What the new Tax Bill means for you?

Howdy Wealth Builders. This isn’t political it’s just informative. This bill is massive and has a lot of moving parts. See below which ones affect you…

On May 22nd, the House of Representatives passed its version of the so-called “One Big Beautiful Bill".” This comprehensive tax package now moves to the Senate which will work to put its mark on the bill in the coming weeks. This will affect everyone from the average American to the 1%ers. Below is a breakdown of the key features of the bill and proposed changes.

1. No new taxes on life insurance or life carriers
   When the Tax Cuts & Jobs Act (TCJA) was enacted in 2017, the Joint Committee on taxation estimated that the 10-year cost to the life insurance industry was $23 billion, mainly through increased DAC taxes and lower reserve deductions. While the Senate now has its bite at the proverbial apple, it looks like the insurance industry will not be a “pay-for” like it was in 2017.

2. Increased Pass-Through Deduction
   The bill raises the 199A small business tax deduction from 20% to 23%, and changes the way certain phase-outs are calculated that should result in some clients being able to claim a higher deduction.

3. Permanent Individual Tax Rate Reductions
   The bill makes the individual tax rate cuts from the 2017 TCJA permanent, including top marginal rates.

4. Restoration of 100% Bonus Depreciation
   The legislation reinstates 100% immediate expensing for capital investments, allowing small businesses to immediately deduct the full cost of equipment and property.

5. Enhanced R&D Expensing
   The bill similarly allows small businesses engaged in domestic research and development immediate expensing of R&D costs.

6. Permanent Individual Tax Rate Reductions
   The bill sets the exemption at $15 million per person in 2026 and makes it indexed to inflation.

7. Above the line deduction for car loan interest
   The House bill creates a new above the line deduction for “qualified passenger vehicle loan interest” for personal use up to a maximum deduction of $10,000.  A phase out of the deduction begins at $100,000 of modified adjusted gross income.  In order to qualify, final assembly of the vehicle must occur in the United States and also applies to ATVs, motorcycles, campers and RVs.

8. Increase SALT Deduction
   The state and local tax deduction limitation (“SALT”) will be increased from $10,000 to $40,000, subject to phase outs if “MAGI” (modified adjusted gross income) exceeds $500,000.

9. Mortgage interest rules made permanent
   TCJA’s limit on mortgage interest deductions on qualified residences, which limited the deductibility to interest incurred on $750,000 of so-called “acquisition indebtedness” was made permanent, while the exclusion of the deductibility of interest on home equity indebtedness is also made permanent.

10. Trump accounts are created
    Trump Accounts can receive up to $5,000 per year until the account beneficiary reaches the age of 18.  Distributions are prohibited until the account beneficiary reaches the age of 18, and the account grows tax free.  Distributions are treated as capital gain if used for “qualified expenses” which include education expenses, post-secondary credentialing expenses, repayment of small business loans, and the purchase of a first-time home.  For children born between December 31, 2024 and January 1, 2029, the U.S. will give each child $1,000 to start his or her Trump Account, unless the taxpayer elects out of the funding of the account.

11. Qualified Opportunity Zones
    The bill adds a new round of QOZ-qualifying tracts, and extends the timing for the recognition of deferred gain invested in qualified opportunity zones to December 31, 2033.

12. New scholarship tax credit
    Starting in 2026, the bill creates a new dollar-for-dollar tax credit for individuals for charitable contributions to tax-exempt organizations that provide scholarships to elementary and secondary school students, otherwise known as “scholarship granting organizations.” Contributions to “scholarship granting organizations” (private foundations are excluded) are deductible up to the greater of (1) $5,000, or (2) 10% of Adjusted Gross Income through the 2029 tax year.

13. Qualified tip deduction
    The bill creates an above the line deduction for “qualified tips” available for tax years 2025-2028 for occupations that “customarily received tips.” Note that “professionals” are excluded and there can’t be any negotiations as the “tip” must be paid voluntarily.

14. Carried interest and compensation deduction limits
    The bill doesn’t include new taxes on carried interest but there are new limits on the ability to deduct compensation over $1million.

15. New excise tax on endowments
    The bill creates a new tiered excise tax of 1.4% - 21% excise tax on college endowment investment income.

16. Faster sunsetting of clean energy credits
    The bill generally sunsets these credits by 2028, and facilities that begin clean energy construction after 60 days of enactment aren’t eligible.