The U.S. Department of the Treasury has released a preliminary list of occupations that customarily and regularly receive tips for purposes of the new “no tax on tips” provision under H.R. 1, P.L. 119-21, commonly known as the One Big Beautiful Bill Act (OBBBA).

This provision, effective for tax years 2025 through 2028, allows workers in certain qualified occupations to claim a deduction of up to $25,000 for eligible tips. To qualify, tips must be received in an occupation that customarily and regularly received tips on or before December 31, 2024. Importantly, the law excludes tips received in the course of certain trades and businesses—including health, performing arts, and athletics.

Preliminary List of Occupations

Treasury’s list spans several industries, including:

• Beverage & Food Service (bartenders, wait staff, cooks, hosts, etc.)
• Entertainment & Events (dealers, dancers, musicians, digital content creators, ushers, etc.)
• Hospitality & Guest Services (baggage porters, concierges, hotel clerks, housekeepers, etc.)
• Home Services (maintenance, landscaping, plumbers, HVAC, appliance repair, cleaning services, locksmiths, roadside assistance, etc.)
• Personal Services (personal care workers, event planners, photographers, videographers, etc.)

The official proposed list will be issued as part of forthcoming regulations. Treasury and the IRS anticipate the final version will be substantially the same as the preliminary list.

For more details, you can access Treasury’s official posting here: Treasury Preliminary List of Tipped Occupations (PDF).

Workers in eligible occupations should be prepared to track and substantiate their tip income carefully beginning in 2025, as this provision offers a significant opportunity to reduce taxable income. Employers in these industries may also need to review payroll and reporting processes to ensure compliance and maximize employee benefits under this new rule.

We will continue to monitor Treasury and IRS guidance as the proposed regulations are released and provide further updates.

On August 28, 2025, the IRS released Revenue Procedure 2025-28, a significant piece of guidance that reshapes how businesses treat research and development (R&D) expenditures under the One Big Beautiful Bill Act (OBBBA). This development arrives just weeks before corporate returns are due on September 15 and October 15, 2025, which means businesses must quickly assess the potential impact. For many taxpayers, especially small businesses, these rules present both opportunities for current year tax savings and the chance to generate refunds for prior years.

The Shift in Treatment of Domestic R&D

Perhaps the most important change introduced by OBBBA and confirmed by Rev. Proc. 2025-28 is the creation of new Section 174A. For tax years beginning after December 31, 2024, domestic R&D expenditures may once again be deducted immediately. This marks a reversal of the Tax Cuts and Jobs Act of 2017 (TCJA) rule, which had required businesses to capitalize and amortize such costs over five years. The ability to deduct these expenses right away will allow companies to align their tax treatment more closely with their actual cash outlays, lowering taxable income in the year the R&D is performed.

At the same time, taxpayers are not forced into immediate expensing. Section 174A also permits an election to continue amortizing domestic R&D expenses over 60 months. This option may make sense in circumstances where a smoother pattern of deductions is preferable—for example, where spreading the deductions helps avoid creating or increasing a net operating loss.

The Continued Limitation on Foreign R&D

The treatment of foreign R&D remains much less favorable. Under the amended Section 174, businesses must continue to capitalize and amortize foreign research costs over fifteen years. This disparity creates a strong tax incentive to locate R&D activities in the United States rather than overseas, a policy objective that Congress has emphasized in recent years.

Transition Rules for Expenses from 2022–2024

A major question left open by the OBBBA was how to deal with R&D expenses that were already capitalized under the TCJA between 2022 and 2024. Revenue Procedure 2025-28 provides clarity. Taxpayers may elect either to deduct the entire remaining balance of unamortized domestic R&D costs in their first tax year beginning after December 31, 2024, or to spread that remaining balance evenly over two years starting in 2025. The availability of these transition options gives taxpayers some flexibility in matching deductions to their income profile and may create refund opportunities for those willing to file amended or superseding returns.

Interaction with the Research Credit

The guidance also revisits the interaction between R&D deductions and the research credit under Section 41. In particular, taxpayers may now make late elections under Section 280C(c)(2) to reduce the research credit instead of reducing R&D deductions. Conversely, taxpayers who previously made such elections may revoke them. This flexibility will allow companies to fine-tune the balance between deductions and credits to maximize overall tax benefits.

