What the 2025 Tax Bill Means for Your Income, Business, and Investments

A sweeping new tax law has officially passed, locking in several major tax breaks and introducing some new ones—especially for individuals, business owners, and investors.

The best news? Many tax provisions that were scheduled to disappear after 2025 have now been made permanent, preventing what could have been a steep tax hike for many.

Here’s a plain-English breakdown of what stayed the same, what’s changing, and how these updates may apply to you.

✅ What Stayed the Same (And That’s a Big Deal)

Several important tax provisions were scheduled to expire in 2026. This new law keeps them in place permanently:

• Lower individual income tax brackets

• Capital gains tax rates stay the same

• The 20% Qualified Business Income (QBI) deduction for pass-through business owners continues

• 1031 like-kind exchanges are preserved

• SALT workaround (via Pass-Through Entity Tax elections) is still available

• Corporate tax rate remains flat at 21%

• Meals and entertainment deductions remain unchanged

• Net Investment Income Tax (NIIT) was not expanded

✅ These provisions were set to sunset after 2025. By making them permanent, the law preserves major savings for small business owners, real estate investors, and high-income households.

🚀 What Changed (And What to Consider)

1. 100% Bonus Depreciation Is Back—and Permanent

Businesses can now deduct 100% of the cost of qualifying property placed in service after January 19, 2025. This includes vehicles, equipment, and leasehold improvements.

⚠️ Many states don’t follow federal bonus depreciation rules. We’ll consider both federal and state treatment in your planning.

2. Opportunity Zones Are Now Permanent

The Opportunity Zones program is no longer set to expire. Updates include:

• 5-year capital gain deferral for investments made after 12/31/2026

• 100% gain exclusion still applies after a 10-year hold

• New zones will be designated every 10 years (starting July 2026)

🏙️ Ideal for clients with large capital gains who miss a 1031 deadline or want long-term tax-free growth.

3. Estate and Gift Tax Exemption Increased

The federal exemption increases to $15 million per person (or $30 million per married couple), indexed annually for inflation.

🛡️ A key planning window for those transferring wealth across generations or using advanced estate strategies.

4. New Senior Deduction (Even If You’re Not on Social Security)

Starting in 2025, taxpayers aged 65 or older can deduct an extra:

• $6,000 (single)

• $12,000 (joint)

This deduction phases out at:

• $75,000 AGI (single)

• $150,000 AGI (joint)

🧾 You do not need to be receiving Social Security to qualify.📊 With this change, 88% of seniors may avoid income tax on Social Security—up from just 64% under prior law.

5. Tip Income Exclusion (With Limits for Owners)

Starting in 2025, employee tips are excluded from federal income tax if:

• AGI is under $150,000 (single) or $300,000 (joint)

Still subject to:

• Social Security and Medicare (FICA) payroll taxes

• State income tax (in most states)

• Standard W-2 tip reporting

⚠️ What About S Corp Owners?

If you're an S corp owner who performs services and receives tips (e.g., a hairstylist or massage therapist), the tip exclusion may not be helpful. Here’s why:

• The IRS still requires you to pay a reasonable salary

• If you reduce your W-2 wages by excluding tips, you could fall below that threshold

• This increases audit risk and could result in reclassification of distributions as wages

⚠️ Bottom line: We'll work with you to ensure tips are reported in a way that supports your salary and protects your audit position.

6. Overtime Deduction for Employees

Between 2025–2028, non-exempt employees (those eligible for overtime) can deduct:

• $12,500 (single)

• $25,000 (joint) in qualified overtime pay

Phases out at:

• $150,000 AGI (single)

• $300,000 AGI (joint)

• Not available above $275K/$550K AGI

⚠️ Business owners and salaried exempt employees are not eligible.Overtime pay is still subject to FICA and generally state income tax.

7. SALT Deduction Temporarily Increased

Starting in 2026, the cap on the state and local tax (SALT) deduction increases to:

• $40,000

It phases out between:

• $500K–$600K AGI (single)

• $1M–$1.2M AGI (joint)

Returns to the $10,000 cap in 2030.

💡 Many will continue to benefit more from the SALT workaround (PTET elections), especially business owners.

8. Expanded Clean Energy Credits (With Deadlines)

✅ Section 48E – Solar and Wind Projects

• Must begin construction within 12 months of enactment

• Must be in service by December 31, 2027

✅ Section 179D – Commercial Energy-Efficient Buildings

• Must begin construction by June 30, 2026

✅ Section 45L – Energy-Efficient Home Builders

• Credit ends for homes acquired after June 30, 2026

🚗 EV Credits – Big Changes After September 30, 2025

🔹 Clean Vehicle Credit (up to $7,500)

• Continues through dealers at the point of sale

• Most new EVs will no longer qualify after 9/30/2025

  • Due to stricter sourcing rules for battery components and critical minerals

  • Tesla models are among those expected to lose eligibility

⚠️ If you're considering an EV purchase, act before October 1, 2025, to preserve the credit.

🔹 Used EV Credit (up to $4,000)

• Still available after 2025

• Conditions:

  • Vehicle priced under $25,000

  • At least 2 model years old

  • Buyer AGI must be below:

    • $75,000 (single)

    • $150,000 (joint)

✅ Used EV credit may be more accessible depending on your income and budget.

9. 100% Expensing for U.S. Factory Construction

If you build and own a U.S.-based manufacturing facility, you can write off 100% of the cost upfront.

Requirements:

• Construction begins between January 19, 2025 – December 31, 2028

• Must be owner-occupied (not leased to others)

🏭 A strong incentive for companies looking to expand or reshore operations.

10. Excess Business Loss Limitation Becomes Permanent

The rule limiting how much business loss can offset other income is now permanent.

• 2025 limits:

  • $305,000 (single)

  • $610,000 (joint)

• Losses above these amounts become Net Operating Losses (NOLs) carried forward

🔍 This affects business owners using large depreciation or paper losses. We’ll account for this in your planning going forward.

⚠️ Don’t Forget State Tax Rules

Many states don’t automatically follow federal law, especially on:

• Bonus depreciation

• Overtime/tip deductions

• Clean energy and EV credits

• SALT deductions

• Excess business losses

We’ll continue reviewing state-level differences as we guide your tax planning.

Final Thoughts

This new law preserves key tax savings and introduces fresh opportunities—especially for business owners, retirees, and employees earning tips or overtime.

If you'd like to review how these changes apply to your unique situation, we’re here to help. Let’s build a plan that maximizes these new rules and keeps more money in your pocket.