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SALT, tips and auto loans: A guide to the House GOP tax bill

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House Republicans’ release of the tax provisions in their massive fiscal bill provides a crucial initial reading of what party leaders think could pass, culminating weeks of intense negotiations among fractious GOP lawmakers. 

But the bill still may change as leaders strike more deals to secure passage in the House. And Senate Republicans are likely to follow their own path, requiring more compromises. 

Business lobbyists notched many of the top tax breaks they were seeking, while avoiding levy increases that were instead targeted at renewable energy projects, immigrants, foundations and colleges. The bill is officially scored as losing $3.7 trillion in revenue, within the $4.5 trillion limit lawmakers set for themselves.

Here’s a rundown of the tax bill’s main provisions impacting individuals and businesses: 

No millionaire tax

House Republicans rejected the so-called “millionaire tax” floated by President Donald Trump, which would have set a higher income tax rate for individuals making more than $2.5 million in a year.

The draft would permanently set the top tax rate for individuals at 37%, extending the rate set by President Donald Trump’s 2017 tax bill. Without new legislation, the top rate is set to expire and would revert back to 39.6%. 

$30,000 SALT limit

The limit on state and local tax deductions would rise to $30,000 – a slight increase from the existing SALT cap, but likely not enough to appease Republicans from high-tax states like California and New York. The proposed SALT cap would be $30,000 for individual filers or married couples filing joint returns but $15,000 for married individuals filing separate returns. 

The bill also would place a new income test on eligibility for the tax deduction, phasing it out for individuals earning more than $200,000, or married couples earning more than $400,000. 

At least five Republican lawmakers rejected the new limit in advance as too low. They could stop the entire tax bill if they stick to their guns. 

Business lobbyists meanwhile beat back an attempt to limit the ability of companies to claim a SALT deduction.

Tips, overtime and autos

Tips and overtime pay would be exempt from income tax through 2028, the end of Trump’s second term, fulfilling — at least for four years — a Trump campaign promise. The GOP bill would also make interest on auto loans deductible through 2028, addressing another Trump campaign promise. All three provisions would be retroactive to the beginning of this year.

Interest expensing

Private equity and other heavily indebted business sectors won a major fight in the tax bill on interest expensing. The bill adds depreciation and amortization when determining the tax deductibility of a company’s debt payments. The maximum amount any company can get in such tax write-offs is calculated as a percentage of earnings. That’s why using EBITDA – which is typically bigger than EBIT — in this process would generate heftier tax deductions.

Carried interest

The bill does not make any changes to the tax treatment of carried interest after a massive lobbying campaign by affected industries. Trump has pushed Republicans to tax carried interest as ordinary income, raising taxes on private equity, venture capitalists and real estate investors.

University endowment tax

Some private universities would face a dramatic tax increase on investment income generated by their endowments, posing a serious penalty to some of the nation’s wealthiest schools.

The provision would create a tiered system of taxation so that wealthy colleges and universities that meet a threshold based on the number of students would pay more. Under Trump’s 2017 tax law, some colleges with the most well-funded endowments currently pay a 1.4% tax on their net investment income. The levy would rise to as high as 21% on institutions with the largest endowments based on their student population.

The provision is a major escalation in Trump’s fight with Harvard and other elite colleges and universities, which he has sought to strong-arm into making curriculum and cultural changes that he favors. Harvard, Yale, Stanford, Princeton and MIT would face the maximum 21% tax rate, based on the size of their endowments in 2024, according to data from the NACUBO-Commonfund Study of Endowments.

Private foundation tax

Private foundations also would face an escalating tax based on their size: 2.78% for private foundations with assets between $50 million and $250 million, 5% for entities with assets between $250 million and $5 billion; and 10% for foundations with assets of at least $5 billion, such as the Gates Foundation, a longtime target for Republicans.

Sports teams

The bill would limit write-offs for professional football, basketball, baseball, hockey and soccer franchises that claim deductions connected to the team’s intangible assets, including copyright, patents or designs.