Accounting Method Relief

Normally, a change in the treatment of R&D expenditures would require filing Form 3115, Application for Change in Accounting Method. Recognizing the widespread and immediate effect of the OBBBA rules, the IRS is simplifying compliance. For the first tax year beginning after December 31, 2024, taxpayers may rely on a statement in lieu of Form 3115, which reduces the administrative burden and speeds up implementation.

Special Opportunities for Small Businesses

One of the most favorable aspects of Revenue Procedure 2025-28 is the special treatment it provides for small businesses. An “eligible small business” is defined as any taxpayer that is not a tax shelter and that meets the gross receipts test under Section 448(c). Specifically, the business must have average annual gross receipts of $31 million or less for the three prior tax years (2022 through 2024).

For these businesses, the benefits are substantial. They may apply Section 174A retroactively to the 2022–2024 period, effectively undoing the TCJA’s capitalization requirement for domestic R&D. In practical terms, this means a small business can file amended or superseding returns—or, in the case of partnerships, an Administrative Adjustment Request (AAR)—to immediately deduct expenses that had previously been capitalized. The result may be a cash refund for taxes already paid.

To make this election, small businesses must attach a specific statement referencing Revenue Procedure 2025-28 to the relevant return. Importantly, there are strict deadlines. Elections on amended returns or AARs must be filed no later than the earlier of July 6, 2026 or the applicable statute of limitations on refund claims.

The IRS also built in a “deemed election” rule for convenience. If a small business files its 2024 original or superseding return on or before November 15, 2025, and it deducts domestic R&D expenses on that return while meeting all other requirements, the election will be considered made automatically. However, businesses taking advantage of this deemed election in 2024 must also amend their 2022 and 2023 returns to apply the new rules consistently.

Extra Time to Act

Recognizing that many businesses had already filed 2024 returns before this guidance was issued, the IRS is granting an automatic six-month extension for filing superseding returns. This extension applies even if the taxpayer did not request an original extension, provided the superseding return is filed solely to implement OBBBA elections. To invoke this relief, taxpayers must clearly mark “REVENUE PROCEDURE 2025-28” at the top of the superseding return.

Because many of the most favorable provisions hinge on strict deadlines—November 15, 2025, for deemed elections and July 6, 2026, for retroactive amended returns—early action and careful planning are critical.  For additional detail, please see Rev. Proc. 2025-28  26 CFR 601.204: Changes in accounting periods and in methods of accounting.

The One Big Beautiful Bill Act (OBBBA) significantly reshapes the tax treatment of research and development (R&D) expenses starting in 2025. It reverses the TCJA requirement to capitalize domestic R&D costs and instead restores the option for immediate expensing. Taxpayers may still choose to capitalize and amortize these costs over a period of at least 60 months. Foreign R&D remains subject to 15-year amortization, and software development continues to be treated as research.

A major feature is the ability to accelerate deductions for previously capitalized but unamortized domestic R&D costs. Taxpayers can elect to write these off beginning with their first return after 2024, either all at once or spread across one or two years.

For small businesses (generally those with average gross receipts of $31 million or less), the OBBBA provides a special retroactive election. These taxpayers can apply the new expensing rules back to tax years beginning after 2021. Doing so requires filing amended 2022–2024 returns and adjusting R&D credits under Section 280C, but it may unlock valuable refunds. Treasury is expected to issue detailed guidance on making this election, which must be filed by July 4, 2026.

The law also clarifies coordination rules, such as how the R&D credit interacts with expensing, and provides flexibility for taxpayers to use different methods for prior versus current costs. Importantly, the start date for amortization under capitalization now shifts to when benefits are first realized, instead of the TCJA midpoint rule.

The OBBBA gives businesses more flexibility in managing R&D costs and creates strategic opportunities, especially for small businesses weighing cash flow benefits of refunds versus the administrative burden of amended filings. Careful modeling will be essential to decide between immediate expensing, acceleration, or continued amortization.

최근 새로 도입된 팁 소득 및 초과근무수당에 대한 연방 세금 공제와 관련하여, 2025년 7월 14일 IRS에서 발표한 초기 지침(FS-2025-03)을 바탕으로 주요 내용을 안내드립니다. 이번 공제는 2025년 1월 1일부터 시행 중이며, 공제는 근로자가 개인 세금 신고 시 적용받는 것이지만, 레스토랑 및 환대업 등 관련 업종의 고용주는 자격 요건 충족 및 관련 보고 의무에 있어 중요한 역할을 하게 됩니다.

