XLinkedInFacebook

Claiming Your One Big Beautiful Bill Tax Breaks

By |2025-09-30T10:53:33-07:00September 30, 2025|Categories: Legislation|Tags: , , , |0 Comments

A wave of new federal income tax-saving opportunities is on the horizon, thanks to the One Big, Beautiful Bill (OBBB, H.R.1, Public Law No. 119-21). These provisions, which will be rolled out over the next four tax years (2025–2028), are envisioned by the current administration as welcome relief for select taxpayers, primarily in the form of the following three deductions:

  • Deduction for tip income (“no tax on tips”)
  • Deduction for overtime pay (“no tax on overtime”)
  • Deduction for interest on certain auto loans

In this SWC blog post, we take a deeper dive into these three tax breaks and explain what you need to do to fully take advantage of them, starting with no tax on tips.

Photo for One Big Beautiful Bill

Deduct Tip Income (Up to $25,000)

H.R.1 introduces an above-the-line deduction (up to $25,000) for cash or credit card tips earned in professions in which tipping is the norm. The Department of the Treasury and the Internal Revenue Service published this list of eligible sectors, covering occupations in:

  • Beverage and food service (bartenders, waitstaff, dishwashers, etc.)
  • Entertainment and events (gambling dealers, dancers, musicians, etc.)
  • Hospitality & guest services (concierges, desk clerks, housekeepers, etc.)
  • Home services (landscapers, plumbers, handymen, etc.)
  • Personal services (personal care and service workers, private event planners, wedding photographers and videographers, etc.)
  • Personal appearance and wellness (estheticians, masseuses, tattoo artists, etc.)
  • Recreation and instruction (golf caddies, piano teachers, ski instructors, etc.)
  • Transportation and delivery (valet parkers, pizza delivery drivers, furniture moves, rideshare drivers, etc.)

For more information, see Treasury, IRS issue guidance listing occupations where workers customarily and regularly receive tips under the One, Big, Beautiful Bill.

Note that this is $25,000 per return, not per taxpayer. So, if you’re married filing jointly (MFJ), and you collectively receive tip income more than $25,000, you can only deduct up to $25,000.

Be Careful: Though the phrase “no tax on tips” sounds like a full exemption, it is actually a deduction, not an income exclusion. You won’t owe federal income tax on the amount of tip income you deduct, but you are required to pay Social Security and Medicare taxes on that income. You may also be required to pay state and local taxes on that income.

Reporting is really important here: Your W‑2s, 1099s, or Form 4137 must clearly identify tip amounts and the profession that generated the tip income you received. And here’s something else you need to know: 2025 forms and withholding tables won’t be updated, but the IRS will issue transitional guidance for what “reasonable” reporting looks like.

If you’re self-employed in a profession in which tipping is the norm, you’re eligible for this tax break, too! However, we’re waiting for Internal Revenue Service (IRS) specifics on how to report tip income via Schedule C.

In any event, you need to be aware of these three limits: Continue reading… Continue reading… Continue reading…

What the Passage of the One Big Beautiful Bill Mean for You and Your Business

By |2025-07-16T12:11:14-07:00July 16, 2025|Categories: Legislation|Tags: , , , , , , , , , |1 Comment

On July 3, 2025, Congress passed H.R. 1, a sweeping piece of tax legislation known as the One Big Beautiful Bill Act (OBBB). The OBBB is a nearly 1,000-page tax package aimed at preserving and expanding key provisions of the 2017 Tax Cuts and Jobs Act (TCJA) and so much more.

This pro-growth bill prevents the expiration of certain tax breaks while adding a host of new tax relief measures, including “no tax on tips,” “no tax on overtime pay,” “no tax on car loan interest,” and “no tax on Social Security.” It also provides tax incentives to businesses that manufacture in the U.S. and hire more U.S. workers, and it rolls back many of the green energy credits that we’ve written about in previous blog posts.

Graphic for One Big Beautiful Bill Legislation

This post summarizes the most important changes found in the new law, which was signed by the President on July 4, 2025, focusing on provisions that directly affect individual taxpayers (as compared to corporations). Understanding these updates is important, whether you’re a high net-worth individual or family member, an employee, a small-business owner or entrepreneur, a parent, or a retiree. Or maybe you just want to know how these tax code changes are likely to affect you and how you can maximize your tax savings legally.

Here’s what you need to know.

