The post Cost Segregation Strategy: Balancing Immediate Tax Savings with Long-Term Impact appeared first on Walter Shuffain.

For taxpayers and businesses that rely on the timely mailed timely filed rule, this shift introduces new risks that require more deliberate planning.

Why This Matters for Tax Filings

Federal tax rules rely heavily on the postmark date to determine whether filings and payments are made promptly. When the postmark date controls, mailing an envelope or package on time no longer guarantees that the postmark will reflect timely compliance.

The risks extend to several ordinary tax-related submissions:

• Estimated Tax Payments
• Tax return deadlines may be missed if the postmark date falls after the due date, even if the return was mailed earlier
  • Estimated tax payments may be treated as late, resulting in penalties
  • IRS correspondence, elections, and appeals could be deemed untimely
  • Charitable contribution documentation for year-end giving may be compromised

In effect, the burden of proof has shifted more heavily to the sender.

How Businesses Can Reduce Mailing Risk

Given the increased uncertainty around postmarks, businesses and individuals should take extra precautions when mailing time-sensitive documents:

• Use Certified or Registered Mail to obtain a postmarked receipt
• Use Certificate of Mailing issued by the Post Office
• Use IRS-approved private delivery services when appropriate

Electronic submission eliminates the uncertainty of postmarking and may be the safest option for filings tied to strict deadlines.

Considerations for Business Owners

Mailing deadlines leave little room for assumption. Changes in USPS processing mean that dropping mail in a box on the due date may no longer provide adequate protection.

Being intentional about how and where time-sensitive tax documents are mailed can help reduce risk and avoid unnecessary penalties. If you have questions about the safest mailing or filing options for tax documents, your tax advisor can help you evaluate the best approach based on your specific situation.

The post USPS Postmark Guidance Raises New Considerations for Tax Deadlines appeared first on Walter Shuffain.

• Beginning in 2026, employees aged 50 or older who participate in a 401(k), 403(b), or 457(b) plan and earned more than $145,000 from their employer in the previous year must make their catch-up contributions on a Roth (after-tax) basis.
• Employers must update plan documents, payroll systems, and employee communications to stay compliant.
• All plan amendments must be adopted by December 31, 2026.

What Employers Need to Know About the 2026 Roth Catch-Up Change

The IRS has finalized regulations implementing the SECURE 2.0 Act’s catch-up contribution rules, effective in 2026. High-wage earners will be required to make their catch-up contributions on a Roth basis—meaning after-tax instead of pre-tax.

For employers, the change affects payroll processes, plan operations, and employee communication. Understanding the details now helps businesses prepare early and avoid compliance challenges.

What Are the New Catch-Up Contribution Rules Under SECURE 2.0?

Starting in 2026, employees aged 50 or older who earned more than $145,000 in the prior calendar year (2025 for 2026) from the employer sponsoring the plan must make their catch-up contributions as Roth contributions, taxed in the year they are made. The rule applies to 401(k), 403(b), and governmental 457(b) plans. Employees earning less than $145,000, or those not eligible for catch-up contributions, can still choose between pre-tax and Roth contributions.

The change simplifies plan administration while encouraging after-tax savings for higher earners. Employers should ensure their plans can accommodate Roth contributions, allowing affected employees to continue maximizing their retirement benefits.

Who Is Considered a High Wage Earner Under the New Regulations?

A high wage earner is any employee whose FICA wages from the sponsoring employer exceeded $145,000 in the prior year, with the amount adjusted annually for inflation. For employers that share a common paymaster, wages across related entities must be combined.

This definition enables payroll teams to identify affected employees easily and ensures compliance through accurate wage reporting.

When Do the New Rules Take Effect and Which Plans Are Affected?

The Roth catch-up requirement begins January 1, 2026. It applies to qualified retirement plans, including 401(k) plans, 403(b) plans, and governmental 457(b) plans. SIMPLE IRAs, SARSEPs, and specific 403(b) plans are excluded.

What Should Employers Do to Prepare for Compliance?

Employers should begin planning now. Begin by reviewing plan documents to determine if a Roth feature is available. If not, one must be added for high earners to continue making catch-up contributions.

Next, coordinate with payroll providers and plan custodians to ensure systems can identify high earners and apply Roth treatment correctly. Finally, adopt plan amendments by December 31, 2026. Without these updates, high earners will not be able to make catch-up contributions.

How Do These Changes Affect Payroll and Employee Communication?

Payroll systems must track employees’ prior-year FICA wages and automatically designate Roth treatment for those exceeding the threshold. This may require updates to payroll software and closer coordination with plan administrators to ensure seamless integration.

