TRANSCRIPT
Hello everyone, Stephen Morris here with Advisory, and today we’re going to be talking about the new tax law updates to the One Big Beautiful Bill Act. So let’s jump into it! There aren’t a lot of huge changes, but we’ll address them point by point.
In a nutshell, the One Big Beautiful Bill Act cements the Tax Cuts and Jobs Act of 2017 and makes permanent all of the changes that were originally set to expire at the end of 2025. What that means is: the 20% qualified business income deduction is now permanent, the mortgage interest deduction on the first $750,000 of mortgage debt is locked in, standard deductions are permanently higher, and the personal exemption has essentially gone extinct.
One major change to itemized deductions is the increase in state and local tax (SALT) deductions. Previously, whether you were single or married filing jointly, you could deduct up to $10,000 of state and local taxes (including property taxes and DMV fees). This was a tough limit for high-tax states like California. Now, the limit has doubled: $20,000 for single or married filing separately, and $40,000 for married filing jointly. Keep in mind, though, these deductions phase out after $500,000 of adjusted gross income, so they won’t help the top earners as much.
Let’s talk about some headline-grabbing priorities from President Trump, particularly around tips, overtime, and the new “Trump accounts.” If you’re a qualified tip worker (like a server) earning up to $150,000 as a single filer or $300,000 as married filing jointly, you can now claim a $25,000 deduction for tip income. The same deduction applies for overtime wages under the same income limits — another $25,000 deduction for overtime pay.
A brand-new feature is the “Trump account.” For any baby born after January 1, 2025, parents can contribute up to $5,000 per year into an account for that child. These funds can be withdrawn when the child turns 18 for things like starting a business or paying for school. Gains inside the account are tax-free until withdrawn, and when withdrawn, they’re taxed at long-term capital gains rates. It functions similarly to a 529 plan but is open only to children born after January 1, 2025.
Now, one of the biggest (and most exciting) changes is the revival of bonus depreciation. Previously, bonus depreciation was 100% through 2022, then started phasing down: 80% in 2023, 60% in 2024, and 40% in 2025. Under the new law, we’re back to a permanent 100% bonus depreciation regime. For real estate investors, this means cost segregation studies are once again incredibly powerful, allowing for huge upfront deductions.
There’s also a revival of full expensing for research and development expenditures. Before 2021, R&D expenses were fully deductible, but after that, they had to be capitalized and amortized. We’re now back to immediate deductions, and importantly, this change is retroactive. That means you can amend prior returns or use a change in accounting method to capture missed deductions. This is great news for our tech clients who often reinvest those tax savings into real estate diversification.
For international taxpayers, there are some key updates. The term “GILTI” (Global Intangible Low-Taxed Income) has been dropped and replaced with “CFC income” (Controlled Foreign Corporation income), removing the reference to “intangibles.” Previously, there was a 10% exemption tied to your qualified business asset investment, and a Section 250 deduction at 37.5%. That 250 deduction is now 40%, but the 10% asset exemption is gone. On the plus side, the foreign tax credit on CFC income is increased from 80% to 90%. Overall, this slightly increases the international tax burden, but many opportunities remain, particularly in low-tax jurisdictions like the UAE.
In the real estate world, it’s worth noting that the Low-Income Housing Tax Credit, New Markets Tax Credit, and Opportunity Zones have all been made permanent. These continue to be fantastic tax-saving tools if you’re investing in designated development areas.
One downside: the phase-out of green energy credits. Starting after September 30, 2025, credits for things like solar panel installation, home batteries, electric vehicles, and energy-efficient appliances will be eliminated as the administration shifts away from renewable energy incentives.
So, what’s the big picture? The One Big Beautiful Bill Act doesn’t drastically change the tax landscape, but it locks in some key strategies we rely on, especially for real estate investors and tech entrepreneurs. Expect more of the same heading into 2025 and 2026 — but knowing these details helps you plan smarter.
Thanks so much for watching! If you want more insights on real estate investing, tax-saving strategies, or business planning, make sure to like and subscribe to our channel. See you in the next video!
