One Big Beautiful Bill Act (OBBBA) Signed Into Law

Jul 10, 2025

On July 4, President Trump signed into law H.R.1, widely recognized as the One Big Beautiful Bill Act (OBBBA). This comprehensive legislation introduces significant budgetary measures addressing border security, defense, energy policy, and federal spending reductions. Most notably, OBBBA represents one of the most consequential federal tax reforms since the Tax Cuts and Jobs Act of 2017 (TCJA), with far-reaching implications for both individuals and businesses.

The most prominent provisions are outlined below. For a more comprehensive overview of how these changes may impact your specific situation, we encourage you to connect with your William Vaughan Company advisor.

Key Provisions for Businesses

  • Research and Experimentation (R&D) Deductions: OBBBA establishes new IRC Section 174A, enabling immediate deductibility of domestic R&D expenses incurred after December 31, 2024, replacing the prior five-year amortization rule, and enhancing tax benefits for U.S.-based innovation. Companies with capitalized domestic R&D expenses between 2022 and 2024 can elect to accelerate those deductions. Eligible small businesses, generally those with average annual gross receipts not exceeding $31 million, can elect to retroactively apply the full expensing of domestic R&D expenses to tax years beginning after December 31, 2021, by amending their returns for 2022, 2023, and 2024 to claim refunds for taxes paid because of amortization. Other taxpayers with capitalized domestic R&D expenses between 2022 and 2024 can choose to accelerate deductions of the remaining unamortized amount over a one or two-year period, starting with the 2025 tax year. Foreign R&D expenditures remain subject to 15-year amortization.
  • Bonus Depreciation: Restores 100% bonus depreciation, allowing businesses to immediately expense qualifying assets placed in service after January 19, 2025, thereby eliminating the previously scheduled phase-down.
  • Qualified Production Property (QPP): Manufacturers can claim a 100% deduction for the cost of new “qualified production property,” including nonresidential real property, defined as property used in a “qualified production activity” (the manufacturing, production, or refining of a qualified product that results in a substantial transformation of the property). This change applies to qualified property placed in service after the date of enactment and before January 1, 2031.
  • Business Interest: Restores the more favorable EBITDA-based calculation for the business interest deduction limitation under Section 163(j) for tax years beginning after December 31, 2024. This reverts to the approach used from 2018 through 2021, which generally allowed larger deductions. It also provides specific rules regarding the interaction of the business interest expense limitation with other tax provisions that capitalize interest.
  • Pass-through Businesses: Makes permanent the Section 199A qualified business income deduction, with no change to the current 20% deduction percentage. Additionally, the bill expands the limitation phase-in window from $50,000 for single filers ($100,000 for married filing jointly) to $75,000 for single filers ($150,000 for married filing jointly).
  • Pass-through Entity Tax (PTET) Elections: Electing pass-through entities (PTEs) can continue to deduct state income taxes paid at the entity level, effectively allowing business owners to bypass the limitation on individual SALT deductions.
  • Advanced Manufacturing Investment Credit: The advanced manufacturing investment credit rate increases from 25% to 35% for property placed in service after December 31, 2025.
  • Federal Tax Exclusion for Capital Gains from Qualified Small Business Stock (QSBS): Updates Section 1202 of the Internal Revenue Code by raising gain exclusion caps from $10 million to $15 million and allowing investors to access tax benefits after a shorter holding period (as little as three years in some cases). The asset limit is also increased from $50 million to $75 million, making it easier for larger start-ups to qualify.
  • Employee Retention Tax Credit: Retroactively bars the IRS from issuing refunds for Employee Retention Tax Credit (ERTC) claims for Q3 2021 (and in some cases Q4 2021) filed after January 31, 2024. The bill also requires ERTC promoters to comply with due diligence requirements regarding a taxpayer’s eligibility and the amount of an ERTC for affected quarters. In addition, OBBBA includes a $1,000 penalty for each failure to comply and extends the penalty for excessive refund claims to employment tax refund claims.

