Key Tax Law Changes for Individuals and Businesses Under the OBBBA

On July 4, President Trump signed into law the far-reaching legislation known as the One, Big, Beautiful Bill Act (OBBBA). As expected, it extends and enhances many of the tax breaks from the Tax Cuts and Jobs Act (TCJA). It also includes several of Trump's campaign promises — though many are only temporary — and eliminates tax breaks related to clean energy. Here's a rundown of some of the main tax law changes to be aware of as you plan for the 2025 tax year.

Highlights for Individuals

• Makes permanent the TCJA's individual tax rates of 10%, 12%, 22%, 24%, 32%, 35% and 37%,
• Makes permanent the near doubling of the standard deduction, plus for 2025 increases it to $15,750 for single filers, $23,625 for heads of households and $31,500 for joint filers, with annual inflation adjustments going forward,
• Makes permanent the higher child tax credit, plus for 2025 increases it to $2,200, with annual inflation adjustments going forward,
• Temporarily increases the limit on the deduction for state and local taxes (the SALT cap) to $40,000 for 2025, with a 1% increase each year through 2029, after which the $10,000 limit will return,
• Expands the allowable education expenses that can be paid with tax-free Section 529 plan distributions, beginning July 5, 2025, or Jan. 1, 2026, depending on the type of expense,
• Permanently increases the federal gift and estate tax exemption amount to $15 million for individuals and $30 million for married couples beginning in 2026, with annual inflation adjustments going forward,
• For 2025–2028, creates a new deduction of up to $25,000 for tip income in certain industries, subject to income-based phaseouts,
• For 2025–2028, creates a new deduction of up to $12,500 for single filers or $25,000 for joint filers for qualified overtime pay, subject to income-based phaseouts,
• For 2025–2028, creates an above-the-line deduction of up to $10,000 for qualified passenger vehicle loan interest on the purchase of certain American-made vehicles, subject to income-based phaseouts,
• For 2025–2028, creates an additional deduction of up to $6,000 for taxpayers age 65 or older, subject to income-based phaseouts, and
• Eliminates clean energy tax credits, generally after 2025, such as the energy-efficient home improvement and residential clean energy credits — but eliminates the clean vehicle credits for both new and used vehicles after Sept. 30, 2025.

Highlights for Businesses

• Makes permanent and expands the 20% Sec. 199A qualified business income (QBI) deduction for owners of pass-through entities (such as partnerships, limited liability companies and S corporations) and sole proprietorships,
• Makes bonus depreciation permanent and increases it to 100% for qualified new and used assets acquired after January 19, 2025,
• Increases the Sec. 179 expensing limit to $2.5 million and the expensing phaseout threshold to $4 million for 2025, with annual inflation adjustments going forward,
• Permanently allows the immediate deduction of domestic research and experimentation expenses (retroactive to 2022 for eligible small businesses), and
• Eliminates clean energy tax incentives, such as the alternative fuel vehicle refueling property credit and the Sec. 179D deduction for energy-efficient commercial buildings after June 30, 2026 — but eliminates the qualified commercial clean vehicle credit after Sept. 30, 2025.

How Will You Be Affected?

While this list may seem extensive, it represents just a sampling of the tax changes included in the 870-page OBBBA. Contact the office with questions about how the new law will affect you.

Closing a Business? Here's How to Stay on Top of Your Tax Duties

Businesses close for various reasons. Perhaps you’re ready to embark on a welcome change such as retirement or launching a new venture. Or maybe it just no longer makes financial sense to continue operating your current business. Whatever the reason, closing your business is a significant milestone, and part of wrapping things up means taking care of a few tax responsibilities.

Final Income Tax Returns

You’ll need to file a final income tax return and other required forms for your last year of operation. The specific forms you’ll file depend on your business structure:

Sole proprietorships: File Schedule C, Profit or Loss from Business, with your individual return for the year you close. You may also need to report self-employment tax.

Partnerships: File Form 1065, U.S. Return of Partnership Income, and report capital gains/losses on Schedule D. Mark the return and each Schedule K-1 as “final.”

All corporations: File Form 966, Corporate Dissolution or Liquidation, if you adopt a resolution to dissolve the corporation or liquidate stock.

C corporations: File Form 1120, U.S. Corporation Income Tax Return, for the closing year and report capital gains/losses on Schedule D. Check the “final return” box.

S corporations: File Form 1120-S, U.S. Income Tax Return for an S Corporation, for the year of closure and report gains/losses on Schedule D. Mark the return and each Schedule K-1 as “final.”

Regardless of business structure, additional forms may be required if you sell the business, report the sale of business property or record asset acquisitions.

Final Payments to All Workers

If you have employees, you must pay them whatever final wages and compensation are owed, make final federal tax deposits and report employment taxes. Don’t neglect to withhold all income, Social Security and Medicare taxes due and pay these taxes over to the IRS. Overlooking that requirement can result in full personal liability for what’s known as the Trust Fund Recovery Penalty. That’s an outcome to avoid.

Did you pay any independent contractors at least $600 during the calendar year you’re closing your business? If so, you must report those payments on Form 1099-NEC, “Nonemployee Compensation.”

More Loose Ends to Be Tied

If your business has an employee retirement plan, it’s essential to properly terminate it and distribute any remaining benefits. That process comes with its own checklist, including specific notice, funding and filing requirements. The same is true for employee benefit accounts such as Flexible Spending Accounts, Health Savings Accounts and other programs for your employees.