팁 소득 공제는 고용주가 연방세법상 “특정 서비스 업종(Specified Service Trade or Business, SSTB)”에 해당하지 않아야 적용됩니다. 대부분의 외식 및 서비스 업종은 SSTB에 포함되지 않지만, 사업체별로 해당 여부를 확인해 둘 필요가 있습니다. 또한, 공제가 적용되기 위해서는 팁이 자발적으로 지급된 것이어야 하며, 자동으로 부과되거나 의무적으로 청구되는 봉사료 등은 해당되지 않습니다. 해당 공제는 2025년 이전부터 팁을 일상적으로 받아온 직종에 종사하는 근로자에게만 적용되며, IRS는 자격이 되는 직종 리스트를 오는 10월 2일까지 발표할 예정입니다.

초과근무수당 공제는 근로기준법(Fair Labor Standards Act, FLSA)에 따라 초과근무수당을 지급받는 비면제(non-exempt) 근로자에게 적용됩니다. 공제 대상이 되는 것은 초과근무수당 중 정규 시급을 초과하여 지급된 프리미엄 부분입니다. 예를 들어, 정규 시급이 20달러이고 초과근무 시 30달러를 지급받는 경우, 공제가 가능한 금액은 추가로 지급된 10달러에 해당합니다. 고용주는 정규 임금과 초과근무 프리미엄을 구분하여 급여를 관리하고, 향후 IRS가 발표할 보고 방식에 맞춰 이를 제출할 수 있도록 준비해야 합니다.

IRS는 관련 직종 목록 및 구체적인 보고 지침을 포함한 추가 안내를 추후 발표할 예정이며, 2025년 한 해 동안은 고용주와 근로자 모두에게 전환 유예 조치를 제공할 계획입니다. 하지만 지금부터 미리 준비해두는 것이 바람직합니다. 이에 따라, 현재의 팁 정책이 자발성 요건을 충족하는지 점검하고, SSTB 해당 여부를 확인하며, 급여 시스템이 팁과 초과근무수당을 별도로 추적하고 보고할 수 있는 구조인지 검토해 두시기 바랍니다.

추가 지침이 발표되는 대로 신속하게 안내드릴 예정이며, 그 외 궁금한 사항이나 준비 관련 문의가 있을 경우 언제든지 연락 주시기 바랍니다.

As a follow-up to our earlier communication regarding the newly enacted federal tax deductions for tip income and overtime pay, we want to provide an important update based on the IRS’s initial guidance released on July 14, 2025 (FS-2025-03). These deductions are now in effect as of January 1, 2025, and, while they are claimed by individual employees, employers in the restaurant and hospitality industries will play a central role in determining eligibility and ensuring compliance with the related reporting requirements.

Tip Income Deduction

The tip income deduction will be available only if the employer is not classified as a “Specified Service Trade or Business” (SSTB) under Internal Revenue Code Section 199A. While most restaurant and hospitality businesses are not SSTBs, we encourage you to confirm your business classification. In addition, the deduction applies exclusively to voluntary tips—mandatory gratuities or service charges will disqualify the compensation from eligibility. Employees must also be working in occupations that have “customarily and regularly” received tips prior to 2025. The IRS has indicated that it will publish a list of qualifying occupations by October 2, 2025.

Overtime Deduction

The overtime deduction applies to the premium portion of overtime compensation—that is, the additional amount paid above the employee’s regular hourly rate for overtime hours as defined under the Fair Labor Standards Act. For example, if an employee earns $20 per hour and receives $30 for overtime hours, only the $10 premium is deductible. Employers will be expected to track and report the regular versus premium portions of employee compensation separately, although the specific reporting method has not yet been released.

While additional IRS guidance is forthcoming—including the expected October release of qualifying occupations and further details on required reporting formats—the IRS has confirmed that transition relief will be provided for both employers and employees during the 2025 tax year. Nonetheless, now is the time to prepare. We recommend reviewing your current tip policies to ensure that all tips remain voluntary, confirming your business classification under Section 199A, and assessing whether your payroll systems can accommodate the required tracking for both tip and overtime reporting.

We will continue to monitor developments closely and will provide further updates as the IRS issues additional guidance. In the meantime, please feel free to contact us with any questions or to begin preparing your systems for compliance in 2025.

