Prepared by SL’s Tax Partners

With expiration of most of the individual tax provisions included in the 2017 tax law commonly known as The Tax Cuts and Jobs Act passed during President Trump’s first term slated to sunset at the end of 2025, as well as unpopular provisions such as a requirement to capitalize research and experimentation costs and the gradual phase-out of bonus depreciation beginning in 2022, tax reform has been at the top of Republicans’ agenda, particularly after sweeping the November 2024 elections and holding a rare federal government trifecta—controlling the Presidency, the House (by a very narrow margin), and the Senate.  

  After months of wrangling and revisions, Republicans ultimately fell in line to pass Trump’s first signature piece of legislation in the President’s second term.  After the House of Representatives passed a bill on May 22nd, just two days after initially being introduced, the Senate debated and revised the bill through mid-June, unveiling their draft bill on June 16th, and passing it on July 1st after holding a 34-hour “vote-a-rama” that began early morning on June 30th.  Despite criticisms surrounding various changes made by the Senate, including deeper Medicaid cuts, projected deficit increases, and clean-energy credit and State and Local Tax (SALT) deduction rollbacks, the House nonetheless passed the Senate’s bill on July 3rd, sending the legislation to Trump’s desk in advance of his stated July 4th deadline. 

Some of the tax highlights in the bill signed into law on Friday include: 

• Preservation of the individual tax rates and inflation-adjusted brackets implemented in 2018 and slated to revert back to pre-2018 provisions at the end of this year, with the top marginal rate remaining at 37%, with no slated sunset. 
• Preservation of the inflation-adjusted enhanced standard deductions implemented in 2018, with no slated sunset, as well as permanent elimination of personal exemptions. 
• An increase to the SALT deduction cap, setting the cap at $40,000 through 2029, with a deduction phase-out for individuals earning more than $500,000 per year ($250,000 for individuals married filing separately). 
• Implementation of an overall cap on itemized deductions, with the cap being $0.35 to the dollar for individuals in the top tax bracket. 
• A permanent charitable contribution deduction for non-itemizing individuals of up to $2,000 for married individuals filing jointly and $1,000 for all other filers, beginning in 2026. 
• Creation of an “above-the-line” tax deduction for seniors (a provision to respond to Trump’s call to eliminate income taxes on Social Security benefits).  
• A permanent reinstatement of 100% bonus depreciation for property acquired and placed in service after January 19, 2025. 
• An increase of the maximum Sec. 179 deduction to $2.5 million adjusted for inflation, with the investment limitation increased to $4 million, applicable for taxable years beginning after 2024. 
• Introduction of elective 100% expensing of newly built “qualified production property” (generally, nonresidential real property used in manufacturing) for which construction began after January 19, 2025 and before 2029, as long as the property is placed in service before 2031. 
• A favorable, permanent reinstatement of the depreciation and amortization addbacks in determining interest deductibility under IRC Sec. 163(j), effective for taxable years beginning after December 31, 2024. 
• Permanent allowance of immediately expensing research or experimental expenditures paid or incurred in taxable years beginning after December 2024; small business taxpayers with annual gross revenues of $31 million or less are further allowed to retroactively apply this provision to 2022; foreign R&D expenditures must still be capitalized and amortized over 15 years. 
• A permanent extension of the 20% Qualified Business Income deduction. 
• A permanent extension of the overall limitation on excess business losses. 
• A deduction up to $25,000 for qualified tips, phasing out for incomes over $150,000, allowed from 2025 to 2028 (i.e., “no tax on tips”). 
• A deduction up to $12,500 for qualified overtime compensation, phasing out for incomes over $150,000, allowed from 2025 to 2028 (i.e., “no tax on overtime”). 
• Preservation of the enhanced estate and gift tax lifetime exemption, setting the exemption at $15 million in 2026, indexed for inflation, with no sunsetting. 
• An expansion of the types of expenses that qualify for us in 529 accounts to include elementary or secondary public, private, or religious school enrollment, and an increase in the per-beneficiary annual distribution limitation to $20,000, beginning in 2026. 
• Revisions and rollbacks to various energy tax credits, including repeal of the Energy-Efficient Home and Residential Clean Energy Credits after 2025. 
• An expansion of the Sec. 1202 Qualified Small Business Stock benefits, including a per-issuer limitation increase to $15 million, increasing the gross asset threshold to $75 million, and creating a tiered approach for the gain exclusion (50% exclusion after three years, 75% after four years, and 100% exclusion after five years). 
• Permanent establishment of Opportunity Zone policy, keeping the designation process from the 2017 tax law, and modifying eligibility requirements. 
• An indefinite extension of the New Markets Tax Credit, starting with a $5 billion annual allocation adjusted for inflation. 
• Creation of tax-advantaged investment accounts (“Trump accounts”) for newborns, allowing a one-time $1,000 credit for each qualifying child on an account for children born after 2024 and before 2029, with up to $5,000 allowed to be deposited per year. 
• An increase to the information reporting requirement threshold for many Form 1099 payments from $600 to $2,000, beginning in 2026. 

As always, if you have questions on your individual tax situation, please reach out to your SL team member. Our team is here to help you navigate what’s ahead.