NEWS & UPDATES

from the 2017 Tax Cuts and Jobs Act (TCJA) while introducing new deductions, credits, and changes that will reshape tax planning for individuals, families, and businesses in 2025. Below, we break down the most impactful provisions and actionable strategies to leverage them.

1. Permanent Extension of the 2017 TCJA

The OBBBA solidifies the individual and business tax cuts introduced by the TCJA, which were originally set to expire in 2025. This includes:

• Lower Individual Income Tax Rates: The current seven tax brackets (10% to 37%) are now permanent, providing long-term certainty for income tax planning.

• Increased Standard Deduction: The standard deduction, doubled under the TCJA, remains at $14,600 for single filers and $29,200 for married filing jointly (adjusted for inflation in 2025).

• Action Item: Review your income sources and withholding to ensure you’re not overpaying taxes. With permanent lower rates, consider reallocating savings to investments or retirement accounts.

2. State and Local Tax (SALT) Deduction Expansion The OBBBA raises the SALT deduction cap from $10,000 to $40,000, a significant win for residents in high-tax states like California, New York, and New Jersey.

• Impact: This allows taxpayers to deduct up to $40,000 in state and local income, property, and sales taxes, reducing federal taxable income.

• Action Item: If you itemize deductions, consult with your Sellers CPA advisor to optimize your SALT deductions, especially if you live in a high-tax jurisdiction. Consider prepaying property taxes or state estimated taxes before year-end to maximize this benefit.

3. Expanded Child Tax Credit The Child Tax Credit (CTC) increases to $2,500 per qualifying child (up from $2,000), with the refundable portion rising to $1,800. The credit now phases out at higher income levels, starting at $400,000 for joint filers.

• Impact: Families with children under 17 will see increased tax relief, particularly middle-income households.

• Action Item: Adjust your withholding or estimated tax payments to account for the higher credit. Families nearing the phase-out threshold should explore income-shifting strategies, such as contributing to retirement accounts, to stay eligible.

4. No Tax on Tips and Overtime A notable provision eliminates federal income tax on tips and overtime pay for hourly workers. This applies to service industry workers, such as servers, and employees earning overtime in industries like manufacturing or healthcare.

• Impact: Workers relying on tips or overtime will see increased take-home pay, but Social Security and Medicare taxes still apply.

• Action Item: If you’re in an affected industry, review your W-4 to optimize withholdings. Consider redirecting additional take-home pay to savings or debt reduction.

5. Small Business Tax Relief and Expensing The OBBBA enhances deductions for small businesses, including:

• Permanent Full Expensing: Businesses can immediately deduct 100% of the cost of qualifying assets (e.g., equipment, machinery) under Section 168(k).

• Section 174 R&D Deductions: The bill restores immediate expensing for research and development costs, reversing the TCJA’s amortization requirement.

• PTET Workaround Preservation: The Pass-Through Entity Tax (PTET) workaround, which allows pass-through entities to bypass the SALT cap, is preserved, benefiting service businesses.

• Action Item: Business owners should accelerate qualifying purchases before year-end to maximize expensing. Consult with Sellers CPA to ensure compliance with Section 174 and PTET strategies.

6. Tax Cut for Seniors on Social Security The OBBBA introduces a new deduction for seniors receiving Social Security benefits, reducing taxable income for many retirees.

• Impact: This provision eases the tax burden for seniors, particularly those with moderate incomes.

• Action Item: Retirees should review their income sources (e.g., Social Security, pensions, IRA distributions) with a Sellers CPA advisor to optimize tax-free income.

7. Repeal of IRS Direct File and 1099-K Surveillance The OBBBA eliminates the IRS Direct File program, shifting focus to private tax preparation services. It also repeals the Biden administration’s expanded 1099-K reporting requirements, reducing compliance burdens for small businesses and gig workers.

• Impact: Sellers CPA clients can continue relying on our expert tax preparation services without competition from IRS Direct File. Gig workers face fewer reporting obligations.