Individual Tax Rates and the Standard Deduction

The 2017 Tax Cuts and Jobs Act (TCJA) reduced most individual income tax rates. The 15 percent bracket dropped to 12 percent, the 25 percent bracket to 22 percent, the 28 percent bracket to 24 percent, the 33 percent bracket to 32 percent, and the top 39.6 percent bracket to 37 percent. The One Big Beautiful Bill Act (OBBB) locks in these rate structures permanently.

Tax Relief at a Cost? While tax relief is always welcome, according to the Congressional Budget Office (CBO), doing so will add $2.2 trillion to the federal deficit over the next decade.

The standard deduction, which was nearly doubled in 2017, is also made permanent by the OBBB and temporarily increased further for tax years 2025–2028:

  • $15,750 for single filers
  • $23,625 for heads of household
  • $31,500 for joint filers

This expansion reduces the number of itemizers and simplifies filing for most taxpayers. It is estimated to cost $1.4 trillion over 10 years, according to the CBO.

The Child Tax Credit

The 2017 Tax Cuts and Jobs Act (TCJA) doubled the Child Tax Credit from $1,000 to $2,000 per child. The OBBB makes this adjustment permanent, increasing it temporarily to $2,500 through 2028. Inflation adjustments begin in 2026. The $500 credit for non-child dependents also becomes permanent. These changes will cost an estimated $817 billion over 10 years, according to the CBO.

The Qualified Business Income (QBI) Deduction

To maintain parity between pass-through businesses and C corporations, the 2017 Tax Cuts and Jobs Act created a 20 percent deduction for qualified business income. The new law keeps this deduction and increases it to 23 percent starting in 2026. It also expands eligibility and adjusts phaseout thresholds to avoid income cliffs. Continue reading… Continue reading… Continue reading…

What That One Big, Beautiful Bill Act May Mean for You or Your Business

By |2025-07-10T10:41:38-07:00July 1, 2025|Categories: Legislation, Tax Credits|Tags: , , , , , , |0 Comments

Depending on how you voted in 2024 or which media outlets you follow, you might think the One Big, Beautiful Bill Act (OBBBA) is either a historic win or a major letdown. Since clients have been asking for our take, we want to share what we know and believe about the bill.

Passed by the U.S. House of Representatives on May 22, 2025, and passed this morning by the United States Senate, the bill includes 300-plus provisions, including one that seeks to extend the provisions of the 2017 Tax Cuts and Jobs Act, which are set to expire at the end of 2025. But there’s much more to it than that.

Graphic for the One Big Beautiful Bill

While changes are expected as the legislation moves back to the House of Representatives for another vote, many provisions will likely survive the legislative process. This summary covers the main individual and business tax provisions broken down into the following four sections:

  • New above-the-line deductions (tips, overtime pay, and vehicle loan interest)
  • Business depreciation and expensing provisions (to encourage new investments in production property and equipment)
  • Business interest expense limitation (to prevent excessive interest deductions that would reduce a business’s taxable income too aggressively)
  • Clean energy credit rollbacks (to reduce subsidies for clean energy technologies)

New Above-the-Line Deductions

President Trump’s campaign promises are reflected in three above-the-line deductions proposed in the OBBBA. (An above-the-line deduction is one that reduces the adjusted gross income [AGI] used to calculate how much federal income tax is owed. It does not affect the amount of Social Security and Medicare tax owed.)

Here are the three new above-the-line deductions proposed in the OBBBA:

  1. A tax deduction for tip income (“no tax on tips”)
  2. A tax deduction for overtime pay (“no tax on overtime”)
  3. A tax deduction for interest paid on loans used to buy certain vehicles manufactured in the United States

Tax Deduction for Tip Income

The proposed “no tax on tips” deduction is for certain tips reported on W-2s and other tax forms. With one out of every 30 workers in the U.S. depending on tips to make ends meet, a tax deduction for tip income is an essential need for some.

Here are the requirements to qualify: Continue reading… Continue reading… Continue reading…

10 New California Laws That Could Impact Your Taxes in 2025

By |2025-01-15T16:10:34-08:00January 15, 2025|Categories: Legislation|Tags: , , |0 Comments

As we enter 2025, a host of new laws are taking effect in California, many that could directly influence your tax planning and finances. From reforms in banking and food delivery to freelancer protections and new insurance mandates, these changes could play a role in how you approach your tax planning.

Here’s what you need to know:

Ban on Certain Bank Fees

California Assembly Bill (AB) 2017 prohibits state-chartered banks and credit unions from charging fees for declined ATM withdrawals due to insufficient funds. Effective Jan. 1, 2025, this new law could save you from unexpected penalties.

  • Tax Planning Impact: Reduced banking fees mean fewer deductions for penalty-related costs. While this may not affect you, it’s a healthy reminder to evaluate other areas of tax planning where savings or reduced deductions might come into play.