President Donald Trump has signed into law the One Big Beautiful Bill Act (OBBBA), enacting the most sweeping set of federal tax reforms since 2017. This legislation makes many provisions of the Tax Cuts and Jobs Act (TCJA) permanent, introduces new deductions and credits, and overhauls critical international tax rules. The new law creates significant planning opportunities for individuals, families, and businesses — while also introducing new compliance risks, particularly for U.S. subsidiaries of foreign-parented companies.

Below is a comprehensive summary of the most relevant provisions. We give special attention to four areas of importance: the expanded estate tax exemption, the temporary increase in the SALT deduction cap, the restoration of immediate expensing for R&D, and the broader application of the Base Erosion and Anti-Abuse Tax (BEAT). These are followed by additional key changes applicable to both individuals and businesses.

Estate and Gift Tax Exemption Permanently Increased

The federal estate and lifetime gift tax exemption will be permanently increased to $15 million per individual and $30 million per married couple starting in 2026. The exemption will be indexed annually for inflation. This change offers long-term certainty for estate planning and provides an extended opportunity for high-net-worth families to engage in tax-efficient wealth transfer strategies, including the use of irrevocable trusts, family partnerships, and valuation discounts.

Temporary SALT Deduction Expansion and Continued Use of PTET Elections

For tax years 2025 through 2029, the deduction cap for state and local taxes (SALT) will be raised from $10,000 to $40,000, with inflation indexing. In 2030, the cap will revert to $10,000. Crucially, the final law does not limit or disallow the use of state passthrough entity tax (PTET) elections, preserving one of the most effective SALT cap workarounds available to owners of partnerships and S corporations. Taxpayers in high-tax states should revisit their current SALT strategies and evaluate the expanded benefits now available under the new cap.

Immediate Expensing of U.S. Research and Experimental (R&E) Costs Restored

One of the most significant business-friendly changes in the bill is the full reinstatement of immediate expensing for U.S.-based R&E expenditures. This change applies retroactively to tax years beginning after December 31, 2021. For small businesses with average gross receipts of $31 million or less, the change may be applied more broadly. Taxpayers may also elect to accelerate amortization of R&E costs incurred between 2022 and 2024 over a one- or two-year period. This reform eliminates the burdensome capitalization rules previously imposed and restores upfront tax savings for innovation-focused businesses. R&E expenditures incurred outside the United States must still be capitalized and amortized over 15 years.

BEAT Expanded: Now Applies to Foreign-Owned U.S. Corporations of Any Size

The Base Erosion and Anti-Abuse Tax (BEAT), a minimum tax regime originally aimed at large multinational corporations, has been significantly expanded. Previously, BEAT applied only to corporations with $500 million or more in average gross receipts. The new law eliminates that gross receipts threshold entirely. Going forward, BEAT may apply to any U.S. corporation that is more than 50% foreign-owned and that makes deductible payments to related foreign parties — such as royalties, interest, service fees, and cost-sharing allocations.

The BEAT rate increases from 10% to 10.5% for tax years beginning after 2025. The definition of modified taxable income has also been broadened, capturing more deductions and making it more difficult to plan around BEAT through ordinary business expenses. As BEAT operates as a parallel minimum tax with limited offsetting credits (R&D being the main exception), the tax can significantly increase the effective tax rate of foreign-owned U.S. subsidiaries. Companies that are majority foreign-owned should immediately assess their intercompany payment structures and model the impact of BEAT under the new law.

Permanent Individual Tax Rates and Brackets

The bill makes permanent the individual tax rates enacted in 2017, along with the inflation-indexing of bracket thresholds. This change ensures ongoing rate stability for individual taxpayers and preserves the benefits of TCJA-era marginal tax rates.

Permanent Standard Deduction with Inflation Adjustments

The increased standard deduction is now permanent, beginning at $15,750 for single filers, $23,625 for heads of household, and $31,500 for married joint filers in 2025. These figures will be adjusted annually for inflation. This change continues to simplify compliance for taxpayers who do not itemize and aligns with the law’s broader policy goal of reducing taxable income through higher base deductions.

Section 199A QBI Deduction Made Permanent with Enhancements

The 20% qualified business income (QBI) deduction under Section 199A is made permanent. The phase-in threshold for specified service trades or businesses is increased to $150,000 for joint filers and $75,000 for other taxpayers. A new minimum deduction of $400 will apply for taxpayers with at least $1,000 of QBI and material participation, even below the full threshold. This permanent extension provides clarity and continued tax relief for passthrough business owners, professionals, and sole proprietors.