• Action Item: Ensure your business or side hustle is prepared for 1099-K changes by maintaining accurate income records. Contact Sellers CPA for tailored compliance guidance.

8. Clean Energy Credit Rollbacks The OBBBA scales back several clean energy tax credits introduced under prior legislation, impacting businesses and individuals investing in renewable energy.

• Impact: Reduced credits may affect the ROI on solar, wind, or electric vehicle investments.

• Action Item: If you’re planning clean energy investments, act before year-end to secure remaining credits. Consult Sellers CPA for alternative tax-advantaged investment options.

9. Death Tax Relief The estate tax exemption, currently $13.6 million per individual (2025, adjusted for inflation), is maintained, with additional relief for family-owned businesses through valuation discounts and deferral options.

• Impact: This benefits high-net-worth families and business owners planning wealth transfers.

• Action Item: Review your estate plan with Sellers CPA to leverage valuation discounts and ensure your business succession plan aligns with the new provisions.

10. Expanded 529 Plans and Health Savings Accounts (HSAs)

• 529 Plans: The OBBBA expands 529 plan flexibility, allowing rollovers to Roth IRAs (up to $35,000 lifetime) and broader use for educational expenses.

• HSAs: Contribution limits increase, and eligible expenses are expanded to include more wellness-related costs.

• Action Item: Maximize 529 and HSA contributions to take advantage of tax-free growth. Families with college-bound children should explore 529-to-Roth strategies.

11. Distributional Impact: Winners and Losers

A Yale report highlights that the OBBBA may increase incomes for wealthier households while potentially reducing incomes for low-earning households due to reduced federal revenue and program funding.

• Action Item: Low- to middle-income households should prioritize credits like the CTC and explore tax-advantaged savings to offset potential impacts. High-income earners should capitalize on new deductions and permanent TCJA benefits.

Additional Tax and Financial Planning Tips for July 2025

1. Mid-Year Tax Check-In

With the OBBBA reshaping the tax landscape, now is the perfect time for a mid-year tax review. Key steps:

• Review Withholdings: Adjust your W-4 or estimated payments to account for new credits and deductions.

• Maximize Deductions: Prepay property taxes, charitable contributions, or business expenses before year-end.

• Retirement Contributions: Increase contributions to IRAs or 401(k)s to reduce taxable income.

2. Business Planning for 2025

Small business owners should:

• Accelerate equipment purchases to leverage full expensing.

• Explore PTET strategies to bypass SALT limitations.

• Review R&D activities to claim immediate Section 174 deductions.

3. Estate and Succession Planning

With death tax relief in place, revisit your estate plan to:

• Utilize valuation discounts for family businesses.

• Explore gifting strategies to reduce your taxable estate.

• Update trusts to align with OBBBA provisions.

4. Investment Strategies

The OBBBA’s tax cuts may increase disposable income for many. Consider:

• Tax-Advantaged Accounts: Max out Roth IRAs, HSAs, or 529 plans.

• Diversification: Rebalance portfolios to mitigate risks from potential economic shifts due to reduced federal revenue.

• Clean Energy Alternatives: Explore non-tax-dependent investments if clean energy credits are no longer viable.

5. Year-End Deadlines

• Charitable Contributions: Donate by December 31 to claim 2025 deductions.

• Tax-Loss Harvesting: Offset capital gains by selling underperforming assets.

• Required Minimum Distributions (RMDs): Ensure compliance if you’re 73 or older.

Sellers CPA: Your Partner in Financial Success

At Sellers CPA, we go beyond tax preparation to deliver personalized financial strategies. Whether you’re navigating the complexities of the OBBBA, planning for retirement, or growing your business, our team is here to guide you. To discuss how these changes affect you, call us at 256-825-8259 or email info@sellerscpa.net to schedule a consultation.

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Sellers CPA | www.sellerscpa.net | (256) 825-8259 | info@sellerscpa.net Disclaimer: Tax laws are complex and subject to change. Always consult with a qualified CPA before making financial decisions. Information in this newsletter is based on sources available as of July 2, 2025, and may not reflect final regulations.