House Passes Tax Bill - “The One, Big, Beautiful Bill”

Updated May 22, 2025: On Thursday morning, May 22, the House narrowly approved the “The One, Big, Beautiful Bill” after an all-night session. The bill now moves to the Senate for evaluation. Republicans are hoping to get the bill approved by the Senate before the July 4 holiday, but it is expected that the Senate will have some changes.

The tax bill has been much anticipated by businesses, particularly flow-through businesses most impacted by the sunsetting provisions of the Tax Cuts and Jobs Act. Some of the key changes are highlighted below.

• TAX RATES - Permanent extension of the rates currently in place
  • Effective for tax years beginning after December 31, 2025
  • Includes a modification of the inflation adjustment for certain tax brackets
• IRC 199A (QBI DEDUCTION) - Permanent extension with expansion
  • Increases the deduction from 20% to 23% of qualifying income
  • Modifies the limitations based on taxable income for specified service businesses in addition to the W-2 and capital investment limitations
• ESTATE TAX LIFETIME EXEMPTION – Permanent extension
  • Expands the exemption amount to $15 million indexed for inflation
• RESEARCH AND EXPERIMENTAL EXPENDITURES (R&E) – Temporary extension
  • Allows domestic R&E to be deducted as incurred for years beginning after Dec. 31, 2024 and before Jan. 1, 2030
  • No change to treatment of foreign R&E
  • Change made on a cutoff method for expenditures
• BONUS DEPRECIATION – Extends and expands 100% bonus depreciation
  • 100% bonus depreciation allowed for assets acquired after Jan. 19, 2025 and before Jan. 1, 2030
  • Expands 100% bonus depreciation to certain real property used in manufacturing meeting certain requirements
• IRC 179 DEDUCTION – Expands deduction
  • Maximum expensing amount under IRC 179 increased to $2,500,000 with phaseout beginning at $4,000,000
• INTEREST EXPENSE LIMITATION (IRC 163(j)) – Temporary extension
  • Allows once again the addback of depreciation and amortization in the calculation of the interest expense limitation for years beginning after Dec. 31, 2024 and before Jan. 1, 2030
• STATE AND LOCAL TAX DEDUCTION – Permanent extension of limitation with modification and expansion
  • State and local tax itemized deduction limitation expanded to $40,000 subject to phase-out that reduce the deduction to $10,000
  • State taxes paid by S Corporation and Partnership trade or businesses other than specified service businesses continue to be available not subject to the limitations above
• NO TAX ON TIPS OR OVERTIME – New law
  • For years beginning after Dec. 31, 2024 and before Dec. 31, 2028, the law allows a deduction for tips received by certain individuals (subject to anti-abuse restrictions)
  • For years beginning after Dec. 31, 2024 and before Dec. 31, 2028, the law allows a deduction for overtime received by certain individuals (subject to anti-abuse restrictions)
• MAGA ACCOUNTS – New law
  • Contributions to new accounts available after Jan. 1, 2026 up to $5,000 annually for children under age 18 (children under 8 eligible for accounts)
  • Eligible for a $1,000 contribution in a pilot government program
  • Earnings distributed for qualified expenses taxable as capital gains
• ENERGY CREDITS – Termination of various credits
  • Various credits created and expanded under the Inflation Reduction Act are subject to phase-out and termination
• INCREASED GROSS RECEIPT THRESHOLD FOR SMALL MANUFACTURING BUSINESSES – Expansion of current threshold
  • Increased threshold for manufacturing businesses from $25 million to $80 million
  • Allows businesses under exemption to utilize the cash method of accounting, avoid the limitation on business interest expense, UNICAP and inventory accounting rules

There are many, many other proposals included in the bill that will impact taxpayers in both positive and negative ways. The Republicans hold a very narrow margin, so the ultimate success of the bill is uncertain. Redpath will continue to provide updates on the status of the bill as it progresses through Congress and, as things move forward, we will provide additional analysis on the key topics and the impact on various tax planning strategies.

For businesses looking ahead, preparation, adaptability, and expert consultation from Redpath will be key to navigating what’s next.