Enhanced Credits for Families and Dependents

The child tax credit is increased to $2,200 per qualifying child beginning in 2025 and indexed for inflation. The refundable portion of $1,400 and the higher income phaseout thresholds ($200,000 for single and $400,000 for joint returns) are also made permanent. The dependent care tax credit is expanded from 35% to 50% of eligible expenses, with higher thresholds for phaseout. The maximum excludable benefit under employer-sponsored dependent care assistance programs is increased from $5,000 to $7,500.

Charitable Contribution Changes for Itemizers and Non-Itemizers

Non-itemizing taxpayers will now be eligible for an above-the-line charitable deduction of up to $1,000 (single) or $2,000 (joint). Itemizers are subject to a 0.5% floor on contributions (1% for corporations), reducing the total deduction by a small portion of adjusted income. These changes reward philanthropic giving across a broader segment of taxpayers.

Mortgage, Casualty, and Miscellaneous Deduction Provisions

The mortgage interest deduction on acquisition debt remains capped at $750,000, with the exclusion of home equity loan interest made permanent. The deduction for personal casualty losses is now restricted to federally or state-declared disasters. The law continues the suspension of most miscellaneous itemized deductions under Section 67(g), except for unreimbursed expenses of eligible educators.

AMT Relief and Temporary Senior Deduction

The increased alternative minimum tax (AMT) exemption amounts from the TCJA are made permanent, but the phaseout of the exemption accelerates from 25% to 50% of the excess income above threshold levels. A temporary $6,000 deduction is available for taxpayers age 65 or older from 2025 to 2028, phasing out at $75,000 of modified AGI for single filers ($150,000 for joint).

Temporary Deductions for Tip Income and Overtime Pay

From 2025 through 2028, taxpayers may deduct up to $25,000 in tip income (for those in tipped occupations) and up to $12,500 in qualified overtime pay as above-the-line deductions. These benefits phase out beginning at $150,000 of MAGI ($300,000 joint).

Education-Related Reforms and New Trump Accounts

529 plan distributions may now be used for postsecondary credentialing and additional K–12 educational expenses. The new law also creates "Trump accounts," a form of IRA for minors under age 18. Contributions are limited to $5,000 annually (indexed), and distributions are permitted starting the year the beneficiary turns 18. A one-time $1,000 credit is available for children born between 2025 and 2028 whose accounts are established under the federal pilot program.

Additional Business Incentives and Administrative Updates

Bonus depreciation is made permanent at 100% for eligible property placed in service on or after January 19, 2025. The Section 179 expensing limit is increased to $2.5 million (phased out above $4 million). The employer credit for paid family and medical leave is made permanent. The employer-provided child care credit increases to 40%, with a higher cap of $500,000 ($600,000 for small businesses).

Form 1099-K reporting thresholds are restored to $20,000 and 200 transactions. The general Form 1099 threshold increases from $600 to $2,000 starting in 2027. A 1% remittance transfer tax applies to certain physical payments. The new law also permits installment reporting over four years for qualifying farmland sales to eligible farmers.

The One Big Beautiful Bill Act delivers long-term clarity in key areas of the tax code while introducing new risks and opportunities. If you are a business owner, investor, or part of a multinational structure — or if you're planning for generational wealth transfer — now is the time to reassess your strategy in light of the new law.

미 의회는 Base Erosion and Anti-Abuse Tax (BEAT) 제도를 대폭 확장하는 입법안을 추진 중이며, 이에 따라 미국 내 외국 지배 법인들에게 추가적인 세금 부담이 발생할 가능성이 커지고 있습니다. 현행법상 BEAT는 과거 3년 평균 매출이 5억 달러 이상이고, 외국 관련자에게 지급한 비용이 총 공제액의 3% 이상인 대형 법인에만 적용되어, 많은 외국계 미국 법인들이 BEAT 적용 대상에서 제외되어 왔습니다.