Key Provisions for Individuals

  • Tax Rates: Permanently extends most of the individual income tax rate structures established by the TCJA of 2017.
  • Standard Deduction: Makes the TCJA’s increased standard deduction amounts permanent. For tax years beginning after 2024, the standard deduction increases to $15,750 for single filers, $23,625 for heads of household, and $31,500 for married individuals filing jointly. The standard deduction will be adjusted for inflation thereafter. These changes are retroactive to include 2025.
  • SALT Cap: The $10,000 cap on state and local tax deductions is raised to $40,000 for most taxpayers. However, the benefit phases out for households with adjusted gross income (AGI) exceeding $500,000, tapering to restore the lower cap for high earners. Both the SALT cap and the income threshold for the phase-out will increase by 1% each year from 2026 through 2029. The $40,000 limit is not permanent; it is scheduled to revert to $10,000 starting in 2030.
  • Alternative Minimum Tax (AMT): The higher AMT exemptions under the TCJA are made permanent, reducing the likelihood of AMT applying for many taxpayers. The exemption phase-out threshold is set at 2018 levels under the TCJA ($500,000 for singles and $1 million for joint filers), indexed for inflation. The exemption also phases out more quickly for higher earners.
  • Excess Business Loss (EBL) Limitations: Makes permanent the current limitations on business losses allowed to offset non-business income, with losses exceeding the limit treated as net operating losses (NOLs) and carried forward to future years.
  • New Deduction for Seniors: OBBBA provides a temporary bonus deduction of $6,000 for individuals age 65 or older (and for each spouse meeting the criteria in the case of a joint return) for taxable years 2025 through 2028. The deduction phases out for joint filers with income starting at $150,000 and $75,000 for all other taxpayers.
  • Charitable Contributions: Creates a permanent deduction for taxpayers who do not itemize. For tax years beginning after December 31, 2025, non-itemizing taxpayers can claim a deduction of up to $1,000 (single filer) or $2,000 (married filing jointly) for certain charitable contributions.
  • Child Tax Credit: Extends and enhances provisions related to the Child Tax Credit (CTC), including increasing the nonrefundable portion of the credit to $2,200 per child. The refundable Additional Child Tax Credit (ACTC) remains at $1,700 for 2025 and will be adjusted annually for inflation. The nonrefundable portion of the CTC will also be indexed for inflation beginning in 2026. Taxpayers must have a valid Social Security number for themselves (or one spouse if married filing jointly) and the qualifying child.
  • Tips & Overtime Pay Deductions: Establishes new above-the-line deductions for the 2025–2028 tax years, allowing taxpayers to deduct up to $25,000 per individual in tip income and up to $12,500 per individual (or $25,000 for joint filers) in overtime compensation. These deductions are subject to phase-out at specified AGI thresholds.
  • Individual Trust Accounts (Trump Accounts): Introduces a new category of tax-advantaged accounts specifically designed to support children under age 18. These accounts can be utilized for qualified expenses such as education, small business investments, and first-time home purchases. Annual contributions are capped at $5,000 per account, with a one-time, government-funded deposit of $1,000 for eligible children born between December 31, 2024, and January 1, 2029. Employers are also permitted to make tax-free annual contributions to these accounts.

Other Notable Provisions

  • Estate Planning: Increases the estate, gift, and generation-skipping tax exemption amounts to $15 million for estates of decedents dying and gifts made after December 31, 2025, and makes them permanent. This is compared to the TCJA’s temporary $10 million exemption (adjusted for inflation to $13.99 million in 2025).

Next Steps
The impact of the One Big Beautiful Bill Act is substantial, introducing changes that warrant continuous review and proactive planning. We strongly recommend that you engage with your William Vaughan Company advisor to assess how these legislative developments may affect your tax liabilities, cash flow, and overall business or personal wealth strategies. Our team is here to help you navigate these complexities and identify opportunities aligned with your objectives.

Categories: Tax Planning

IRS Modifies 1099 Forms & (Re) Introduces 1099-NEC

Sep 01, 2020

The IRS is making some significant changes to the 1099 process. Beginning with the 2020 tax year, a new 1099-NEC form will be used for reporting non employee compensation (NEC) payments. Previously NEC was reported in Box 7 of the 1099-MISC form. These payments will now be reported in Box 1 of the new 1099-NEC form. The 1099-NEC made an appearance in the 1980’s and is now making a comeback to alleviate deadline confusion caused by separate deadlines for Form 1099-MISC that report NEC in box 7 and all other Form 1099-MISC for paper filers and electronic filers. Companies will start reporting on the new Form 1099-NEC in January 2021.

There are several parts of the new 1099-NEC form worth noting:

  • Box 1 is where you key in the dollar amount of non employee compensation.
  • Box 4 is used for any amount you held back to comply with backup withholding requirements.
  • Boxes 5-7 are used to report any state withholding.

In addition, the removal of NEC payments on the 1099-MISC form has resulted in a reordering of information and corresponding boxes. These changes are listed below:

  • Box 7 is where you will now key in payer-made direct sales of $5000 or more
  • Box 9 is where you will report crop insurance proceeds
  • Box 10 is used for gross proceeds to an attorney
  • Box 12 is for Section 409A deferrals
  • Box 14 is for reporting non qualified deferred compensation income
  • Boxes 15, 16, and 17 is where you will report state taxes withheld, the state identification number, and the amount of income earned in the state.

The deadline for both paper and electronic filing of the 1099-NEC form for 2020 is February 1 for both the recipient and the IRS. The 1099-MISC is due to recipients by February 1 while they are due to the IRS by March 1 for paper filing and March 31st for electronic filing.

