TL;DR
- Individuals: New Senior Deduction, deductions for tips and qualified overtime, vehicle loan interest, bigger Adoption and Child credits, broader 529 uses, higher SALT cap (with phase-down).
- Businesses: Immediate expensing for domestic R&D, looser business interest cap (EBITDA) in 2025, a minimum QBI deduction, QSBS changes, powerful investment incentives via §179, 100% bonus depreciation, and a temporary Qualified Production Property expensing window.
- Reporting: 1099-K threshold restored to $20k/200 retro to 2022.
- Many items have phase-outs or sunsets—plan before you file.
Why This Matters Now
The One Big Beautiful Bill Act (OBBBA) reshaped key parts of the code for 2025 and beyond. Many benefits hinge on AGI/MAGI thresholds and phase-outs; knowing where your income lands determines what you actually receive. Below is a practical, side-by-side look you can use with our team to lock in the best moves before deadlines hit.
Want a personalized 2025–2026 playbook? Schedule a planning session.
Key Changes for Individuals (2025–2028, unless noted)
Senior Deduction. From 2025–2028, an extra $6,000 per person age 65+; phases out beginning at $75,000 MAGI (single) / $150,000 (MFJ) by $100 per $1,000 over. Available whether you itemize or take the standard deduction.
No Tax on Tips. 2025–2028: Deduction up to $25,000/year for qualified cash tips in customary tip occupations (excludes specified service trades). Phases out at $150k AGI (single) / $300k (MFJ), reduced $100 per $1,000 over. Employers will report via W-2 (or a transition statement for 2025).
No Tax on Qualified Overtime. 2025–2028: Deduct the overtime premium up to $12,500 (single) / $25,000 (MFJ). Phases out at $150k MAGI (single) / $300k (MFJ).
Example: OT rate $30 – regular $20 = $10/hour deductible OT premium.
Vehicle Loan Interest. 2025–2028: Deduct up to $10,000/yr of interest on loans for new personal-use vehicles assembled in the U.S., < 14,000 lbs. No family loans; campers excluded. Phase-outs: $100k–$150k (single), $200k–$250k (MFJ).
Adoption Credit. 2025 credit $17,280 + $5,000 refundable; in 2026: $17,670 + $5,120 refundable (inflation-adjusted). Phase-outs: $259,190–$299,190 (2025) and $265,080–$305,080 (2026). 5-year carryforward for excess.
Child Tax Credit. 2025–2028: $2,200 per qualifying child under 17 ($1,700 refundable). Phase-out begins at $400k MAGI (MFJ) / $200k (others), reduced $50 per $1,000 over. Child and one filer must have work-eligible SSNs.
Environmental Credits. Most EV credits end after Sept 30, 2025. Residential clean energy and home energy credits end after Dec 31, 2025.
SALT Cap. 2025 limit increases to $40,000 (from $10,000) with a phase-down starting at $500k MAGI, reaching a $10,000 floor at $600k (never below $10k). 2026: cap $40,400, phase range $505k–$606,333. Caps rise through 2029, revert to $10,000 in 2030+.
529 Plans. For distributions after July 4, 2025, funds can cover elementary/secondary and postsecondary credentialing program costs (tuition, fees, books, etc.), expanding 529 flexibility.
Reporting – 1099-K. OBBBA restores the original threshold: $20,000 & 200 transactions, retroactive to 2022—overriding phased-in lower thresholds.
Unsure which new deductions you qualify for? Upload your 2024 return + 2025 YTD, and we’ll map MAGI impacts, phase-outs, and timing.
Key Changes for Businesses
QSBS (Qualified Small Business Stock). For QSBS acquired after July 4, 2025: exclusion of 50% after 3 years, 75% after 4 years, 100% after 5 years; exclusion cap rises to $15M; corporate asset limit to $75M (inflation-adjusted after 2026). Older rules still apply to stock bought before that date (e.g., 100% exclusion for certain periods with 5-year holds).
Research/Experimental (R&E). Starting in 2025, domestic R&E is immediately deductible; foreign R&E continues 15-year amortization.
Business Interest Deduction (163(j)). For years after 2024, limitations were computed using EBITDA (vs. EBIT), allowing larger deductions for many. But starting after Dec 31, 2025, OBBBA adds limits: excludes foreign income from ATI and curtails the benefit of capitalizing interest to avoid 163(j). Small business exemption: average gross receipts ≤ $31M for 2025 (inflation to $32M in 2026).
Minimum QBI Deduction. From 2025, taxpayers with ≥ $1,000 of QBI from actively managed businesses receive a minimum $400 deduction.
Qualified Production Property (QPP) – Temporary. Nonresidential real property placed in service after Jan 19, 2025, in the U.S./possessions may be expensed if original use begins with the taxpayer, construction begins after Jan 19, 2025, and before Jan 1, 2029, and it’s placed in service before Jan 1, 2031. Aimed at manufacturing/production/refining (limited to agricultural and chemical production). Office/admin, lodging, parking, sales, R&D, software engineering, and certain other uses don’t qualify. This can still benefit small/mom-and-pop manufacturers, not just large firms.
Section 179 Expensing. Limits jump to $2.5M (2025) and $2.56M (2026), with phase-out beginning at $4.0M (2025) / $4.09M (2026) of qualifying purchases. Watch recapture if business use later drops to ≤50%.
Bonus Depreciation. 100% bonus made permanent by OBBBA for qualifying property placed in service after Jan 19, 2025 (new or used, ≤20-year life). For property in service Jan 1–Jan 19, 2025, the bonus was 40%. This is a powerful lever for cash flow and tax timing.
Planning equipment or facility investments? Talk to us before you buy—we’ll coordinate §179 vs. bonus vs. QPP for the optimal mix.
Employment & Reimbursements
Overtime/Tip Reporting. Expect W-2 reporting updates (2025 is a transition year for tips and overtime reporting mechanics).
Accountable Plans (Employers). Reimburse mileage/auto and other employee expenses tax-free when properly substantiated. With unreimbursed employee expenses largely nondeductible, an accountable plan is essential.
Employees. Employee business auto expenses remain nondeductible under TCJA and made permanently nondeductible by OBBBA, except for: reserve component military members, fee-based state/local officers, certain performing artists, and limited educator adjustments (year-specific rules apply).
What to Do Next
- Know your thresholds. Map AGI/MAGI now to avoid surprise phase-outs (SALT, tips, overtime, vehicle interest, credits).
- Sequence your moves. Coordinate bonus vs. §179, R&E expensing, QPP, and QSBS timelines to match cash flow and eligibility windows.
- Update payroll & reporting. Prepare for W-2 changes (tips/overtime) and confirm 1099-K processes.
- Document everything. Substantiation drives results—especially for deductions with new criteria.
Ready to optimize 2025–2026 under OBBBA? Contact Key 2 Accounting or upload your documents securely, and we’ll build a compliant, tax-smart action plan.
