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Top Tax Provisions from the 'One Big Beautiful Bill'

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1. 2017 Tax Cuts Made Permanent

Makes the 2017 Tax Cuts and Jobs Act (TCJA) tax brackets and standard deduction permanent for all taxpayers, preventing any scheduled tax increases for tax year 2026.

Higher rates, now permanently removed, versus TCJA Lower Tax Rates in operation since 2017:

• Bracket 1 - 10.0% vs. 10.0%
• Bracket 2 - 15.0% vs. 12.0%
• Bracket 3 - 25.0% vs. 22.0%
• Bracket 4 - 28.0% vs. 24.0%
• Bracket 5 - 33.0% vs. 32.0% 
• Bracket 6 - 35.0% vs. 35.0%
• Bracket 7 - 39.6% vs. 37.0%

 

Higher Standard Deduction Made Permanent - Comparison: 2024 vs. 2025 and Following

Standard Deduction by Filing Status

Senior Bonus Deduction (Age 65+)

Note: Senior bonus deduction begins phasing out at $75,000 (single) and $150,000 (joint), and is fully phased out at approximately $175,000 and $250,000, respectively.

All 2025+ standard deductions are indexed for inflation.

 

2. $2,200 Child Tax Credit

Raises the child tax credit to $2,200 per child, fully refundable and inflation-adjusted. Phases out for single filers over $200,000 and joint filers over $400,000.

 

3. Tip Income Deduction

Allows deduction of tip-based earnings for workers with income under $150,000, capped at $25,000 per year, valid through 2028.

 

4. Overtime Pay Deduction

Creates a deduction for overtime earnings for individuals earning under $150,000, capped similarly to tips, valid through 2028.

 

5. New Car Loan Interest Deduction

Permits up to $10,000 of interest deduction on new auto loans for U.S.-assembled cars bought 2025-2028; phases out for singles over $100k or joint filers over $200k.

 

6. Temporary SALT Cap Increase

Raises SALT deduction to $40,000 ($20,000 MFS) for households earning <$500,000 in 2025, phasing down above $500,000. Reverting to $10,000 in 2030.

 

7. Special Bonus Deduction

Allows a special $6,000 deduction for taxpayers aged 65+, phasing out for MAGI over $75k (single) and $150k (joint), valid through 2028. This special deduction is "in lieu" of the "No Tax on Social Security" campaign promise.

 

8. "MAGA" Newborn Savings Accounts

Allows one-time $1,000 tax-exempt contribution for each newborn into a designated savings account; annual contribution limit $5,000. No income cap specified.

 

9. Above-the-Line Charitable Deduction

Introduces $2,000 ($1,000 single) deduction for non-itemizers; no income limit specified, encouraging broader charitable giving. Effective for tax year 2026 and following.

 

10. 100% Bonus Business Depreciation Made Permanent

Allows immediate expensing of 100% qualifying property costs, permanently restoring full write-off for businesses without income limits.

 

11. Full R&D Expensing

Permits immediate expensing for domestic R&D costs, reversing prior amortization rules -- available to all businesses; no cap cited.

 

12. The 20% Pass-Through Deduction (§199A) Made Permanent

Keeps 20% QBI deduction.

 

13. Estate and Gift Tax Exclusion Raised to $15M Per Taxpayer Effective 2026

Removes potential 50% reduction permanently -- makes higher exemption permanent and indexed for inflation going forward.

 

14. Opportunity Zones for Capital Gains Deferral - New Series Approved

Permanently extends Opportunity Zones and introduces a new series of designated zones with deferral of original gain through 2023. Enhanced incentives for rural Zones. Further details to be issued.

 

15. Capital Gains Tax Step-Up Preserved

Maintains the step-up in basis for inherited assets, avoiding capital gains tax at death.

 

16. Repeal Clean Energy Credit

Eliminates green-energy credits (EVs, solar, wind, hydrogen, etc.), some as early as September 30, 2025.

 

17. 529 Plan Expansion

Permits 529 withdrawals for K-12 tuition, apprenticeships, homeschool; no stated income cap.

 

If you have any questions about these updates, please contact BakerAvenue.

What Is Qualified Small Business Stock?