Electric vehicles

A popular consumer tax credit of up to $7,500 for the purchase of an electric vehicle would be fully eliminated by the end of 2026, and only manufacturers that have sold fewer than 200,000 electric vehicles by the end of this year would be eligible to receive it in 2026. Tax incentives for the purchase of commercial electric vehicles and used electric vehicles would also be repealed.

Renewable tax credits

Popular production and investment tax credits for clean electricity would be phased out by the end of 2031 and new requirements against using materials from certain foreign nations would be added. Those credits weren’t set to expire until the later part of 2032 or until carbon emissions from the U.S. electricity sector decline to at least 75% below 2022 levels. A tax credit for the production of nuclear energy would also be phased out by 2031.

Bonus for elderly

Americans aged 65 and older who don’t itemize their taxes would get a $4,000 bonus added to their standard deduction through 2028. That benefit would phase out for individuals making more than $75,000 and couples making more than $150,000. It would be retroactive to the beginning of this year.

Trump had campaigned on ending taxes on Social Security benefits, but that proposal would have run afoul of a special procedure Republicans are using to push through the tax law changes without any Democratic votes. The higher standard deduction is an alternative way of targeting a benefit to the elderly.

Targeting immigrants

Immigrant communities would face a new 5% tax on remittances sent to foreign nations. Many immigrants send a portion of their earnings abroad to support family members in their home countries. Tax credits would be available to reimburse U.S. citizens who send payments abroad.

Multinational corporations benefit

Multinational companies would get an extension of current lower rates on foreign profits, marking a win for corporate America.

Factory incentives

The bill does not include Trump’s call for a lower corporate tax rate for domestic producers, but instead allows 100% depreciation for any new “qualified production property,” like a factory, if construction begins during Trump’s term — beginning on Jan. 20, 2025, and before Jan. 1, 2029, and becomes operational before 2033. That would be a major incentive for new facilities as Trump wields tariffs to drive production to the U.S.

Child tax credit

The maximum child tax credit would rise from $2,000 to $2,500 through 2028 and then drop to $2,000 in subsequent years. 

‘MAGA’ accounts

The bill would create new tax-exempt investment accounts to benefit children, dubbed “MAGA” accounts, referring to his Make America Great Again campaign slogan. The accounts would allow $5,000 in contributions per year and adult children would be able to use the funds for purchasing homes or starting small businesses, in addition to educational expenses. The bill would authorize one-time $1,000 government payments into accounts for children born from 2025 through 2028.

Pass-through deduction

Owners of pass-through businesses would be allowed to exclude 23% of their business income when calculating their taxes, a 3% increase from the current rate. The increase is a win for pass-through firms — partnerships, sole proprietorships and S corporations — which make up the vast majority of businesses in the U.S.  

Research and development

The draft would temporarily reinstate a tax deduction for research and development, a top priority for manufacturers and the tech industry. The deduction will last through the end of 2029.

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Accounting

In the blogs: Higher questions

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Valuations this year; handling interviewees; AI and accounting ed.; and other highlights from our favorite tax bloggers.

Higher questions

Haunting of the Hill House

  • Eide Bailly (https://www.eidebailly.com/taxblog): The House Ways and Means Committee planned to begin to publicly debate and amend tax legislation on May 13, with the ultimate goal to produce the “one big, beautiful” bill to extend the Tax Cuts and Jobs Act: “This is the stage where seemingly dead and buried ideas mysteriously come back to life to haunt the proceedings.” 
  • Wiss (https://wiss.com/insights/read/): Key highlights of the proposed beauty.
  • Current Federal Tax Developments (https://www.currentfederaltaxdevelopments.com/): And a bulleted summary.
  • Tax Vox (https://www.taxpolicycenter.org/taxvox): If Congress expands the Child Tax Credit with TCJA extension, who might benefit and what might it cost?
  • Tax Foundation (www.taxfoundation.org/blog): Policymakers will also decide the fate of the SALT cap. Debate rages about making the cap more generous, along with possible limits on pass-through workarounds and SALT deductions  by corporations. While capping business SALT could raise additional revenue, it would risk slowing economic growth.

