Tax Incentives: A Marvel of Hot Dogs, Pyrotechnics, and Fiscal Policies Edition
The One Big Beautiful Bill Act (OBBBA), passed by the House on July 3, 202x, has brought significant changes to the US tax system. The 887-page bill aims to promote business growth and reduce tax burdens on both pass-through entities and individuals, although it is expected to increase federal budget deficits.
For pass-through entities, the OBBBA reinstates immediate expensing for U.S.-based research and development costs, restores 100% bonus depreciation, and contains provisions that generally favor business tax structures. These measures can benefit pass-through entities by reducing their taxable income and creating a more favorable business environment.
Individuals, on the other hand, will see permanent tax cuts, with personal income tax brackets remaining unchanged. The standard deduction increases for 2025, offering more relief to taxpayers. The SALT (State and Local Taxes) deduction cap has been boosted to $40,000 with a 1% increase each year until 2029, providing more relief to taxpayers who itemize deductions.
The OBBBA also includes a permanent increase in the lifetime exclusion amount for estate and gift taxes, allowing individuals to shelter more assets from these taxes. Workers who receive overtime will be eligible for a deduction for qualified overtime pay from 2025 to 2028. Additionally, seniors are entitled to claim a new, temporary deduction of $6,000 beginning in 2025, which would expire in 2028.
However, the OBBBA has not been met with universal approval. A Pew study found that nearly half (49%) of voters oppose the OBBBA, while 29% favor it, and 21% are not sure. Most voters supported an increase in the SALT deduction, but they weren't enthusiastic about losing green tax credits. Voters opposed the end of consumer credits for electric vehicle purchases and business credits for wind, solar, and nuclear energy production.
As the 2026 midterm elections approach, with 468 seats in Congress up for election (all 435 House seats and 33 Senate seats), the impact of the OBBBA on voter sentiment remains to be seen. The bill is projected to increase federal deficits over the next 10 years by nearly $3.3 trillion.
In other news, the U.S. Senate has passed the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act, introducing a federal regulatory framework for stablecoins, which could lead to the mainstream adoption of stablecoins for digital payments and drive growth in the stablecoin industry.
The IRS and its Security Summit partners have launched the special summer "Protect Your Clients; Protect Yourself" campaign to help tax professionals protect themselves against tax-related identity theft.
Meanwhile, a trivia question answer is Illinois, which clings to a 1942 ban on fireworks while neighboring states have boasted millions of dollars in sales tax revenue from selling the Fourth of July staple.
- The One Big Beautiful Bill Act (OBBBA) updates the United States tax system, promoting business growth and reducing tax burdens, while also including provisions that favor stablecoins, offering a potential opportunity for growth in the stablecoin industry.
- In the realm of finance, the OBBBA provides permanent tax cuts for individuals, such as increased standard deductions and a new senior's deduction, but it also faces opposition from voters who are concerned about the potential increase in federal deficits and the loss of green tax credits. Meanwhile, a trivia note, Illinois, unlike its neighboring states, still maintains a ban on fireworks, potentially missing out on substantial sales tax revenue from this Fourth of July staple.