Image of California

Paid Family Leave Expansion

Starting Jan. 1, AB 2123 (Changes in Managing Employee Leave under Paid Family Leave Act) ensures that employers can no longer require workers to use accrued vacation time before accessing the state’s Paid Family Leave Program.

  • Tax Planning Impact for Individuals: If you plan to take Paid Family Leave, remember that benefits from the state program may be taxable. Here at SWC, we recommend that you consider setting aside funds for potential tax liabilities to adjust your withholding or estimated tax payments.
  • Tax Planning Guidance for Business Owners: We recommend that you review your policies and payroll processes to ensure compliance with the new rule. Consider how this change may affect your labor costs or employee coverage needs and ask us for help in updating your tax strategy accordingly, if you’re unsure what to do.

Freelancer Protections Against Late Payments

Under California Senate Bill (SB) 988 (Freelance Worker Protection Act), effective Jan. 1, companies must pay independent contractors by the date specified in their contracts — or within Continue reading… Continue reading… Continue reading…

New Tax Credits Can Offset the Costs of Energy-Efficient Home Improvements

By |2025-07-10T10:35:23-07:00January 31, 2023|Categories: Legislation, Real Estate, Tax Credits|Tags: , , |0 Comments

With energy costs soaring, some homeowners are looking for ways to make their homes more energy efficient. However, energy-efficient home improvements can be quite costly.

To make these improvements more affordable, the federal government offers tax credits to offset the costs, while some state and local governments offer additional tax credits. Thanks to the Inflation Reduction Act of 2022, two substantial federal income tax credits for energy-efficient home improvements have been extended and expanded:

  • The residential clean energy credit
  • The energy efficient home improvement credit

In this post, we cover these credits and the steps you need to take to claim them.

Tax Credits Can Offset the Costs of Energy-Efficient Home Improvements

The Residential Clean Energy Credit

The federal income tax credit for eligible energy saving home improvements, formerly called the residential energy efficient property credit, is now called the residential clean energy credit. Before explaining how the credit has changed, let’s look at how it works under the “old rules” for eligible home improvements made in 2020–2022.

The Old Rules — for 2020–2022

The residential energy property credit varies, depending on when you had the work done:

  • 26 percent of qualified expenditures for energy-saving home improvements in 2020–2021
  • 30 percent of qualified expenditures for energy-saving home improvements in 2022 (thanks to the Inflation Reduction Act)

Note that there are no income limits. Even billionaires can take advantage of these tax credits. And given the high cost of many energy-saving home improvements, this tax credit can be substantial. For example, the credit for installation of a new $35,000 geothermal system in 2022 is $10,500!

Qualified expenditures include costs for site preparation, assembly, installation, piping, and wiring for the following: Continue reading… Continue reading… Continue reading…

Demystifying the Inflation Reduction Act: Part 4 — Additional Provisions

By |2025-07-10T10:36:20-07:00September 21, 2022|Categories: Legislation, Tax Credits|Tags: , , , |0 Comments

The Inflation Reduction Act of 2022 (IRA ’22) is 750-plus pages of tax and spending legislation designed to tackle everything from climate change to the runaway costs of prescription medication. It contains tax credits for clean energy, nuclear power production, electric vehicles, and other technologies intended to fuel the transition to a lower carbon economy.

It also seeks to reduce health insurance premiums for 13 million low- and middle-income Americans and imposes a $2,000 per year cap on out-of-pocket medicine costs under Medicare Part D. And it establishes a new 15 percent minimum tax on the “book income” of large corporations.

Oh, and if you believe the stated intent, it provides about $80 billion in new funding to the IRS over the next 10 years that is not exclusively for increased tax enforcement. More on this below.

IRS Audit Cartoon

We covered many of the provisions of the new legislation, which the President signed into law on Aug. 16, 2022, in the first three parts of this four-part series:

Today’s Part 4 of this series covers additional provisions in the IRA ’22 that apply to increased IRS funding, drug pricing, and Affordable Care Act insurance premiums.

Increased IRS Funding

The Internal Revenue Service (IRS) has been underfunded for years. You may have experienced the ramifications of this underfunding if you ever tried to contact the IRS with a question or concern. But the lack of funding has also impaired the IRS’s ability to conduct audits and collect unpaid taxes.

The Inflation Reduction Act of 2022 provides an additional $80 billion to the IRS over 10 years to improve customer services and expand its enforcement and compliance efforts. The Congressional Budget Office estimates that these investments will raise an additional $124 billion from increased collections over a 10-year period.