Soft skills

Rational decisions

Tidying up

  • Boyum & Barenscheer (https://www.myboyum.com/blog/): Should you vacuum the meeting room? How many times should you talk with a candidate? Keys — some often overlooked — to effective interviewing.
  • The National Association of Tax Professionals (https://blog.natptax.com/): A WISP is the written information security plan that verifies how your firm protects taxpayer information. You can’t ignore them anymore, and here’s how to build a compliant one.
  • Taxing Subjects (https://www.drakesoftware.com/blog): An outstanding guide to SEO for accounting firms. 
  • AICPA & CIMA Insights (https://www.aicpa-cima.com/blog): Where does AI fit into accounting education? Everywhere.

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Accounting

House committee marks up tax reconciliation bill

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The House Ways and Means Committee held a hearing Tuesday to mark up the so-called “one, big beautiful bill” extending the expiring provisions of the Tax Cuts and Jobs Act while adding other tax breaks for tip income, overtime pay and Social Security income and eliminating tax credits from the Inflation Reduction Act for renewable energy as well as the Direct File and Free File programs.

“Today, this Committee will move forward on President Trump’s promise of delivering historic tax relief to working families, farmers and small businesses,” said committee chair Jason Smith, R-Missouri, in his opening statement. “The One Big Beautiful Bill is the key to making America great again. This moment has been years in the making. While Democrats were defending IRS audits on the middle class and tax carveouts for the wealthy, Republicans on this Committee got on the road, to hear from real Americans about how the 2017 tax cuts benefited them. This bill wasn’t drafted by special interests or K Street lobbyists. It was drafted by the American people in communities across the country.”

Democrats blasted the bill. “In 2017, Republicans passed a tax law that was supposed to pay for itself, raise wages, and help working families,” said ranking member Richard Neal, D-Massachusetts. “None of that happened. Instead, it exploded the deficit, worsened inequality, and left everyday Americans behind. Now they want to double down on the same failed playbook. One that rigs the system for billionaires and big corporations while everyone else pays the price.”

Among the provisions, the bill would make the expiring rate and bracket changes of the TCJA permanent and increase the inflation adjustment for all brackets excluding the 37% threshold, according to a summary from the Tax Foundation. The bill would also make the expiring standard deduction levels permanent and temporarily increase the standard deduction by $2,000 for joint filers, $1,500 for head of household filers and $1,000 for all other filers from 2025 through the end of 2028. It would also make the personal exemption elimination permanent, and make the $750,000 limitation and the exclusion of interest on home equity loans for the home mortgage interest deduction permanent. It would also make the state and local tax deduction cap, also known as the SALT cap, permanent at a higher threshold of $30,000, phasing down to $10,000 at a rate of 20% starting at modified adjusted gross income of $200,000 for single filers and $400,000 for joint filers.

Other changes and limitations to itemized deductions would be made permanent, including the limitation on personal casualty losses and wagering losses and termination of miscellaneous itemized deductions, Pease limitation on itemized deductions, and certain moving expenses.

The bill is likely to go through some changes when it goes to the Senate. “Politically, we’ve been talking about the process for the last couple months,” said Mark Baran, managing director at CBIZ’s national tax office. “Congress is finally able to pass a concurrent resolution to unlock the budget reconciliation process.”

“The House and the Senate have completely different instructions on what they’re going to cut and how they’re going to score,” he added. “Some of that’s very controversial, and that needs to be worked out. But now we’re getting into the actual crafting of provisions and legislation.”

According to a summary on the CBIZ site, the bill would make permanent and increase the Section 199A pass-through entity deduction from 20% to 23%, also known as the qualified business income, or QBI, deduction. The bill includes provisions that open the door for pass-through entity owners in specified service industries to use the deduction. It would also extend current deductions for research and experimental expenses through Dec. 31, 2029, and extend 100% bonus depreciation through that same date.

The bill would also allow businesses to include amortization and depreciation when figuring the business interest limitation through Dec. 31, 2029, while making permanent the excess business loss limitation.

