductions: A return of the $300 (or $600 for couples) above-the-line deduction.
- Green energy credits: Restructured and reduced, phasing out by 2027.
- ERC penalties: A flat $1,000 fine for fraudulent Employee Retention Credit claims.
So, What Now?
The Senate has not passed the bill. Lawmakers are working to reconcile key differences between the House and Senate versions, and it’s unclear what will survive in the final legislation.
But if even half of this becomes law, it could significantly change how you invest in your business, manage deductions, and plan ahead.
Want to Talk Strategy?
This is just the tip of the iceberg. The bill is still evolving, and many of these provisions could change before anything becomes law.
At Affinity Accounting, we’re staying on top of the updates so you don’t have to. If you’re thinking about major purchases, restructuring, or just want to plan ahead with confidence, now’s the time to talk.
You can get in touch with us over on our Contact page to get started.
Stay tuned for further updates!
