New Tax Law Brings Big Changes for Homeowners & Businesses: What the OBBBA Means for You
The One Big Beautiful Bill Act (OBBBA), signed on July 4, introduces some of the most meaningful tax updates in years. Whether you own a home in a high‑tax area or operate a small to mid‑sized business, this legislation may create opportunities for significant savings.
Below is a clear breakdown of the key changes—and what they mean for your 2025 tax planning.
🏡 Homeowners: A Major Expansion of the State and Local Tax Deduction
For many taxpayers, especially those in areas with high property taxes, the previous State and Local Tax (SALT) deduction limit of $10,000 has been a major obstacle. The OBBBA dramatically increases this limit and opens the door to additional planning opportunities.
A New $40,000 SALT Deduction Cap
From 2025 through 2029, the maximum SALT deduction increases to:
- $40,000 for most taxpayers
- $20,000 for married filing separately
- 1% annual inflation adjustments starting 2026
This update is especially helpful for people who:
- Live in high‑property‑tax counties
- Live in states with high income taxes
- Own higher‑value homes
- Have multiple properties (primary home + vacation home)
Unless Congress extends it, the limit reverts back to $10,000 in 2030
⚠️ Higher Income Households Face a Phaseout
Beginning in 2025, the expanded SALT deduction begins to phase out based on Modified Adjusted Gross Income (MAGI).
Phaseout starts at:
- $500,000 MAGI (married filing jointly)
- $250,000 MAGI (married filing separately)
For income above these thresholds, the deduction is reduced by 30% of the income over the limit, but cannot go below the original $10,000 floor.
Example:
A couple earning $550,000 in MAGI with $60,000 in SALT payments can deduct only $25,000 rather than the full $40,000.
Taxpayers at $600,000 or more in MAGI receive no benefit from the increased limit.
🧾 Sales Tax vs. Income Tax: You Still Choose
Taxpayers may choose between deducting:
- State and local income taxes, or
- State and local sales taxes
The option to deduct sales tax can be beneficial if:
- Your income tax is low, or
- You made major purchases that increased your sales tax paid
The Internal Revenue Service (IRS) continues to offer its Sales Tax Calculator, which estimates deductible sales tax without needing to save every receipt.
📅 How Homeowners Can Prepare for 2025
To maximize the expanded SALT benefits:
- Explore ways to keep MAGI below the phaseout threshold
- Consider prepaying property taxes in 2025
- Review your year‑end tax and withholding strategy
We can help evaluate which approach is best for your situation.
🏢 Businesses: Two Major Tax Updates Under the OBBBA
The new law also includes important changes for business owners, especially those with research expenses or interest‑heavy financing.
🔬 1. Immediate Deductions Return for Research and Experimentation Costs
Previously, the Tax Cuts and Jobs Act (TCJA) required businesses to amortize Section 174 Research and Experimentation (R&E) expenses over:
- 5 years for U.S.-based research (effectively 6 years with the mid‑year convention)
- 15 years for foreign research
Starting in 2025, the OBBBA restores:
- 100% immediate deduction for domestic R&E expenses
- 15‑year amortization for foreign R&E expenses, unchanged
Retroactive Opportunities
- “Small businesses” (those with $31 million or less in average annual gross receipts for 2025) may retroactively deduct R&E costs back to 2022
- Any business, regardless of size, may accelerate remaining deductions from 2022–2024 over one or two years
This change can significantly improve cash flow and refund opportunities.
💼 2. More Favorable Business Interest Deduction Rules
The TCJA previously limited interest deductions to 30% of Adjusted Taxable Income (ATI), calculated similarly to earnings before interest and taxes.
Beginning in 2025, the OBBBA expands ATI by adding back:
- Depreciation
- Amortization
- Depletion
This effectively shifts ATI to an EBITDA‑style (Earnings Before Interest, Taxes, Depreciation, and Amortization) calculation—allowing many businesses to deduct more interest.
Small Business Exemption
Businesses with $31 million or less in average annual gross receipts remain fully exempt from this limitation beginning in 2025.
📈 What This Means for Your Tax Strategy
The OBBBA offers opportunities for both individuals and businesses—but only if you plan ahead. Our office can help you:
- Maximize the expanded SALT deduction
- Stay below MAGI phaseout thresholds
- Capture new and retroactive R&E tax benefits
- Increase allowable business interest deductions
- Build a proactive 2025 tax plan
If you’d like a customized analysis, we’re here to help.
