Knowing What Counts Podcast

Breaking Down the "Big, Beautiful Bill": Your 2025 Tax Planning Guide

• Tim Provost, CPA • Episode 17

Share episode

Send us a text

Big, Beautiful Breakdown: Big Beautiful Bill Tax Takeaways – Joe Oliveira Tax Director  

The tax landscape is shifting dramatically with the signing of the "Big, Beautiful Bill" this July 4th, and understanding these changes now could save you thousands in the coming years. Join tax expert Joe Oliveira as he cuts through the headlines and misconceptions to reveal what this legislation actually means for your wallet.

Much has been made about "no tax on tips" and "no tax on overtime," but Joe explains the reality: starting in 2025, service workers can deduct up to $25,000 in tip income, while overtime workers can claim deductions up to $12,500 (single) or $25,000 (joint). These above-the-line deductions don't require itemizing and help lower your AGI, potentially unlocking other tax benefits.

The conversation explores the dramatic increase in the SALT cap from $10,000 to $40,000, empowering taxpayers in high-tax states to deduct significantly more of their state income and property taxes. Families will benefit from an enhanced Child Tax Credit ($2,200 in 2025), while all taxpayers can look forward to a new charitable giving deduction available without itemizing. There's even a surprising new deduction for auto loan interest up to $10,000 annually, though Joe cautions this comes with specific requirements, including U.S. assembly of the vehicle.

Business owners have reason to celebrate with the Section 179 deduction increasing to $2.5 million, the return of 100% bonus depreciation, and the restoration of immediate R&D expense deductions. Investors receive particularly favorable treatment for Qualified Small Business Stock, with potential 100% tax-free gains for holdings of five years or more.

With green energy credits expiring after 2025 and electric vehicle incentives ending this September, now is the time for strategic tax planning. Contact Joe and the MP CPAs team at 413-739-1800 to develop your personalized strategy that transforms these tax changes into lasting financial advantages. Remember – in the world of taxes, being proactive beats being reactive every time.

To learn more about MP CPAs visit:
https://thempgroupcpa.com/
MP CPAs
413-739-1800

Speaker 1:

Welcome to the Knowing what Counts podcast, the place where expert guidance meets smart financial decisions. Whether you're a high net worth individual or a thriving business, the experts at MPCPAs are here to help you protect and optimize your wealth. Let's get started, because success begins with Knowing what Counts. Because success begins with knowing what counts.

Speaker 2:

The latest federal tax legislation has landed in its complex, packed and potentially game-changing. Joe walks us through the big, beautiful bill and highlights what business owners and individual taxpayers need to watch for. Welcome back everyone. I'm Sofia Yvette, co-host and producer, back in the studio today with Joe Oliveira, director of MPCPAs. Joe, how's it going today?

Speaker 3:

Going great.

Speaker 2:

Great. Now, before we get started, why don't you introduce yourself to our audience?

Speaker 3:

All right, well, my name is Joe Oliveira. I am a tax director here at MPCPAs. I've been a CPA for over 20 years and I've been with MPCPAs for over 10 years. I work with a lot of small businesses, high net worth individuals and families, and I work with them in the areas of income tax and estate planning, and families and I work with them in the areas of income tax and estate planning.

Speaker 2:

Now the big, beautiful bill was signed on July 4th and there was a lot of talk leading up to the bill about no tax on tips and no tax on overtime. What should people know about this?

Speaker 3:

Well, it's not really a no tax on overtime and tips. It's going to be a big deduction for these individuals that they'll be able to take on their tax return going forward in 2025. Qualified tip income is usually your restaurant servers, your valets. They will be able to deduct $25,000 per year. Deduct $25,000 per year and similar to overtime income. The max deduction there, though, will be $12,500 for a single person and $2,500 for a married filing joint return, but both provisions share similar aspects, like both of these will start in 2025 and run through 2028. Both deductions begin to phase out once your AGI exceeds $150,000 300 $300,000 for your married filing joint. A person doesn't need to itemize for this, so you don't need to be filing extra forms. It goes right on your tax return and this is what we call an above-the-line deduction, and this helps keep everybody's AGI down so they can claim other credits.

Speaker 2:

Wow, Now there seems to be a lot of debate on changing the SALT cap deduction. What is the SALT deduction and what changes should people be aware of?

Speaker 3:

Well, salt stands for state and local taxes, and this is usually what people take what we call itemized deductions, what we take on Schedule A. These are what we call your state income tax withholdings, your state tax payments made during the year, real estate taxes, property taxes and, in some cases, sales tax. These taxes are, like I said, a part of your itemized deductions, and, starting in 2025, this SALT deduction was raised to $40,000 for taxpayers. The SALT deduction, though, is going to be limited, and it's going to be. That limitation is up to $500,000. And once you get over that number, it starts to get reduced for 30% for every dollar over that 500. But, good news, it doesn't go to zero, it just flatlines right to $10,000.

Speaker 2:

Now there was some talk on different tax credits. What is the difference between a deduction and a credit and what are the changes in credits that people benefit from?