Perhaps the most controversial aspect of this increased funding is what the IRS plans to do with it — hire and train up to 87,000 new IRS agents. While U.S. Secretary of the Treasury Janet Yellen has indicated that the additional funds will not be used to increase audits of people earning less than $400,000, it would be foolish to believe that such an increase in enforcement efforts would not be used to target regular, everyday taxpayers.

Warning: As soon as the IRS uses the increased funding to become fully staffed, we are confident that it will expand its enforcement efforts to small businesses and households making less than $400,000 per year.

Your best defense is Continue reading… Continue reading… Continue reading…

Demystifying the Inflation Reduction Act: Part 3 — Tax Implications for Businesses and Corporations

By |2025-07-10T10:36:45-07:00September 16, 2022|Categories: Legislation, Tax Credits|Tags: , , , |0 Comments

The Inflation Reduction Act of 2022 (IRA ’22) is generally considered to be ‘Build Back Better Light’ (note: we briefly covered the President’s ‘Build Back Better’ proposal in 2021 Year-End Tax-planning Tips for Business Owners here on the SWC blog.). Many of its provisions are clearly intended to offset the costs of transitioning to green energy for consumers, as explained in Part 1 and Part 2 of this four-part series.

However, the IRA ’22 also contains several provisions that apply specifically to businesses and corporations — some of which provide similar incentives for adopting green energy alternatives and others which clearly target businesses and corporations to increase tax revenue — presumably to help cover the cost of this Act.

In this, Part 3 of our series, we get down to business as we highlight what business owners and corporate leaders need to know about the IRA ’22.

Inflation Reduction Act's Tax Implications for Businesses and Corporations

 

Green Energy Tax Incentives: Extended and Revised

Many of the energy credits available to businesses before the enactment of the Inflation Reduction Act of 2022 have been extended and revised by the Act. Below are highlights of some of the changes made to existing business energy credits and incentives:

  • Revises the Internal Revenue Code (IRC) §179D Energy Efficient Commercial Buildings deduction as follows:
    • The deduction is increased for taxpayers who meet specified prevailing wage and apprenticeship requirements (see below) and decreased for taxpayers who do not. (For additional information on prevailing wages, visit the U.S. Department of Labor’s prevailing wages webpage.)
    • Allows additional increases for achieving specified energy savings targets.
    • Replaces the lifetime cap on the deduction with a three-year cap.
    • Updates the efficiency standards that must be met.
    • Allows tax-exempt entities, including governmental agencies, to allocate the deduction to the designer of the building or the qualified retrofit plan.
  • Modifies the Renewable Electricity Production Credit in the following ways: Continue reading… Continue reading… Continue reading…

Demystifying the Inflation Reduction Act: Part 2 — Energy Efficiency Credits and Rebates for Residents and Owners of Residential Property

By |2025-07-10T10:37:09-07:00September 9, 2022|Categories: Legislation, Tax Credits|Tags: , , , |0 Comments

The Inflation Reduction Act of 2022 (IRA ’22) has garnered a great deal of press, along with even more confusion and concern. Its provisions cover everything from offsetting the costs of the transition to green energy to helping consumers keep pace with the rising costs of health insurance and prescription medications.

To help you make sense of this massive piece of legislation, we are breaking it all down in this four-part series — “Demystifying the Inflation Reduction Act.”

Last week, we posted Part 1 of this series to explain the Clean Vehicle Credit — a tax credit intended to help offset the cost of certain new and used electric vehicles and electric hybrids.

  • Here, in Part 2 of this series, we stay with the theme of green energy by examining tax incentives and rebates intended to help residents and owners of residential property make their homes more energy efficient.
  • In Part 3, we shift our attention to provisions in the Act that apply to businesses.
  • And we wrap the series in Part 4 by covering a hodgepodge of other provisions, including tax incentives to help make healthcare more affordable and increased funding for the IRS.

The Residential Clean Energy Credit

In the Inflation Reduction Act of 2022, the Residential Energy Efficient Property Credit under Internal Revenue Code §25D (often referred to as the Solar Energy Credit) is renamed the “Residential Clean Energy Credit” and is extended to property placed in service prior to January 1, 2035.

nergy-Efficiency-Credits-and-RebatesPrior to passage of the Inflation Reduction Act, homeowners were entitled to a non-refundable tax credit for the use of solar electric panels, solar hot water heaters, fuel cells, small wind energy systems, geothermal heat pumps, and biomass fuel units they had installed for their homes.

