The One Big Beautiful Bill

Here's what TaxStudio’s clients need to know

*The information provided on this page is for general informational purposes only and is not intended to constitute legal, tax, accounting, or other professional advice – please consult your legal and tax advisers as it relates to your specific situation. See full disclaimer.

The U.S. is shaking things up with a major new legislative package known as the “One Big Beautiful Bill.” While originally including a controversial “revenge tax” on foreign investors, that provision has now been removed after a recent deal with the G7.

Our goal here is simple… cut through the noise and highlight what’s important to our client base (and not simply summarize the tax provisions at great length for you to decipher what is what from that summary).  This is not intended to be an all inclusive list but is, in our opinion, the key points to think about.  There are plenty of other provisions in this bill that are changing the landscape of US tax.  

We want to work with you as soon as reasonably possible to model out the impacts as needed.  Please select the profile / entity type that applies to you to better understand how these changes may affect you.

How this applies to you

    1. Corporate Tax Rate:  The 21% corporate tax rate is permanent (not set to expire).

    2. Bonus Depreciation:  100% current year expensing of qualified assets that were placed into service.

    3. Business Interest Deduction: Restores previous law of a more favorable EBITDA type calculation of determining the deductibility of interest expense. 

    4. Base Erosion and Anti-Abuse Tax (BEAT):  A slight increase in US tax by raising the BEAT rate from 10% to 10.5%.  However, the threshold for BEAT to apply remains relatively high and generally means our client base is not impacted by these rules ($500m gross receipts test).  

    5. Downward Attribution:  Unique rules applying ownership attribution from a common foreign parent for purposes of Subpart F income (and restoring older rules on eliminating a downward attribution rule).

    1. Corporate Tax Rate:  The 21% corporate tax rate is permanent (not set to expire).

    2. Bonus Depreciation:  100% current year expensing of qualified assets that were placed into service.

    3. R&D Expenditures:  Domestic R&D spend can be expensed currently (prior law was 5 year amortization).  Foreign R&D spend still remains amortized over 15 years.  Certain small businesses may be eligible to amend 2022-2024 to claim refunds on prior expenses that were capitalized under the old law.

    4. QSBS (Qualified Small Business Stock): Rules favorably updated - expanded asset cap from $50m to $75m, increases individual benefit cap from $10m to $15m and allows holders to receive benefit earlier (starting at 3 years rather than 5 years).

    5. Net CFC Tested Income (GILTI):  Slight adjustment to calculation in that deduction reduced from 50% to 40% with a change to foreign tax credit use from 80% to 90%.  The resulting change to GILTI calculation should be addressed but likely not a material increase to US tax profile. 

    6. FDDEI (Formerly FDII):  The deduction for foreign derived income by US companies is reduced from 37.5% to 33.34%.  The result here is a slight reduction in benefit for those US companies deriving profits from selling outside of the US.

    1. Corporate Tax Rate:  The 21% corporate tax rate is permanent (not set to expire).

    2. Bonus Depreciation:  100% current year expensing of qualified assets that were placed into service.

    3. R&D Expenditures:  Domestic R&D spend can be expensed currently (prior law was 5 year amortization).  Foreign R&D spend still remains amortized over 15 years.  Certain small businesses may be eligible to amend 2022-2024 to claim refunds on prior expenses that were capitalized under the old law.

    4. QSBS (Qualified Small Business Stock): Rules favorably updated - expanded asset cap from $50m to $75m, increases individual benefit cap from $10m to $15m and allows holders to receive benefit earlier (starting at 3 years rather than 5 years).

    5. Business Interest Deduction:  Restores previous law of a more favorable EBITDA type calculation of determining the deductibility of interest expense. 

    1. State and Local Tax Cap:  Cap on itemized deductions for state and local tax increases from $10,000 to $40,000 within certain income limits in 2025 (to be increased in future based on inflation).

    2. Mortgage Interest Limitation:  The limit for itemized deductions on mortgage interest increases back to a loan amount of $1,000,000 in 2026.

    3. Interest on Auto Loans:  Interest on auto loans for U.S.-assembled vehicles is deductible up to $10,000 pre-AGI with phase-outs.

    4. Charitable Contributions:  Charitable contributions up to $1,000 for Single and $2,000 for Married Filing Jointly, even if you take the standard deduction.

    5. QBI Deduction:  The bill permanently extends the 20% Qualified Business Income Deduction for business owners.

    6. QSBS (Qualified Small Business Stock): Rules favorably updated - expanded asset cap from $50m to $75m, increases individual benefit cap from $10m to $15m and allows holders to receive benefit earlier (starting at 3 years rather than 5 years).

    7. Tax-Deferred Savings for Children:  Additional tax-deferred savings opportunities for children born between 2025-2029.

    8. Cryptocurrency:  Cryptocurrency is now subject to the same wash sale rules as other investments.

Disclaimer:  The information provided is for general informational purposes only and is not intended to constitute legal, tax, accounting, or other professional advice; it has not been tailored to any specific entity’s or person's situation. While we strive to ensure that the content is accurate and up-to-date, laws and regulations frequently change, and their application can vary widely based on the specific facts and circumstances involved.

You should not rely on any information here as a substitute for professional advice. Always consult with a qualified tax advisor, attorney, or other appropriate professional before making any decisions or taking any action based on the information contained herein.

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