President Trump’s new budget proposal outlines sweeping tax changes that could impact business owners on multiple fronts. From extending key provisions of the 2017 Tax Cuts and Jobs Act to introducing new tax breaks and proposing targeted spending cuts, the proposal sets the stage for significant policy shifts.
Business owners should also watch for updates on the SALT deduction cap, bonus depreciation, and R&D expensing, which may be part of upcoming negotiations. Meanwhile, strategies like the Pass-Through Entity Tax continue to offer tax-saving opportunities, and new IRS guidance on reporting delayed Employee Retention Credit (ERC) refunds brings added clarity for those still navigating pandemic-era relief.
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President Trump's "Big Beautiful Bill" (BBB)
President Trump has introduced a new budget proposal, unofficially dubbed the “Big Beautiful Bill” (BBB). While still in the early stages, this proposal offers a window into potential tax changes that could significantly affect business owners across the country.
With key provisions, optimistic timelines, and plenty of political negotiation ahead, here’s what you need to know.
A Familiar Foundation: Extending the TCJA
A central component of the BBB is the extension (or possible permanence) of provisions from the 2017 Tax Cuts and Jobs Act (TCJA). This includes:
- Qualified Business Income (QBI) Deduction
- Lower individual tax rates
- Bonus depreciation rules
The goal appears to be a continuation of the TCJA framework that’s been in place since 2017, though final details (extension vs. permanence) remain unclear.
The Pass-Through Entity Tax
One area getting increased attention from business owners is the Pass-Through Entity (PTE) Tax.
It’s not a new tax but an optional one that allows state income taxes to be paid at the business level rather than individually. This shift can create a significant federal tax savings opportunity.
Here’s how it works:
- Normally, individuals can only deduct up to $10,000 of combined SALT on their federal return.
- By paying those taxes through a business entity owners can deduct the full amount as a business expense, bypassing the SALT cap.
- For many business owners, this strategy offers a meaningful reduction in federal tax liability.
This workaround was introduced by states like Wisconsin in response to the 2017 TCJA’s SALT cap. While widely adopted, it could become a target in future federal negotiations as lawmakers look for ways to raise revenue or offset new tax cuts.
New IRS Guidance on Employee Retention Credit (ERC) Refunds
Finally, let’s talk about Employee Retention Credit (ERC) refunds. The main question: Is the refund considered taxable income?
If the credit was already included as income in the year wages were paid, no further action is needed. If not, the IRS now allows businesses to include the refund as income in the year it was received, rather than going back to amend prior returns.
This updated guidance simplifies the process for many businesses and helps avoid additional paperwork during tax season.
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