That credit was in the process of being gradually reduced and then eliminated by the end of 2023. The Inflation Reduction Act retroactively returns the credit to 30 percent for the years 2022 through 2032 when it begins to phase out again and end after 2034. Those who qualify for the credit in 2022 receive a 30 percent credit rather than the expected 26 percent.

Electrifying: The Act’s battery storage technology is also added to the list of qualified expenditures eligible for the renamed credit and is applicable to expenditures made after December 31, 2022.

The Energy Efficient Home Improvement Credit

The Energy Efficient Home Improvement Credit essentially renames and modifies the Internal Revenue Code’s §25C Nonbusiness Energy Credit and extends it to apply to purchases of qualified property placed in service prior to January 1, 2033.

Notable changes introduced by the Energy Efficient Home Improvement Credit include the following and apply to property placed in service after December 31, 2022 and through December 31, 2032: Continue reading… Continue reading… Continue reading…

Demystifying the Inflation Reduction Act: Part 1 — The Clean Vehicle Tax Credit

By |2025-07-10T10:37:32-07:00August 26, 2022|Categories: Legislation, Tax Credits|Tags: , |0 Comments

Regardless of whether you approve of the most recent spending bill out of Washington D.C. or think that “Inflation Reduction Act” is a misnomer, now that it has been passed by Congress and signed by the President, it is law.

The best approach at this point for both individual and corporate taxpayers is to take advantage of the tax incentives that the legislation provides and identify the most effective ways to deal with new challenges presented by the legislation, such as the $80 million in additional funding for the Internal Revenue Service (IRS).

In this four-part series, “Demystifying the Inflation Reduction Act,” we highlight the key provisions in this bill that are likely to impact individuals, businesses, and corporations now and for years to come:

  • In this part, we cover the Clean Vehicle Credit for individual taxpayers.
  • In Part 2, we cover tax credits and rebates for offsetting the costs of making your home more energy efficient.
  • In Part 3, we focus our attention on various provisions in the bill that will impact businesses and corporations.
  • In Part 4, we cover other provisions in the bill, including tax incentives to help make healthcare more affordable and increased funding being allocated to the IRS.

Clean Vehicle Credit

Graphic for Clean Vehicle Tax Credit

The Act’s Clean Vehicle Credit replaces the current Qualified Plug-in Electric Drive Motor Vehicle Credit. It’s generally applicable to qualified electric vehicles, including plug-in hybrid electric vehicles (PHEVs) and hydrogen fuel cell electric vehicles (FCEVs) placed in service starting in 2023 through 2032. (PHEVs typically operate on electricity until the battery is depleted, at which point they run on gas. FCEVs are typically powered by hydrogen fuel cells.)

Key changes introduced in the Clean Vehicle Credit include but are not limited to the following: Continue reading… Continue reading… Continue reading…

Keeping Pace with California Tax Law: Part 2 — The Parent-Child Exclusion

By |2022-08-18T12:28:56-07:00August 9, 2022|Categories: Legislation|Tags: , |3 Comments

This week, in Part 2 of our three-part series on keeping pace with California tax law, we bring you up to speed on the parent-child exclusion, which applies to any real property purchases or transfers between parents and children. In last week’s post, we covered Prop 19, which makes it more affordable for older homeowners to relocate in California.

In a nutshell, the parent-child exclusion enables children to inherit their parents’ property and parents to inherit their children’s property without a property tax increase, subject to certain qualifications and limitations. Prop 19 changed the way the parent-child exclusion works as of Feb. 16, 2021.

Parent-Child Exclusion in California

The Parent-Child Exclusion Before and After Prop 19

In California, real property, such as a home, is reassessed only upon a change in ownership, but when the change in ownership is within a family — specifically parent to child, child to parent, or grandparent to grandchildren — you can file for a reassessment exclusion to prevent a reassessment or reduce the reassessed value.

Before Prop 19 (effective Feb. 16, 2021), here’s how the parent-child exclusion worked:

  • Parents (transferor) could transfer their primary residence to their child/children (transferees) without a reassessment.
  • There was no limit on the value of the home that could be transferred.
  • The child/children could live in the home, use it as a vacation home, or rent it out.
  • Parents could transfer up to $1 million of California real property other than their primary residence to a child/children without reassessment. If the assessed value is more than $1 million, the first million dollars is transferred without change, and only the balance is reassessed.

Prop 19 changed the rules. For any property transfers occurring on or after Feb. 16, 2021, the parent-child exclusion works like this: Continue reading… Continue reading… Continue reading…

© 2014- Stees, Walker & Company, LLP (SWC). All rights reserved.
XLinkedInFacebook
Go to Top