그러나 이번 개정안은 기존 §59A를 폐지하고 신규 §899 조항을 도입하는 내용을 담고 있으며, 그 적용 범위는 훨씬 넓습니다. 하원안은 매출 기준과 기지식 비율 기준을 전면 폐지하고, 외국인이 50% 이상 지분을 보유한 미국 법인이라면 예외 없이 BEAT 적용 대상에 포함시키는 방향입니다. 또한, 지금까지 제외되었던 서비스 비용, 관련 외국인으로부터의 자산 구매, 그리고 미국 원천세가 부과된 로열티 지급액까지 Base Erosion Payment으로 간주하여 과세 대상에 포함시키고 있습니다. 상원안은 3% Base Erosion Payment 비율 기준을 0.5%로 낮춰 유지하면서도 유사한 과세 범위를 제안하고 있으며, BEAT 세율 또한 상향될 예정입니다.

이러한 개편안이 통과될 경우, 특히 로열티, 서비스 수수료, IP 관련 지급 등이 있는 외국계 미국 법인들은 새로운 BEAT 세부담에 직면할 수 있습니다. 본 제도의 통과 가능성이 높아지고 있는 만큼, 사전에 관련 구조와 거래 흐름을 재검토해 보시는 것을 권장드립니다.

BEAT 적용 가능성 분석이나 제도 변경에 대비한 준비가 필요하신 경우, 언제든지 문의해 주시기 바랍니다.

Congress is advancing legislation that could significantly expand the scope of the Base Erosion and Anti-Abuse Tax (BEAT), posing increased tax exposure for many foreign-owned U.S. corporations. Under current law, BEAT applies only to large corporations with at least $500 million in average annual gross receipts and a base erosion percentage of 3% or more. These thresholds have historically shielded many foreign-parented U.S. entities from BEAT liability, even where substantial intercompany payments exist.

The proposals under consideration would replace the current BEAT framework with a broader regime under a new Section 899. The House version would eliminate the gross receipts and base erosion percentage thresholds altogether, applying BEAT to any U.S. corporation that is more than 50% foreign-owned. It would also expand the definition of base erosion payments to include service payments, purchases of tangible assets from related foreign affiliates, and royalty payments—even those already subject to U.S. withholding tax. The Senate version retains a reduced base erosion percentage threshold (0.5%) but is otherwise aligned in targeting similar payments and raising the BEAT rate.

If enacted, these changes would expose a much larger segment of foreign-owned U.S. companies—particularly those with intercompany royalties, service fees, or IP-related arrangements—to the BEAT minimum tax. We encourage impacted businesses to begin assessing their structures and payment flows in anticipation of possible enactment later this year.

Please reach out to us if you would like assistance in evaluating potential BEAT exposure or preparing for compliance under the new rules.

The Senate Finance Committee released its draft of proposed tax provisions as part of the ongoing budget reconciliation process. While largely aligned with the House’s “One Big Beautiful Bill Act” (H.R. 1), the Senate version includes key differences across individual, business, and international tax provisions.

Individual Tax Provisions

• Tax Rates & Deductions: TCJA individual tax rates and standard deduction amounts made permanent. Adds inflation adjustment for lower brackets.
• SALT Cap: Retains $10,000 cap but includes anti-avoidance rules and separate treatment of passthrough entity taxes (PTETs); final SALT cap still under negotiation.
• Senior Deduction: Adds $6,000 temporary deduction (2025–2028) for taxpayers age 65+ with income phaseouts.
• Child Tax Credit: Increases nonrefundable credit to $2,200; makes $1,400 refundable portion permanent.
• QBI Deduction (Sec. 199A): Made permanent; expands phase-in thresholds but retains 20% deduction rate (House proposed 23%).
• Estate & Gift: Exemptions raised to $15M/$30M (single/joint) in 2026, indexed for inflation.
• AMT & Itemized Deductions: AMT exemption amounts extended; replaces Pease limitation with a cap on deduction benefit (35¢ per dollar for top earners).
• Other Notable Deductions:
  • No tax on qualified tips (up to $25K) and overtime (up to $12.5K/$25K) for 2025–2028.
  • Permanent changes to mortgage interest, wagering losses, casualty losses, and charitable contributions for both itemizers and non-itemizers.

Business Tax Provisions

• Bonus Depreciation: Permanent 100% first-year bonus depreciation for assets placed in service after Jan. 19, 2025.
• Sec. 179: Expensing cap increased to $2.5M (phase-out begins at $4M).
• R&D Expenses: Allows immediate expensing of U.S.-based R&D starting in 2025; retroactive relief available for prior years for small businesses.
• Interest Deduction (Sec. 163(j)): EBITDA-based limitation reinstated; adjusted taxable income excludes Subpart F, GILTI, and Sec. 78 amounts.
• Employer-Provided Child Care: Credit increased to $500K; higher rates for qualifying small businesses.
• Opportunity Zones: Program made permanent with narrowed eligibility criteria starting in 2027.

