OBBB Tax Changes Impacting Individual & Small Business

The “One Big Beautiful Bill” Signed on July 4, 2025

This is a high-level overview of the OBBB as it could impact most of my audience – health professionals.  I will address tax legislation as impacts individuals & small businesses like S-Corps and sole proprietorships.

OBBB Tax Legislation Affecting Individuals

• Current individual marginal tax rates are now permanent.  Otherwise, they would have riveted back to the pre-2018 rates with the highest marginal tax rate at 39.6%.  OBBB sets the highest marginal tax rate at 37%.

• State and Local Taxes (SALT) Limit – These are possible tax deductions IF you itemize your deductions.  The SALT Limit was $10,000, which disproportionately impacted CA, NY, NJ residents (ie, high state taxes), has been increased to $40,000 for taxpayers with AGIs less than $500,000.  Temporary increase through Dec 31, 2029.

• Charitable Deductions for Non-Itemizers – up to $1,000 for single and $2,000 for married filing jointly for qualified charitable donations can be deducted without the need to itemize.

• Senior Tax Deduction – If you’re 65 or older, then you could qualify for a tax deduction of $6,000.  There are income phase-outs; $75,000 is single & $150,000 married filing jointly.

• Trump Account for Children – There are two possible benefits:

  1. $1,000 federal account credit for children born between Jan 1, 2025 to Dec 31, 2028.  Details on how to claim the credit have not yet been released.

  2. Contributions can be made by parents, other individuals, or employers up to $5,000/year for any child under 18. These contributions would be treated as parent custodial accounts until 18 with no distributions allowed.  After 18, account is treated like a traditional IRA, i.e. tax-free growth, and withdrawal available at 59 ½.  More details to follow.

• Auto Loan Interest Deduction – For new car assemble in the United States, you could qualify for up to $10,000 auto loan interest (interest only, not principal payments) deduction.  Tax deduction phase-outs begin at $100,000 for singles and $200,000 married.

  
  

OBBB Tax Legislation Affecting Small Businesses

• Qualified Business Income (QBI) Deduction – Makes permanent the 20% income exclusion from federal income tax consideration for certain qualified pass-through businesses entities like sole proprietorships, partnerships, and S Corps.  Most professional services businesses (ie, dental practices) are subject to income phase-outs; $394,600 for married filing jointly and $197,300 for single.

• Section 179 Deduction – Purchase of business equipment up to $2.5 million can be deducted in the purchase year.  Generally, business equipment is depreciated/deducted over the life of the asset.  Life of the asset is determined by the IRS.  But, Section 179 allows immediate deduction during the purchase year up to $2.5 million/year.

• 100% Bonus Depreciation Made Permanent – Very similar to Section 179.  It allows businesses to immediately deduct the full cost of business equipment and machinery in the year purchased.

Again, a high-level summary of the OBBB as it could affect individuals and small businesses.

Cheers,

Sergio