On May 22, 2025, Congress approved a major tax reform package known as the Big Beautiful Tax Law, commonly referred to as the “One Big Beautiful Bill.” The legislation builds on the foundation of the 2017 Tax Cuts and Jobs Act (TCJA) while introducing targeted updates that directly impact entrepreneurs, high-income taxpayers, and real estate investors.
Below, we outline the most impactful provisions of the new law, explain how they affect your tax planning, and highlight opportunities you can leverage starting in 2025.
100% Bonus Depreciation Returns (Retroactive to January 20, 2025)
Under the new law, businesses can once again deduct 100% of the cost of qualifying assets, such as equipment, furniture, and certain building components, in the year the asset is placed in service.
This change creates a powerful planning opportunity for business owners and real estate investors, particularly when combined with a cost segregation study.
Example:
You purchase a short-term rental property for $950,000. A cost segregation study identifies $200,000 in accelerated depreciation items (including appliances, flooring, and landscaping).
→ You may deduct the full $200,000 in 2025.
If you materially participate in the rental under the Short-Term Rental (STR) rules or qualify as a Real Estate Professional (REP), this depreciation loss can offset W-2 income or S Corporation income, even if the property generates positive cash flow.
Any unused losses may be carried forward and applied in future tax years.
Qualified Business Income (QBI) Deduction Increased to 23%
The Section 199A deduction for pass-through businesses has been expanded. Previously capped at 20%, the deduction now allows eligible taxpayers to deduct 23% of qualified business income.
Example:
Your S Corporation pays you a $60,000 salary and reports $140,000 in remaining business income.
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Previous QBI deduction: $28,000
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New QBI deduction: $32,200
That’s an additional $4,200 of income excluded from taxation.
Keep in mind that income limitations may still apply to service-based businesses such as consulting or legal services. IRS guidance is expected, and we will continue monitoring updates closely.
SALT Deduction Cap Increased to $30,000 (with Caveats)
The deduction for state and local taxes (SALT) has been raised from $10,000 to $30,000 for households earning under $400,000.
This change significantly benefits taxpayers in high-tax states including California, New York, New Jersey, and Illinois.
However: Potential Elimination of the PTE Workaround
The legislation also proposes removing the Pass-Through Entity (PTE) workaround, which allowed S Corporations and partnerships to deduct state taxes at the entity level.
If this provision is repealed, the benefit of the higher SALT cap could be reduced, particularly for higher-income taxpayers exceeding the $400,000 threshold.
Expanded Opportunity Zone (OZ) Incentives
The Opportunity Zone program has been renewed and expanded, with enhanced incentives for rural zones and clearer rules for both capital gains and ordinary income investments.
Key Enhancements:
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Basis Step-Up:
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10% increase after 5 years
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30% increase for investments in rural Opportunity Zones
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Ordinary Income Contributions:
Investors may now contribute up to $10,000 of ordinary income into a Qualified Opportunity Fund (QOF) and exclude future gains on that amount if held for 10 years.
Example:
You invest $100,000 of capital gains into a rural Opportunity Zone fund.
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After 5 years, only $70,000 remains taxable.
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After 10 years, all appreciation becomes tax-free.
Partial Return of Entertainment and Meal Deductions
The new law restores certain deductions related to business meals and entertainment:
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Entertainment expenses: 50% deductible when business-related
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Meals with clients or prospects: Remain 100% deductible, provided business discussions occur
Example:
You spend $4,000 on meals and $2,000 on entertainment.
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Meals deduction: $4,000
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Entertainment deduction: $1,000
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Total deduction: $5,000
Expanded Child and Family Tax Benefits
Family-focused provisions have also been enhanced:
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Child Tax Credit: Increased to $2,500 per child through 2028
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A permanent $2,000 credit remains thereafter
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Standard deduction increases, with additional benefits for seniors
These changes resemble the TCJA-era family benefits, with modest improvements.
Introduction of MAGA Savings Accounts
One of the more symbolic elements of the bill is the creation of MAGA Savings Accounts. Each child born between 2025 and 2028 will receive a $1,000 government-funded account, potentially functioning similarly to a 529 plan or Roth-style investment.
While no immediate planning strategies apply yet, further guidance is expected.
What Should You Do Next?
Tax planning under the new law is highly timing-sensitive. At Taxfully, we are already helping clients position themselves to take advantage of these changes.
Action steps to consider:
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Utilize bonus depreciation while real estate pricing remains favorable
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Reassess your business structure, particularly if you relied on PTE deductions
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Recalculate 2025 projections under the higher QBI and SALT limits
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Maintain thorough documentation if claiming STR or REP status
Taxfully’s Perspective
We have already assisted numerous clients in securing refunds by restructuring S Corp salaries, applying STR strategies, and implementing cost segregation studies correctly.