Phase 2: Filing and Managing Your Insurance Claim

Recovering from the devastation of a wildfire is a long and complex process. After reviewing your insurance policy and securing short-term housing, the next critical phase is filing and managing your insurance claim effectively. This guide provides a step-by-step breakdown of the claims process and offers essential tips to maximize your coverage and ensure a smooth recovery.

For more information on creating an action plan and understanding your home insurance policy, read our first article: Phase 1: Action Plan and Insurance Policy Review.

Phase 1: Action Plan and Insurance Policy Review

Experiencing a loss of a home due to wildfires is devastating and navigating the process can be difficult and time-consuming. It's important to take specific actions after a loss to ensure you understand your options and the home insurance policy you have in place. If you were affected by the wildfires, we have provided an action plan and guide to help you understand your home insurance policy.

BakerAvenue will publish a series of articles to guide those who have been impacted by the fires. Even if you haven’t been affected by the recent events, it's still important to ensure you have adequate insurance coverage and an action plan in place for emergencies. Please reach out to your advisor if you have questions or need to review your home insurance policy in detail.

Important Disaster Relief Information from the IRS

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Hurricane Beryl & Wildfire Relief

Due to various hazardous fires and storms caused by Hurricane Beryl across the country, the IRS has announced Disaster Relief: The due date for 2023 tax returns has been extended to February 3, 2025. The due date for 2024 estimated payments is extended to February 3, 2025.

• 2023 filing relief (not payment) for fire and severe storm for those affected by  Hurricane Beryl in the entire states of LA, VT, Puerto Rico, The Virgin Islands, and specific counties AZ, CT, IL, KY, MN, MO, MT, NY, PA, SD, TX, WA - Due February 3, 2025
• 2024 estimated payment relief for fire and severe storm for those affected by Hurricane Beryl in the entire states of LA, VT, Puerto Rico, The Virgin Islands, and specific counties AZ, CT, IL, KY, MN, MO, MT, NY, PA, SD, TX, WA - Due February 3, 2025

Please check the following website for specific filing and payment information: IRS reminder to disaster area taxpayers with extensions: All or parts of 14 states, 2 territories need to file 2023 returns by Feb. 3; others have until May 1

 

Hurricane Helene and Milton Relief

Due to the hazardous hurricanes that hit the Southeast regions: Alabama, Georgia, North Carolina, South Carolina, and Florida, the IRS has announced Hurricane Relief: The due date for 2023 and 2024 tax returns has been extended to May 1, 2025.

• 2023 relief for return filing (not payment) for the entire states AL, FL, GA, NC, SC - Due May 1, 2025
• 2024 relief entire states of AL, FL, GA, NC, SC - Return & Payment - Due May 1, 2025

Please check the following website for specific filing and payment information: IRS reminder to disaster area taxpayers with extensions: All or parts of 14 states, 2 territories need to file 2023 returns by Feb. 3; others have until May 1

 

Israel/Gaza Terrorist US Citizen Relief

Due to the terrorist attacks in Israel, the IRS has announced relief to affected individuals and businesses: The due date for 2023 and 2024 tax returns has been extended to September 30, 2025.

• 2023 relief for return filing and payment for anyone affected by conflict in Israel, Gaza, or West Bank - Due September 30, 2025
• 2024 relief for return filing and payment for anyone affected by conflict in Israel, Gaza, or West Bank - Due September 30, 2025

Please check the following website for specific filing and payment information: IRS announces new relief for taxpayers affected by terrorist attacks in Israel: 2023 and 2024 returns and payments are now due Sept. 30, 2025; other relief available

 

California - Los Angeles Wildfires (Los Angeles County) Relief

Due to the hazardous wildfires throughout Los Angeles County, the IRS has announced Wildfire Relief: The due date for 2023 and 2024 tax returns has been extended to October 15, 2025.

• 2024 relief for filing and paying individual, S Corp, Non Profits and Payroll returns, tax due and estimated payments - Due date is now October 15, 2025
• 2024 relief for IRA and health savings accounts contributions - Due date is now October 15, 2025

Please check the following website for specific filing and payment information: IRS: California wildfire victims qualify for tax relief; various deadlines postponed to Oct. 15

If you have any questions about these tax updates, please contact BakerAvenue.

