Navigating the Maze: What the Senate's Latest Tax Bill Could Mean for Business Owners

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More Specifically, What the Senate's Latest Tax Bill Could Mean for High-Income Business Owners of Passthrough Entities.

July 2, 2025

The U.S. Senate recently passed its version of the "One Big Beautiful Bill Act," a significant piece of legislation that could bring substantial changes to the tax landscape. While the bill must still pass the House of Representatives and could undergo further changes, its current form offers a glimpse into potential shifts that high-income owners of passthrough entities should be watching closely.

For business owners, understanding these proposed federal changes is crucial for proactive wealth planning. Here’s a breakdown of the key provisions relevant to you.

Disclaimer: This information is for educational purposes only and is based on the bill as passed by the Senate. It is not law and is subject to change. Please consult with your tax and legal professionals before making any financial decisions.

Key Provisions for Individuals

  • Permanent Individual Tax Rates: The bill seeks to make the individual income tax rates from the 2017 Tax Cuts and Jobs Act (TCJA) permanent. This would provide long-term stability and certainty around the current, historically low tax rates and their corresponding income brackets.

  • State and Local Tax (SALT) Cap: The proposal would temporarily quadruple the SALT deduction cap from $10,000 to $40,000. However, this increase comes with a significant catch for high earners. The benefit is phased out for those with a modified adjusted gross income (MAGI) over $500,000, effectively returning many high-income Texans to the current $10,000 cap for their property tax deductions. Notably, the Senate's version does not include provisions to limit the popular Passthrough Entity Tax (PTET) workarounds, preserving this key strategy for business owners to deduct state and local taxes at the entity level.

  • New Itemized Deduction Limitation: The bill introduces a new limitation on itemized deductions for high-income taxpayers. Your total itemized deductions would be reduced by 2/37 of either your total itemized deductions or the amount your income exceeds the 37% tax bracket, whichever is less.

    • Example: If your taxable income is $100,000 into the 37% bracket and you have $150,000 in itemized deductions, your available deduction would be reduced by approximately $5,405.

  • Qualified Business Income (QBI) Deduction: In a major win for passthrough entities, the 20% QBI deduction would be made permanent. The bill also enhances the income phase-in ranges for the deduction’s limits, making it accessible to more business owners.

  • Estate and Gift Tax Exemption: The bill proposes a permanent and significant increase in the lifetime estate and gift tax exemption to $15 million per individual ($30 million for a married couple), indexed for inflation after 2026. This is a welcome development for long-term wealth transfer planning.

  • Mortgage Interest & Wagering: The current $750,000 limitation on mortgage acquisition debt for the interest deduction would be made permanent. Additionally, wagering loss deductions would be limited to 90% of the loss and could only offset wagering gains.

Key Provisions for Businesses

  • 100% Bonus Depreciation: The bill would permanently extend 100% bonus depreciation, allowing businesses to immediately write off the full cost of qualifying assets.

  • Section 179 Expensing: The maximum expensing amount under Section 179 would be increased to $2.5 million, with the phase-out threshold rising to $4 million, providing more flexibility for capital investments.

  • Limitation on Business Interest: The bill would revert the calculation for the business interest deduction limitation to be based on earnings before interest, taxes, depreciation, and amortization (EBITDA). This is a taxpayer-favorable change that generally allows for a larger interest expense deduction compared to the current calculation.

  • Research and Development (R&D) Expenses: The treatment of R&D expenses would see a significant, business-friendly overhaul.

    • Immediate Expensing: Businesses could immediately deduct domestic R&D costs in the year they are incurred, a major improvement over the current five-year amortization requirement.

    • R&D Tax Credit: This change would not affect the separate R&D tax credit. Businesses could still claim this valuable dollar-for-dollar credit against their tax liability in addition to expensing the costs.

  • Reduced Reporting Burden: The bill raises information reporting thresholds, easing compliance for businesses. The Form 1099-K threshold would revert to its prior, higher level (over 200 transactions AND over $20,000), and the general Form 1099 reporting threshold for services would increase from $600 to $2,000.

What Happens Next?

The legislative journey for this bill is far from over. It now heads to the House, where negotiations and amendments are likely. However, the Senate's version provides a clear framework of priorities that could shape the final law.

Staying informed and agile is key. As these proposals evolve, the strategies you employ today can have a significant impact on your financial future tomorrow. We are monitoring these developments closely and are here to help you navigate the potential implications for your personal and business wealth strategy.

Source: This summary is based on reporting from the Journal of Accountancy article, "Senate passes reconciliation bill including tax changes," by Alistair M. Nevius, J.D., updated July 1, 2025.

Contact our team today to discuss how these potential tax changes could affect your wealth planning.