International Tax Provisions

• GILTI & FDII: Deduction percentages lowered, effective tax rate increased to 14%; FDII and GILTI renamed and restructured.
• Foreign Tax Credit: Limitations adjusted to restrict foreign deductions allocable to GILTI.

Superfund Excise Tax Repeal

While not included in either the House-passed bill (H.R. 1) nor the Senate Finance Committee’s proposal, Senator Ted Cruz (R-TX) is separately leading an effort to repeal the Superfund (chemical) excise tax imposed under the 2021 Infrastructure Investment and Jobs Act.

Cruz reintroduced the Chemical Tax Repeal Act, with strong support from industry groups such as the U.S. Chamber of Commerce, American Chemistry Council, and others. The repeal effort aims to either be included in the final reconciliation package or advance as standalone legislation.

On May 14, 2025, the House Ways and Means Committee approved a 389-page tax reform proposal that would extend key provisions of the 2017 Tax Cuts and Jobs Act (TCJA) and introduce new tax breaks for individuals and businesses. The proposal also scales back a number of recent clean-energy tax credits. According to the Joint Committee on Taxation, the package would reduce federal revenue by $3.819 trillion over the next decade.

This bill is part of a larger budget reconciliation process, which allows Congress to fast-track certain tax and spending changes. Because of this process, the bill can pass the Senate with a simple majority instead of the usual 60 votes. However, only items that directly affect government spending or revenues can be included.

The next step is for the proposal to be merged into a broader budget bill by the House Budget Committee. If approved by the House and Senate, the final version would go to the President for signature and become law.

The following are the key highlights of the proposed legislation:

TCJA Extensions and Updates

• Income Tax Brackets: TCJA’s lower tax rates made permanent, with inflation adjustments.
• Standard Deduction: Increased deduction levels extended permanently, with added boosts through 2028.
• Child Tax Credit: Increased to $2,500 per child through 2028, then permanently set at $2,000 (adjusted for inflation).
• Business Income Deduction (Sec. 199A): Increased to 23%, expanded to new investment income types, and made permanent.
• Estate & Gift Tax: Exemption raised to $15 million, indexed for inflation.
• AMT Relief: Higher exemption amounts made permanent.
• SALT Cap Repeal: $10,000 cap eliminated; replaced with a more complex income-based limit.

New Tax Breaks for Individuals

• No Tax on Tips or Overtime: Above-the-line deductions for reported tips and qualified overtime wages.
• Senior Bonus Deduction: $4,000 deduction for taxpayers age 65+, phased out for higher incomes.
• Car Loan Interest Deduction: Available through 2028 for U.S.-assembled vehicles.
• 529 Plan Expansion: Includes K–12, homeschool, and credentialing expenses.
• Charity Deduction for Non-Itemizers: Restored up to $300 for joint filers (2025–2028).
• Adoption Credit: Up to $5,000 refundable.
• New “MAGA” Savings Accounts for Children: Tax-favored accounts for children under 8, with optional $1,000 government seed deposits.

Business Tax Incentives

• Bonus Depreciation: Restored at 100% through 2029.
• Section 179 Expensing: Cap increased to $2.5 million.
• R&D Costs: Amortization requirement suspended through 2029 for domestic research.
• Interest Deduction Rules: EBITDA-based limit reinstated.
• FDII & GILTI: Scheduled deduction reductions canceled.
• 1099 Reporting Thresholds: Raised to $2,000 and $20,000/200 transactions for certain forms.

Energy Tax Rollbacks

The bill would end or scale back many clean-energy tax credits earlier than scheduled, including:

• Electric vehicle credits
• Home energy upgrades
• Clean hydrogen and nuclear power
• Manufacturing and fuel production credits

The proposal still needs to pass the House Budget Committee, then move to a full vote in both the House and Senate. Because it’s part of the budget reconciliation process, it can become law with a simple majority vote in the Senate. If both chambers approve, it will go to the President for final signature.  If passed, this bill would permanently extend many TCJA tax cuts, introduce new deductions for working individuals and seniors, and significantly reduce clean-energy incentives.