Essential Deadlines for Retirement, Charitable Contributions, and More

As 2024 comes to a close, taking a strategic approach to your finances can make a significant difference. Effective year-end tax planning isn't just about reducing your tax bill; it's about setting up a strong financial foundation for the future. Here are the key deadlines and strategies to consider, especially for retirement accounts, charitable contributions, and general wealth management.

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Retirement Accounts

December 31, 2024

• Fully Utilize Employer Retirement Plans 
  Max out your tax-deductible 401(k) contributions of $23,000 if under 50, $30,500 if over 50.
• Mega Backdoor Roth Contributions Using Your Company 401(k) Assuming that fully tax-deductible contributions have been maximized, consider making post-tax contributions to your 401(k) account and immediately converting those post-tax contributions to a Roth IRA account where they will grow tax-free forever and won’t be subject to Required Minimum Distributions (RMDs). The 401(k) plan must allow post-tax contributions to carry out the Mega Backdoor Roth strategy. The maximum contribution (pre- and post-tax) to a 401(k) for 2024 is $69,000 and $76,500 (if over 50). These maximums consider all pre-tax (deductible) employee contributions, employer match, and employee post-tax (non-deductible) contributions to the plan. 
• Convert Traditional IRA Accounts to Roth IRAs 
  Convert Traditional IRAs to Roth IRAs accounts where they can grow tax-free indefinitely, as no Required Minimum Distributions (RMDs) are required for Roth IRA accounts. Roth conversions work best in years with lower total income. Unlimited amounts can be converted to Roth under this strategy; however, the conversion is considered a taxable event at ordinary income rates.
• Required Minimum Distributions 
  Unless it is the first RMD, which can be taken up until April 1st of the following year.
  For inherited IRAs, where the original account holder died after 12/31/2019, there is no requirement to take an RMD under the 10-year rule for 2024 due to a special waiver being granted by the IRS.  Where the account holder died before 2020, there is no waiver on 2024 RMDs.

April 15, 2025

• Traditional IRA contributions
  Where the taxpayer or the taxpayer’s spouse are covered by a qualified plan with an employer, the deductibility of the contribution may be limited or lost entirely. The deduction for the contribution starts to be limited at modest income levels ($77,000 for 2024 if single, $123,000 if MFJ).  Where a plan at work covers neither of the spouses, contributions can be made on a fully deductible basis, regardless of income.
• Contribute to Your Spouse 
  For those filing joint returns, there is no earned income requirement for IRA contributions made by a nonworking spouse if the earned income of the couple exceeds the combined IRA contribution amount. Such contributions are also subject to income limits when deductibility is assessed.
• Fund Roth IRA Accounts

Contributions can be made up to $7,000 for 2024 from earned income (with a $1,000 catch-up contribution if over 50 years old). Roth contributions are subject to income limits ($161,000 if filing single for 2024 and $240,000 for MFJ). Due to the income restrictions, direct Roth contributions may only be relevant for younger, lower-earning taxpayers.

• “Backdoor” Roth IRA Conversion 
  Consider a backdoor Roth Conversion where income exceeds the direct Roth contribution limits. Make contributions to a Traditional IRA on a post-tax (non-deductible) basis, then convert that Traditional IRA contribution to a Roth IRA. Because of the Aggregation Rule, this strategy is not appropriate for those clients with existing pre-tax IRA accounts, such as rollovers.

Charitable Contributions

December 31, 2024

• Contribute highly appreciated assets (stocks) 
  Contribute to charity to avoid paying capital gains and receive tax deductions. Such contributions also remove assets from the taxable estate.  The tax deduction will be equal to the Market Value of the stocks, even if there is a very low or no tax basis. The tax deduction may be limited to 30% of adjusted gross income (AGI); however, any unused deduction in the year may be carried forward for five years.
• Contribute cash to a public charity or DAF
  For 2024, up to 60% of AGI can be deducted if paid in cash to a public charity.
• Make use of Qualified Charitable Distributions (QCDs) 
  Due to the large Standard Deduction ($32,300 for MFJ 2024) if both spouses are over 65 years old, charitable donations claimed as itemized deductions are often not tax effective.  In these circumstances, it is more beneficial to make a yearly QCD from an IRA to a public charity if you are over 70.5 years old. Such QCDs count towards meeting your RMDs for the year and transfer highly taxed ordinary income to the charity without creating taxable income for you. There is a limit of $105,000 per year for a QCD per tax return.
• Consider Bunching of Donations 
  Often a donation delivers no tax benefit if the client does not naturally itemize deductions.  Bunching several years of donations together can lead to itemized deductions that exceed the standard deduction in the bunched year and obtain at least partial deductions for the client.