Speaker 3:

Well, a deduction is a reduction to get your taxable income. So if you have $100,000 in charity, it doesn't reduce your taxes by $100,000. It just reduces your income that's going to be taxed by $100,000, where a credit is a dollar for credit towards your taxes. So if you get $100 of a tax credit, you reduce your taxes by $100. Some credits to keep an eye out for is the child tax credit was increased to $2,200 for 2025. And the child independent tax credits will also increase to 35% for qualifying expenses. So again, tax credits will also increase to 35% for qualifying expenses.

Speaker 2:

So again, those are credits that are going to reduce your taxes, dollar for dollar. Wow, now what are some other big changes?

Speaker 3:

that will impact individuals. Starting with 2026, individuals will be able to deduct $1,000, $2,000, if you're married of cash contribution. Now I said cash. That's important to remember, so you can't go to Goodwill and claim this deduction but again, you don't need to itemize for these. So therefore, if you have a standard deduction, this is going to be on top of that, so charity won't be lost. Also, starting in 2025, auto loan interest is going to be deductible. You can deduct up to $10,000 per year, but it does come with some limitations. It starts to phase out once your income exceeds $100,000, $200,000 if you're married.

Speaker 3:

The car has got to be a brand new purchase and the final assembly of that car has to be in the US. Also, something to keep an eye out a lot of rebuilds in this area. So a lot of green energy credits are going to be terminated after 2025. So get them all in now, before the year ends. For example, a lot of people put new windows and doors in. You got to get them in before the end of the year. And if you like solar panels and geothermal units, those are going to be done by the end of the year. Also, green energy cars you have to buy those before the end of September, because that $7,500 credit is going to go once a year. Let's see October rolls around.

Speaker 2:

Now, what types of changes can business owners expect to see?

Speaker 3:

There's some big ones here, starting first and foremost, in 2025, the Section 179 deduction, which allows business owners to deduct equipment right off the bat, increases at $2.5 million. It's a big number, but that helps business owners purchase property and equipment and deduct it right now to help keep their income down. Also, they put bonus depreciation back in at 100%, which is just like the 179 deduction. You get an expense. Your equipment purchase is right off the bat, starting again for any equipment purchase after January 19th. A lot of research companies have been having to capitalize their research and development expenses in the past, but starting in 2025, they don't have to do that anymore. But now, with small businesses those are, businesses that are under $31 million in sales they can go back and amend returns to take all the R&D expenses that they had to capitalize. But they can start taking up either a monthly return and take it in the past or take it over a year or two going forward.

Speaker 2:

Now, are there any changes an investor might benefit from?

Speaker 3:

Quite a few. Actually, we've done a podcast on this type of business called a qualified small business stock. Go back and listen to that. This type of stock, this type of stock, actually gets quite a good treatment. If you sell the stock, a lot of the gain could be excluded. But starting after January, july 4th, if you hold the stock for three years, the gain is 50% excluded. You hold it for four years 70, that gain is 75% excluded. You hold it for five, it's 100% excluded and that gain exclusion is up to $15 million per issuer. So you have a $15 million gain for a stock you held for five years. This qualified small business stock. It's 100% tax-free.

Speaker 2:

What planning opportunities should people be thinking about, both on the individual side and business side, keeping all of these great things in mind?

Speaker 3:

With the SALT cap going up to $40,000, going from $10,000 to $40,000, there's a lot of room to go there. So if you have property taxes and you got the funds, prepay those before the end of the year. If you got state taxes to pay, prepay those again by the end of the year. You got to keep your income levels in mind when you do that. But again, in the past we used to say pass them. You know, push off to next year. Now we're saying bring them back into the current year. For business owners, you know, with all these 100% bonus and Section 179, buy your equipment now, you can expense it 100%. So that way you can really reduce your income and really, you know, get your business on a good foot. And same with R&D, you know, start accelerating those expenses now so that way you can deduct them 100%.

Speaker 2:

What advice would you give someone wondering what they should do now that the bill is signed into law?

Speaker 3:

Well, you know, as I've been saying, there's so many changes. So the best thing to do is actually contact your advisor and just get a conversation started and say, hey, I got all this going and nothing's too small to talk about, because you have kids credits, you have taxes, there's deductions, so nothing's too small to talk about. And let's just be proactive versus reactive at the end of the year, because you can't change much in December but you can change a whole lot in July and August. So, again, if you want to call an advisor, feel free to call me and we can talk about the triple B law. You can call me at 413-739-1800 and just ask for Joe O.

Speaker 2:

Wow. Well, thank you, Joe, for sharing that with me and the listeners today and filling us in all about the big, beautiful bill tax takeaways. We'll catch you next time. Have a great rest of your day.

Speaker 3:

Take care.

Speaker 1:

Thanks for listening to the Knowing what Counts podcast. Ready to optimize your wealth and protect your future, visit thempgroupscpacom or call 413-739-1800 to connect with our team of experts. Remember, success is about knowing what counts.