Sellers CPA September 2025 Tax Newsletter

"The hardest thing in the world to understand is the income tax.” – Albert Einstein

Dear Valued Clients and Friends,

As we transition into the fall season, the tax landscape for 2025 is undergoing significant changes that will impact your financial planning. At Sellers CPA, we are committed to keeping you informed about the latest tax laws, updates, and executive actions that could affect your personal and business finances. This month’s newsletter provides an in-depth look at the new tax provisions, including the monumental “One Big Beautiful Bill Act” (OBBBA) signed into law on July 4, 2025, and key executive orders from the Trump administration that may influence your tax strategy. Let’s dive into the details to help you navigate these changes with confidence. Key Tax Law Changes for 2025: The One Big Beautiful Bill Act

The passage of the One Big Beautiful Bill Act (H.R. 1), also referred to as “Tax Reform 2025,” marks the most significant tax overhaul since the Tax Cuts and Jobs Act (TCJA) of 2017. Signed into law by President Donald Trump on July 4, 2025, this legislation makes permanent many TCJA provisions that were set to expire at the end of 2025, introduces new tax incentives, and implements temporary relief measures. Below, we outline the key changes and their implications for your tax planning.

1. Permanent Extension of TCJA Provisions

The OBBBA ensures that several cornerstone provisions of the 2017 TCJA remain in place, providing continuity for taxpayers:

• Standard Deduction: The larger standard deduction introduced by the TCJA is now permanent. For 2025, it rises to $15,000 for single filers and $30,000 for married couples filing jointly, up from $14,600 and $29,200 in 2024, respectively. This increase, adjusted for inflation, simplifies tax filing for many but may reduce the incentive to itemize deductions.

• Personal Exemptions: The elimination of personal and dependent exemptions, a TCJA provision, is also permanent, except for certain seniors who may qualify for limited exemptions.

• Income Tax Rates: The seven tax brackets (10%, 12%, 22%, 24%, 32%, 35%, and 37%) established by the TCJA are retained, with an inflation adjustment for the first two brackets starting in 2026. For 2025, the top 37% rate applies to incomes over $626,350 for single filers and $751,600 for joint filers.

• Qualified Business Income (QBI) Deduction: The 20% deduction for pass-through businesses under Section 199A is extended permanently, providing ongoing relief for small business owners.

Tax Planning Tip: With the standard deduction now permanently higher, evaluate whether itemizing deductions (e.g., mortgage interest, charitable contributions, or medical expenses) still makes sense for your situation. For business owners, the permanent QBI deduction offers opportunities to optimize your business structure.

2. New Deductions for 2025–2028

The OBBBA introduces temporary above-the-line deductions aimed at providing relief for specific income types, reflecting President Trump’s campaign promises:

• No Tax on Tips: For tax years 2025–2028, tip income up to $25,000 is deductible from adjusted gross income (AGI). This deduction phases out for single filers with modified AGI above $150,000 and joint filers above $300,000. Service industry workers should track tip income carefully to maximize this benefit.

• No Tax on Overtime Pay: Qualified overtime compensation up to $12,500 per taxpayer ($25,000 for joint filers) is deductible from AGI, subject to the same income phase-outs as the tip deduction. This provision targets workers in industries with significant overtime opportunities.

• No Tax on Car Loan Interest: Interest on loans for new U.S.-made vehicles is deductible up to $10,000, also subject to income phase-outs. This incentive encourages domestic vehicle purchases but requires careful documentation of loan terms.

• No Tax on Social Security Benefits: A highly debated provision, this eliminates taxes on Social Security benefits for retirees. However, concerns have been raised about its impact on Social Security’s solvency, with estimates suggesting a $2.3 trillion shortfall over 10 years, potentially advancing insolvency to 2031. Financial advisors recommend caution, as this change may not be factored into long-term planning until further clarity emerges.