In addition, the bill would retroactively terminate the Employee Retention Tax Credit for taxpayers who filed refund claims after Jan. 31, 2024. 

In keeping with Trump campaign promises, the bill would eliminate taxes on tips for employees in certain defined industries where tipping has been a traditional form of compensation. There would be a new $4,000 deduction for seniors that phases out starting at $75,000 of income. The bill would also eliminate taxes on overtime pay.

The bill would give individuals an above-the-line deduction for interest on loans used to purchase American-made cars, but that would be capped at $10,000 with income phaseouts starting at $100,000 (single) and $200,000 (married filing jointly).

The bill would also increase taxes on certain private college investment income up to a maximum of 21% on universities with a student-adjusted endowment above $2 million.

It would also roll back some of the renewable energy provisions from the Inflation Reduction, including a phaseout and restrictions on clean energy facilities starting in 2029, while also limiting or eliminating clean housing energy and vehicle credits. The bill would sunset major IRA clean electricity tax credits, including the clean electricity production tax credit (45Y), clean electricity investment tax credit (48E), and nuclear electricity production tax credit (45U) begin phasing out after 2028 and finish phasing out by the end of 2031; repeal hydrogen production credit (45V) for facilities beginning construction after 2025, according to the Tax Foundation. It would also phase out advanced manufacturing production credit (45X) for wind energy components after 2027, for all other eligible components after 2031. Across several IRA clean energy credits, the bill would repeal transferability after the end of 2027 and further limit credits based on involvement of foreign entities of concern. On the other hand, it would expand the clean fuel production credit (45K), and tighten rules on the 126(m) limitation for executive compensation.

The bill would terminate the current Direct File program at the Internal Revenue Service and establish a public-private partnership between the IRS and private sector tax preparation services to offer free tax filing, replacing both the existing Direct File and Free File programs.  

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Accounting

FASAB mulls accounting impact of federal reorganization

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The Federal Accounting Standards Advisory Board is asking for input on emerging accounting issues and questions related to reporting entity reorganizations and abolishments as the federal government endures wide-ranging layoffs and reductions in force, including the elimination of entire agencies by the Elon Musk-led Department of Government Efficiency.

“Federal agencies and their functions, from time to time, have been reorganized and abolished,” said FASAB in its request for information and comment

Reorganization refers to a transfer, consolidation, coordination, authorization or abolition of one (or more) agency or agencies or a part of their functions. Abolition is a type of reorganization and refers to the whole or part of an agency that does not have, upon the effective date of the reorganization, any functions.

The Trump administration has recently moved to all but eliminate parts of the federal government such as the U.S. Agency for International Development and the Consumer Financial Protection Bureau, and earlier this month, Republicans on the House Financial Services Committee passed a bill that would transfer the responsibilities of the Public Company Accounting Oversight Board to the Securities and Exchange Commission. 

FASAB issues federal financial accounting standards and provides timely guidance. Practitioner responses to the request for information will support its efforts to identify, research and respond to emerging accounting and reporting issues related to reorganization and abolishment activities, such as transfers of assets and liabilities among federal reporting entities. The input will be used to help inform any potential staff recommendations and alternatives for FASAB to consider regarding short- and long-term actions and updates to federal accounting standards and guidance in this area.

The questions include:

  1. Have any recent or ongoing reorganization activities or events affected the scope of functions, assets, liabilities, net position, revenues, and expenses assigned to your reporting entity (or, for auditors, your auditees)? If so, please describe.
  2. What accounting issues have you (or your auditees) encountered (or do you anticipate) in connection with recent or potential reorganization activities and events?
  3. Please describe the sources of standards and guidance that you (or your auditees) are applying to recent, ongoing, or pending reorganization activities and events.
  4. Have you experienced any difficulties or identified gaps in the accounting and disclosure standards for reorganization activities and events? What potential improvements would you recommend, if any?

FASAB is asking for responses by July 15, 2025, but acknowledged that late or follow-up submissions may be necessary given the provisional nature of the request. Responses should be emailed to [email protected] with “RERA RFI response” on the subject line.

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