For up-to-date information on these changes, you can visit the IRS website or connect with us at 419.891.1040.

By: Aaron Gray, Accountant

Categories: Tax Compliance

Economic Impact Payments Received by Deceased or Ineligible Recipients

May 18, 2020

The CARES Act stimulus package passed by Congress in late March provided Economic Impact Payments to eligible recipients which been remitted throughout the last month. According to the Act, eligible individuals include U.S. citizens and qualifying resident aliens who are not a dependent of another taxpayer and have a work-eligible Social Security number with adjusted gross income (AGI) up to the following:

  • $75,000 for individuals filing single or married filing separately
  • $112,500 for the head of household filers
  • $150,000 for married couples filing jointly

These eligible recipients have received or will receive payments of $1,200 to individuals and $2,400 to married couples, plus $500 per dependent child. Taxpayers will receive a reduced payment if their AGI is between:

  • $75,000 and $99,000 for individuals filing single or married filing separately
  • $112,500 and $136,500 for the head of household filers
  • $150,000 and $198,000 for married couples filing jointly

As with any new program, glitches have been identified. Eligibility was determined using 2018 or 2019 tax returns. Discrepancies between information on these previously filed returns and current status have led to deceased taxpayers, trusts, and other ineligible individuals mistakenly receive funds. Those ineligible to receive Economic Impact Payments include:

  • Individuals who were deceased before the date of payment
  • Individuals or married taxpayers filing separately with AGI greater than $99,000
  • Taxpayers filing head of household with AGI greater than $136,500
  • Married taxpayers filing jointly with AGI greater than $198,000
  • Individuals who can be claimed as a dependent on another person’s return (For example, a child or student claimed on a parent’s return
  • Individuals who do not have a valid Social Security number
  • Nonresident aliens
  • Individuals who filed Form 1040-NR, 1040NR-EZ, 1040-PR, or 1040-SS for 2019
  • Individuals who are currently incarcerated

How do I determine if I received misappropriated funds?
The IRS has set up an Economic Impact Payment Information Center that includes information about which taxpayers are eligible and how to return payments received by those disqualified by the factors above.

In many instances, the family or beneficiaries of a deceased individual or trust have received payment on behalf of the deceased. This is particularly common in situations where the individual had passed away in late 2019 or 2020, and a 2019 tax return had not yet been filed on their behalf. By definition, these payments to trusts or family of a deceased individual are considered payments to an ineligible recipient.

What should I do if I received funds for a deceased or an ineligible recipient?
Economic Impact Payments given to deceased or otherwise ineligible recipients previously listed must be returned to the IRS. For payments received by joint filers where only one spouse is deceased or ineligible, only the portion of the payment made for the ineligible spouse must be returned ($1,200 unless the AGI exceeds $150,000). Ineligible recipients of the payments, or those who received payment on behalf of an ineligible or deceased recipient, should follow the IRS repayment instructions to return the payments.

If the payment was a paper check:
1. Write “Void” on the endorsement section on the back of the check.
2. Mail the voided Treasury check immediately to the appropriate IRS location.
3. Do not staple, bend, or paper clip the check.
4. Include a note stating the reason for returning the check.

If the payment was a paper check and you have cashed it, or if the payment was a direct deposit:
1. Submit a personal check, money order, etc., immediately to the appropriate IRS location.
2. Write on the check/money order made payable to “U.S. Treasury” and write “2020EIP,” and the taxpayer identification number (Social Security number, or individual taxpayer identification number) of the recipient of the check.
3. Include a brief explanation of the reason for returning the payment.

Appropriate IRS mailing addresses can be found in the IRS repayment instructions located on the Economic Impact Payment Information Center.

If you feel you have received funds for an ineligible individual but are unsure how to proceed, contact your William Vaughan Company advisor and they can guide you through the appropriate process for your given circumstance.

Categories: Other Resources

What is the SECURE Act and How Could It Affect Your Retirement?

Feb 10, 2020

The new Setting Every Community Up For Retirement Enhancement or SECURE Act recently signed into law by President Trump is one of the most significant pieces of retirement legislation in more than a decade. The law focuses on retirement planning in three key areas: 1) modifying required minimum distribution (RMD) rules for retirement plans; 2) expanding retirement plan access and 3) increasing lifetime income options in retirement plans. Ultimately, the law has significant provisions aimed at increasing access to tax-advantaged accounts and preventing older Americans from outliving their assets

Here are explanations of some key provisions. Unless noted, the new rules went into effect on Jan. 1, 2020:

  • Elimination of the so-call “stretch IRA” – The Secure Act eliminated the “stretch IRA,” which allowed non-spousal beneficiaries to withdraw assets of inherited accounts over their lifetimes to optimize the beneficiary’s income tax deferral. Now, those who inherited an IRA since the beginning of 2020 and thereafter have 10 years to withdraw the assets — however or whenever they’d like — or face taxation of the money all at once. Spouses and disabled beneficiaries are among the exceptions to the rule. The new restrictions pose a problem for people who have been planning to use IRAs as an inheritance vehicle.
  • Increases the required minimum distribution (RMD) age for retirement accounts – Distributions must begin from traditional IRAs when savers reach a certain age. The SECURE Act raised the age for these required minimum distributions (or RMDs) from 70½ to 72. This will enable individuals between these ages to keep money in their IRAs longer and put off paying income taxes on withdrawals if they don’t need funds yet to pay for living expenses. However, the new rule does not apply to those already older than 70 ½ or turned 70 ½ in 2019 (born on or before June 30, 1949). Those individuals must continue or begin taking RMDs under the old rule.
  • Allows long-term, part-time workers to participate in 401(k) plans – The SECURE Act requires employers to permit long-term, part-time employees who work at least 500 hours in three consecutive 12-month periods to participate in their plans (other than collectively bargained plans). However, an employer will not be required to make matching or nonelective contributions on behalf of such employees and may continue to impose an age-21 requirement.
  • Permits parents to withdraw up to $5,000 from retirement accounts penalty-free within a year of birth or adoption for qualified expenses – The new law allows penalty-free withdrawals from retirement plans for birth or adoption expenses, up to $5,000 limit would apply to each parent, including those who have adopted children. So technically, a couple could take out up to $10,000 from their retirement savings, as long as they both have separate accounts in their own names.
  • Allows parents to withdraw up to $10,000 from 529 plans to repay student loans – The list of qualified expenses has now expanded under the SECURE Act. Most notably, 529 assets can now be used to pay for qualified education loan repayments (up to $ 10,000-lifetime maximum) and costs for an apprenticeship program.

Contact your William Vaughan Company tax professional if you have additional questions about how the SECURE Act impacts your retirement plans. Changes in the tax code, family relationships, and your own financial circumstances are common—requiring that you update your planning strategies every few years. Remember, your plans should evolve as you do. Look for additional tax alerts from William Vaughan Company as we roll out more information on how the SECURE Act impacts retirement plan administration.

Categories: Tax Planning

Wayfair Update: State & Local Tax Landscape Altered

Oct 30, 2019

Last year, the U.S. Supreme Court found in favor of the State of South Dakota by expanding the definition of in-state nexus to include a “virtual presence” in South Dakota v. Wayfair, Inc. The Supreme Court approved the South Dakota law imposing filing requirements on businesses that have $100,000 of gross receipts or 200 transactions with customers in the state. Many states have adopted those thresholds, but others have altered them slightly.

Since the Supreme Court’s decision, many states have enacted legislation similar to South Dakota’s rule expanding sales tax conditions to require more businesses to register and file sales tax returns. Businesses can now be required to collect sales tax even if they do not have a physical presence in a state, so long as it meets some minimum thresholds.

Recently, Ohio and Pennsylvania adopted modified economic nexus provisions:

Ohio
In response to the U.S. Supreme Court decision in Wayfair, Ohio has adopted an economic sales & use tax nexus standard.  The new standard replaces the traditional physical presence nexus standard. Under House Bill 166, effective August 1, 2019, a seller is presumed to have sales & use tax nexus in Ohio if the seller has either gross receipts in excess of $100,000 from sales into Ohio or engages in 200 or more separate transactions in Ohio. The threshold under either test is measured during the current calendar year or the preceding taxable year. Taxpayers doing business in Ohio should review their sales data to determine if they are subject to the new nexus standards and are required to collect and remit sales tax from customers.

Pennsylvania
Beginning in the tax year 2020, the State of Pennsylvania will impose a new income tax nexus standard that is comparable to the sales & use tax economic nexus standard outlined in Wayfair. Historically, a taxpayer had income tax nexus in a state where it had a physical presence, i.e. carrying on activities beyond the solicitation of sales or having property located in the state. The Pennsylvania Department of Revenue is asserting that the physical presence is no longer required. Under the new standard, the state will impose an income tax filing obligation on remote taxpayers that are doing business and have an economic presence in the state. Economic presence under the Pennsylvania nexus standard is defined as having in excess of $500,000 of gross receipts sourced to Pennsylvania from the sale or lease of tangible personal property, sale of services or the sale or licensing of intangible property in the state. Taxpayers that have Pennsylvania sourced sales and are not filing an income tax return in the state should review their sales data to determine if they have an income tax filing obligation based on the new nexus standard for tax years beginning on or after January 1, 2020.

Click here to view an up-to-date state nexus guide.

Categories: Retail, Tax Compliance, Tax Planning