Tax Planning Tip: If you rely on tips, overtime, or Social Security benefits, consult with us to ensure you meet the eligibility criteria and income thresholds for these deductions. For retirees, consider how this tax break might affect your overall income strategy.

3. Enhanced Deductions and Credits

• State and Local Tax (SALT) Deduction: The $10,000 cap on SALT deductions, enacted under the TCJA, is temporarily increased for 2025–2028, with specifics varying by income level. High earners in high-tax states may benefit, but the exact increase remains subject to further IRS guidance.

• Adoption Credit: Up to $5,000 of the adoption credit is now refundable for 2025, with the total credit limit at $17,280 (adjusted for inflation). This change supports families adopting children, particularly those with special needs.

• 529 Plan Expansions: The OBBBA expands tax-exempt distributions from 529 plans to include up to $20,000 for K-12 expenses (previously $10,000) and additional post-secondary costs like testing fees for professional credentials (e.g., CPA, bar, or medical exams). This offers greater flexibility for educational planning.

• Bonus Depreciation: The OBBBA reinstates 100% bonus depreciation for property acquired and placed in service after January 19, 2025, and introduces a new 100% bonus depreciation for manufacturing property constructed between January 19, 2025, and January 1, 2031. Businesses should act quickly to leverage these deductions.

Tax Planning Tip: Families saving for education should review their 529 plans to take advantage of the expanded qualified expenses. Businesses considering capital investments should prioritize projects in 2025 to maximize bonus depreciation.

4. New “Trump Accounts” for Children

The OBBBA creates a new tax-deferred savings vehicle called “Trump Accounts” for children under 18 with a Social Security Number. Key features include:

• Annual contributions up to $5,000 (indexed for inflation after 2027), with no tax deduction for donors.

• Employers can contribute up to $2,500 annually.

• Accounts are seeded with a $1,000 government contribution for children born between 2025 and 2028.

• Withdrawals are tax-deferred until the child reaches 18, with no restrictions on use after that age.

These accounts offer a new avenue for tax-advantaged savings, particularly for families planning for future expenses like education or home purchases.

Tax Planning Tip: Consider incorporating Trump Accounts into your annual gifting strategy, especially given the tax-deferral benefits and flexibility of use after age 18.

5. Estate and Gift Tax Changes

The TCJA’s doubled estate and gift tax exemption ($13.99 million for individuals, $27.98 million for couples in 2025) is extended, maintaining the 40% rate. Without this extension, the exemption would have reverted to approximately $7 million in 2026. The annual gift exclusion rises to $19,000 for 2025, up from $18,000 in 2024.

Tax Planning Tip: High-net-worth individuals should review their estate plans to leverage the extended exemption and increased gift exclusion, potentially using trusts to optimize tax outcomes.

6. Corporate and International Tax Reforms

• Corporate Tax Rate: The OBBBA reduces the corporate tax rate from 21% to 20%, with a further reduction to 15% for companies manufacturing in the U.S., incentivizing domestic production.

• Foreign R&E Expenditures: These must still be capitalized and amortized over 15 years, with no immediate recovery for abandoned or disposed property.

• Clean Energy Credits: The OBBBA accelerates the phaseout of wind and solar tax credits and introduces restrictive foreign entity of concern (FEOC) rules, limiting credits for projects using Chinese equipment or inputs.

Tax Planning Tip: Businesses with international operations or clean energy investments should reassess their strategies in light of these changes, particularly the FEOC rules and bonus depreciation opportunities.

Trump’s Executive Orders Impacting Taxes

“In this world, nothing can be said to be certain, except death and taxes.” – Benjamin Franklin

President Trump’s executive orders issued in early 2025 are reshaping the tax landscape, particularly through regulatory and administrative changes at the IRS. Here’s what you need to know:

• IRS Hiring Freeze and Workforce Reduction: On January 20, 2025, Trump issued an executive order imposing a temporary hiring freeze across the federal government, with a specific focus on the IRS. The order directs the Office of Management and Budget (OMB) and the U.S. Department of Government Efficiency Service (DOGE) to submit a plan by April 20, 2026, to reduce the federal workforce through efficiency improvements and attrition. This could limit IRS enforcement capacity, potentially reducing audits in some areas but increasing scrutiny in others, such as partnerships and R&D credits.