There are additional complex tax matters that may come into play, such as cancellation of debt, using up net operating losses, unlocking passive activity losses, depreciation recapture and even bankruptcy-related considerations. Addressing them can feel overwhelming, but you don’t have to do it alone. Contact the office for help.

Don’t forget about your business records. Depending on the type of records, there are specific rules for how long to retain them. When everything is squared away, you’ll also need to close your IRS business account. Note that while the Employer Identification Number itself is permanent, after receiving confirmation that the business has closed and verifying that there are no outstanding taxes or other issues, the IRS will make the account inactive.

What Else?

If your business is unable to pay all the taxes it owes, there are payment options available. To learn about these options, to ask about specific record retention rules or for any other issues, contact the office.

Reasons and Rules for Filing an Amended Return

Once a tax return is filed, most people breathe a little easier. But it’s not uncommon to realize too late that something was left off a return, figures were misreported or some other error was made. Accuracy is essential, but, depending on the type of error, an amendment may not be required.

Reasons to Amend

Generally, you should amend only to correct reported items such as filing status, dependents, income, deductions or credits.

For example, you should file an amended return if:

• You would have benefited from filing as head of household instead of single,
• You incorrectly reported your number of dependents,
• You received additional or corrected W-2s or 1099s after filing, or
• You realized you qualified for a deduction or credit you didn’t claim.

Filing an amended return may also be beneficial if Congress passes retroactive tax law changes that affect your return.

Errors That Don’t Call for an Amendment

You don’t need to amend your return for math errors. The IRS will correct them. Also, if you forgot to attach a W-2 or schedule, the IRS will request the missing documents directly.

If you get a CP2000 notice (noting underreported income based on discrepancies between what the IRS has on file and what you reported), you shouldn’t need to file an amended return to report that income, even if there are corrections to the adjustments proposed by the IRS.

What and When to File

In general, you can file an amended tax return (Form 1040x) and claim a refund within three years from the date you filed your original return or within two years of paying the tax, whichever is later. For example, if you filed your 2024 tax return on April 15, 2025, you’ll have until April 15, 2028, to file an amendment.

Some exceptions allow more time. For instance, if you’re claiming a bad debt, the statute of limitations is seven years from the tax return’s due date for the year the debt became worthless.

You also may have an extended deadline if you were affected by a federally declared disaster or are eligible for other exceptions.

File a separate form for each year you’re amending and include all relevant forms and schedules. You can amend a return more than once.

Have Questions?

Amending your federal return may also require amending your state return(s). Other tax implications may apply. Contact the office for answers to your questions.

The Tax Impact of Business Bartering

Bartering is simply the exchange of services or property, and it’s a taxable event. For example, if a computer consultant trades services with an advertising agency, each must report income equal to the fair market value of the services they received, typically the amount the service provider would normally charge. The rules are similar when property is part of the exchange. For example, if a construction company accepts unsold inventory as payment, it must report income equal to the inventory’s fair market value.

Some businesses participate in barter clubs that manage these exchanges using “credit units.” Members earn credits by providing goods or services and redeem them later. Generally, bartering is taxable in the year it occurs. However, when participating in a barter club, you might owe taxes when credits are added to your account, rather than when they’re used. Barter clubs must send participants IRS Form 1099-B (Proceeds from Broker and Barter Transactions) by January 31 of the following year.

Business bartering transactions may be beneficial as long as you’re aware of the federal and state tax consequences. Contact the office if you need assistance or would like more information.

What Could Happen if You Don't File a Required Tax Return?

Taxpayers who are required to file a federal tax return but don’t may be in for a costly surprise. If the IRS receives a document like a Form W-2 indicating taxable income, it may file a Substitute for Return (SFR) on your behalf.

Before doing so, the IRS typically will attempt to contact you and encourage voluntary filing. If you fail to file by the deadline, the IRS can move forward with an SFR. The resulting tax bill will likely be higher than necessary because it won’t include deductions or credits you qualify for.

If you receive a Notice of Deficiency with a proposed assessment, don’t delay. Respond within 90 days to avoid further action and additional penalties. Contact the office for help.

10 Small Business Tax Tips from the IRS

To help ensure small businesses take advantage of all potential tax breaks, the IRS Taxpayer Advocate Service (TAS) summarizes the types of tax you may owe and provides a list of 10 federal tax tips.

Among the tips are to separate your business and personal finances, which means establishing business-only bank accounts and credit cards. Another TAS tip, directed at startups in particular, is to correctly classify your business. Choosing the appropriate business structure is important because some enjoy greater tax benefits. But perhaps the most important tips are to know when to get tax assistance from a professional and to choose one who’s knowledgeable and trustworthy.

Read the tips here: https://www.taxpayeradvocate.irs.gov/news/tax-tips/small-business-tax-highlights/2025/04/

Upcoming Tax Due Dates

July 15

Employers: Deposit Social Security, Medicare and withheld income taxes for June if the monthly deposit rule applies.

Employers: Deposit nonpayroll withheld income tax for June if the monthly deposit rule applies.

July 31

Employers: File a 2024 calendar-year retirement plan report (Form 5500 or Form 5500-EZ) or request an extension.

Employers: Report Social Security and Medicare taxes and income tax withholding for the second quarter of 2025 (Form 941) and pay any tax due if all of the associated taxes due weren’t deposited on time and in full.

August 11

Individuals: Report July tip income of $20 or more to employers (Form 4070).

Employers: Report Social Security and Medicare taxes and income tax withholding for the second quarter 2025 (Form 941), if all associated taxes due were deposited on time and in full.

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