In a landmark move with far-reaching implications, Congress has passed and President Trump has official signed into law a sweeping tax reconciliation bill. This comprehensive bill includes a mix of permanent extensions to the Tax Cuts and Jobs Act (TCJA), new deductions, international tax reform, energy credit rollbacks, and significant compliance updates. Whether you’re an individual taxpayer, business owner, or multinational enterprise, this legislation likely impacts you.
At BrilTax Advisors, we’ve studied the bill and are breaking down the most important takeaways for our clients. Here’s what you need to know:
Business Tax Provisions
Permanent 100% Bonus Depreciation
Businesses can permanently deduct 100% of qualified property costs placed in service after January 19, 2025. This includes a new elective provision for 100% depreciation on “qualified production property,” such as facilities used for manufacturing, refining, or agricultural production. Offices, lodging, and research space are excluded.
Planning tip: Consider accelerating capital investments to maximize this benefit.
Expanded Section 179 Deduction
The maximum deduction under Section 179 increases to $2.5 million, with a phaseout beginning at $4 million, both indexed for inflation starting in 2025. This aligns well with small- to mid-sized businesses planning for growth.
Research & Development (Section 174)
The bill restores immediate expensing of domestic R&D costs, reversing the 2022 TCJA requirement to amortize over five years. The new Section 174A covers software development and includes optional transition rules, including:
Expensing unamortized amounts from 2022–2024 in the first year after 2024, or
Spreading them over the first two post-2024 years.
Small businesses may retroactively amend returns to claim deductions — unless they fall into a tax shelter category.
Section 163(j) Interest Deduction Rule Changes
Amortization, depreciation, and depletion are excluded from ATI (Adjusted Taxable Income) for the purposes of the business interest limitation, restoring broader deductibility.
But beginning in 2026, disallowed capitalized interest will be treated less favorably, impacting future carryforwards. Interest capitalized to certain assets will now be included in the limitation.
Section 199A Pass-Through Deduction
The popular 20% qualified business income (QBI) deduction for pass-throughs is made permanent. Additional improvements include:
A new minimum $400 deduction for taxpayers with at least $1,000 in QBI.
More generous phaseouts for those in specified trades or with low wage/capital investment.
Individual Tax Relief & Extensions
Tip Income Deduction – Up to $25,000 (2025-2028)
If you work in a service profession where tipping is customary — such as restaurants, hospitality, or personal care — you may be eligible for a deduction of up to $25,000 per year on reported tips.
- Applies to tips reported on Forms W-2, 1099-K, or 1099-NEC
- Begins phasing out at $150,000 (single) or $300,000 (married filing jointly)
- Employers must report qualifying tips; businesses in “specified trades or businesses” are excluded
- Self-employed individuals may face limitations
Overtime Pay Deduction – Up to $25,000
W-2 employees required to work overtime under the Fair Labor Standards Act (FLSA) may now deduct up to:
- $12,500 (single)
- $25,000 (married filing jointly)
This deduction also phases out at $150K/$300K of modified AGI and only applies to qualified overtime compensation (not bonuses or commissions). Employers will have to report overtime compensation separately going forward.
Auto Loan Interest Deduction – Up to $10,000
For the first time in decades, interest on auto loans will be tax-deductible — with conditions:
- Deduction capped at $10,000
- Only applies to loans on U.S.-assembled passenger vehicles
- Deduction phases out starting at $100,000 (single) and $200,000 (joint)
- Excludes leased vehicles, commercial vehicles, and previously purchased vehicles used as collateral for loans
New Personal Exemption for Seniors
For the 2025–2028 tax years, individuals age 65 and older will be allowed to claim a $6,000 personal exemption, even if they don’t itemize.
- Phases out at $75,000 (single) and $150,000 (joint)
- Designed to offset the loss of personal exemptions under prior tax reform
Charitable Giving Incentives
The bill makes two important changes to charitable contributions:
- Non-itemizer deduction: Permanent deduction for non-itemizers up to $2,000 (joint) or $1,000 (single)
- 0.5% haircut for itemizers: A small reduction in deductible value (0.5%) for high-income itemizers
SALT Deduction Cap Adjustments
The controversial cap on state and local tax (SALT) deductions is extended permanently, but temporarily increased:
- 2025 SALT Cap: $40,000
- Phase-down: Gradually reduced to $10,000 by 2030
- Income threshold for phaseout: Starts at $500,000
Opportunity Zones & Real Estate Changes
Qualified Opportunity Zones (QOZs)
The QOZ program becomes permanent, but new rules will:
- Require recognition of deferred gains after five years, with a 10% basis bump
- Limit basis step-ups after 30 years
- Create new rural opportunity zones with up to a 30% basis bump and reduced improvement thresholds
- Enforce stricter reporting for QOFs and QOZBs
Residential Construction Relief
All residential builders, not just homebuilders, now qualify for:
- Exemptions from the percentage-of-completion method
- Extended allowable construction periods (2 → 3 years)
- Exemption from uniform capitalization (UNICAP) rules if they meet the gross receipts test
Energy & Environment Changes
The bill repeals or phases out many energy credits, including:
- EV and clean vehicle credits
- Residential energy efficiency incentives
- Hydrogen production credits
- Clean fuel credits (with tighter sourcing rules)
Prohibited foreign entity restrictions apply across the board, tightening compliance for global supply chains.
Other Notable Changes
- 1099 Reporting Thresholds:
- Form 1099-K: Restores original thresholds — $20,000 & 200 transactions
- Forms 1099-MISC/NEC: Raised from $600 to $2,000 starting 2026
- New 1% Remittance Tax on money orders, cashier’s checks, and similar physical transfers (exceptions apply)
- Estate & Gift Tax Exemption: Permanently set at $15 million starting 2026
- ERC (Employee Retention Credit):
- Refunds barred after Jan 31, 2024
- Extended 6-year statute of limitations
- Increased penalties for improper claims
Let’s Talk
Need help understanding how this bill impacts your personal or business taxes? Want to prepare before these rules take full effect? BrilTax Advisors is here to guide you.