• Regulatory Review: A 2017-style executive order requires the Treasury to review significant tax regulations issued in the prior year for undue burdens or complexity. While no specific regulations have been rescinded yet, taxpayers should comply with existing rules until changes are formalized.

• Energy Credit Restrictions: A July 7, 2025, executive order directs the Treasury to issue guidance within 45 days to restrict “broad safe harbors” for determining the start of construction for wind and solar projects, potentially accelerating the phaseout of these credits. This creates uncertainty for clean energy investors.

• IRS Leadership Changes: Former IRS Commissioner Danny Werfel resigned on January 20, 2025, with Douglas O’Donnell appointed as acting commissioner. Former Rep. Billy Long has been nominated to lead the IRS, with a confirmation hearing pending. These leadership shifts may influence IRS priorities, particularly enforcement.

Tax Planning Tip: Stay proactive by ensuring compliance with current regulations, as the IRS may shift enforcement focus due to staffing constraints. Businesses in the clean energy sector should monitor guidance on credit phaseouts closely.

Economic and Fiscal Implications

The OBBBA is projected to reduce federal tax revenue by $5 trillion from 2025–2034 on a conventional basis, though dynamic feedback (e.g., economic growth) may reduce this to $4.1 trillion. Combined with $1.1–1.2 trillion in spending reductions, the net deficit increase is estimated at $2.9–3.4 trillion over the decade. Critics argue that provisions like the Social Security tax exemption could strain program solvency, while supporters highlight potential GDP growth of 1.2% and job creation.

Tax Planning Tip: Given the fiscal uncertainty, prioritize flexibility in your financial plans. Accelerating income into 2025 or deferring deductions to 2026 may be advantageous if tax rates or policies shift further.

Strategies for 2025 Tax Planning

“By failing to prepare, you are preparing to fail.” – Benjamin Franklin

With these changes in mind, here are actionable steps to optimize your 2025 tax strategy:

1. Review Income Sources: If you earn tips, overtime, or Social Security benefits, ensure proper documentation to claim the new deductions. Verify your AGI to avoid phase-out surprises.

2. Maximize Retirement Contributions: Contribution limits for 2025 include $23,500 for 401(k)/403(b) plans, $7,000 for IRAs (plus $1,000 catch-up for those 50+), and $70,000 for SEP IRAs. These accounts remain powerful tools for reducing taxable income.

3. Leverage 529 Plans and Trump Accounts: Explore the expanded 529 plan benefits and consider opening Trump Accounts for children to build tax-deferred savings.

4. Business Investments: Businesses should act swiftly to take advantage of 100% bonus depreciation for 2025 capital expenditures, particularly in manufacturing.

5. Estate Planning: High-net-worth individuals should consult with us to update estate plans, leveraging the extended exemption and increased gift exclusion.

6. Monitor IRS Guidance: With executive orders and new leadership, IRS enforcement priorities may shift. Stay informed about regulatory changes to avoid surprises.

Contact Sellers CPA TodayNavigating the complexities of the 2025 tax landscape requires personalized guidance. At Sellers CPA, Carol Sellers and our team are here to help you make informed decisions tailored to your unique financial situation. Don’t let these changes catch you off guard—contact Carol Sellers today to book a paid consultation and start planning for a tax-efficient future.“The only difference between a tax man and a taxidermist is that the taxidermist leaves the skin.” – Mark Twain

We look forward to working with you to turn tax challenges into opportunities.

Warm regards,

Carol Sellers

C.P.A.

Sellers C.P.A.

carol@sellerscpa.net Disclaimer: This newsletter provides general information and is not a substitute for professional tax advice. Always consult a qualified tax professional for advice specific to your circumstances.

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