Other Year-End Planning 

December 31, 2024 

• Harvest unrealized capital losses 
  Stock with an unrealized loss can be sold, creating a tax loss that can be banked or used to offset realized taxable gains. Net short-term losses can offset Net long-term gains and vice versa.  This is especially relevant for non-BakerAvenue managed accounts where no active management is in place.  Such strategies need to consider the Wash Sale rules.
• Use the Annual Gift Tax Exclusion amount 
  $18,000 per individual recipient of a gift in 2024.  Married couples can gift the same recipient $18,000 each.  An unlimited number of recipients.
• Consider taking taxable IRA Distributions in years up to RMD age 
  May be relevant for those clients with large, deferred balances where the first RMD may automatically be in a very high tax bracket.

Tactical Use of Margin Account Near Year-End
Use margin accounts to meet short-term cash requirements rather than sell appreciated stock or take a taxable distribution just before the year's end.

If you have any questions about this tax update, please contact BakerAvenue.

Important Tax Update for the Southeast

The deadline for filing 2023 and 2024 taxes, including tax payments, estimated payments, and return submissions, has been extended to May 1, 2025. Additionally, funds received from FEMA or other government entities are typically not included in gross income.

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Hurricane Helene and Milton: States Affected

Due to the hazardous hurricanes that have hit the Southeast Regions: Alabama, Georgia, North Carolina, South Carolina, and Florida, the IRS has announced Hurricane relief: The due date for 2023 and 2024 tax returns has been extended to May 1, 2025.

• 2023 returns must have had a valid extension filed
• Tax payments in these states are extended until May 1, 2025
• 2024 Q4 estimated payments due January 15, 2024 are now due May 1, 2025
• 2025 Q1 estimated payments due April 15, 2025, are now due May 1, 2025

For details, view the IRS releases:

• IR-2024-264, October 11, 2024: IRS provides Hurricane Milton relief; May 1 deadline now applies to individuals and businesses in all of Florida; many businesses qualify for deposit penalty relief
• IR-2024-253, October 1, 2024: IRS provides relief for Helene; various deadlines postponed to May 1, 2025; part or all of 7 states qualify

If you have any questions about this tax update, please contact BakerAvenue.

RSU, ISO, NQSO, and QSBS: What Are the Differences?

RSU, ISO, NQSO, and QSBS: The alphabet soup of executive compensation. For most employees, the names themselves are difficult to navigate, let alone the tax implications involved with each type of compensation.

Equity compensation can be complex, and with the rise in popularity of equity as a form of compensation, it is more important than ever to understand the details as the equity comp can often be many times greater than base salary.

When working with equity compensation clients, the most commonly asked questions are: What are the differences between each type, and how do I minimize the tax?

Let's start with an overview of the various stock compensation categories.

Venture Capital Explained

Venture Capital (VC) is a type of business financing typically focused on startups and small businesses that have significant growth opportunities early in their lifecycle.  These investments are high-risk but also can provide substantial investment returns.

In this article, we'll explore the role of venture capitalists, the differences between venture capital and private equity (PE), the various stages of venture capital investment, and the success stories that have emerged from this dynamic industry.

Overview of Growth, Income, and Market Neutral Solutions for Your Clients 

Are you seeking general information about Income, Growth, and Market Neutral alternative investments to share with your clients? Here are the general differences between the three alternative investment solutions: 

• Income investments focus on generating a steady income stream through assets like bonds, dividend-paying stocks, or real estate investment trusts (REITs).
• Growth investments aim to maximize capital appreciation by investing in high-growth potential companies.
• Market-neutral alternative investments, on the other hand, aim to achieve positive returns regardless of market conditions.