Employers should also clearly communicate these changes to ensure that high earners understand that catch-up contributions will be made after-tax, starting in 2026, which will impact both take-home pay and retirement savings strategies.

Are There Special Rules or Exceptions Employers Should Know?

Some exceptions apply. Collectively bargained employees may have different timelines. Employers should verify which exceptions apply to their plans.

Additionally, the SECURE 2.0 “super” catch-up provision for employees aged 60 to 63 remains available in 2026, but must also follow Roth rules for high-wage earners.

Why Early Planning Matters for Employers

Proactive planning ensures a smooth transition to the Roth-only requirement. Updating systems and documents early will minimize compliance risks and protect employee savings. Working with a CPA or retirement plan advisor helps confirm alignment with final IRS regulations and reduces last-minute stress.

Frequently Asked Questions (FAQ’s)

1. What changes does SECURE 2.0 make to catch-up contributions in 2026?
   In 2026, employees earning more than $145,000 in the previous year (2025 for 2026) must make all catch-up contributions as Roth (after-tax).
2. Who qualifies as a high wage earner under the new IRS rules?
   Any employee whose FICA wages exceeded $145,000 in the prior year, with adjustments for inflation, is considered a high wage earner.
3. How can employers prepare for Roth catch-up compliance?
   Employers should confirm Roth features, update payroll systems, and adopt plan amendments by December 31, 2026.
4. What is the deadline for updating retirement plan documents?
   All plan amendments must be adopted by December 31, 2026, to stay compliant with the new regulations.

The post Understanding the New IRS Regulations on SECURE 2.0 Catch-Up Contributions for 2026 appeared first on Walter Shuffain.

The White House on March 25, 2025, issued Executive Order 14247, “Modernizing Payments To and From America’s Bank Account.” The executive order states that effective September 30, 2025, to the extent permitted by law, the Secretary of Treasury will cease issuing paper checks for all federal disbursements, which includes tax refunds.  

In addition to establishing the September 30 deadline for stopping paper checks, the executive order also provides that payments to the federal government should be made electronically as soon as practicable. The executive order indicates that the purpose is to modernize and minimize the costs, delays, risks, and inefficiencies that paper-based payments entail. It notes that mail theft has increased in recent years, and Department of Treasury paper checks are significantly more likely to be reported lost or stolen, returned, or altered than electronic funds transfers (EFTs).  

The executive order instructs Treasury to support the transition to digital payment methods, such as direct deposits, debt or credit card payments, digital wallets, and other electronic payment systems. Treasury is authorized to grant limited exceptions when electronic payment is not feasible, including for individuals who do not have access to bank services or electronic payments systems. Other potential exceptions include:  

• Emergency payments when electronic disbursement would cause undue hardships;  

• National security and law enforcement-related activities when non-EFT transactions are necessary or desirable; and  

• Other circumstances as determined by the Secretary of the Treasury.  

On August 14, 2025, Treasury issued a news release indicating that it will stop paper checks for most federal benefit items on September 30, 2025.   

Insights 

Treasury has moved towards electronic payments and away from issuing paper checks, effective September 30, 2025. The department recently requested public comments regarding the implementation of the executive order, but the September 30 deadline did not change.    

Taxpayers that typically receive paper checks for tax refunds should evaluate the potential electronic options to confirm that they can receive their refund in a timely manner.  

Some content borrowed with permission from BDO USA. Our firm is an independent member of the BDO Alliance USA, a nationwide association of independently owned local and regional accounting, consulting, and service firms. 

The post Treasury to Stop Issuing Paper Checks on September 30, 2025 appeared first on Walter Shuffain.

• Business owners have retirement plan options beyond standard IRAs. 

• Solo 401(k)s, SEP IRAs, SIMPLE IRAs, and cash balance plans can unlock powerful tax savings. 

• The One Big Beautiful Bill (OBBB) introduces new deductions and planning opportunities. 

What Makes Retirement Planning Different for Business Owners? 

Running your own business comes with freedom and responsibility. Unlike traditional employees, business owners don’t automatically receive a retirement plan from an employer. That means securing your financial future is up to you. The advantage is flexibility—you can use plans with higher contribution limits, more substantial tax benefits, and options that grow with your business. The right choice depends on your income, team size, and retirement timeline.  

Solo 401(k): High limits for solo owners 

A Solo 401(k), also called a one-participant 401(k), is built for businesses with no employees other than a spouse. You can contribute as both an employee and an employer. 

For 2025, the combined limit is up to $70,000, or $77,500 if you’re 50 or older. Ages 60-63 can qualify for an extra $11,250 catch-up, for a total of $81,250. Many providers also allow Roth contributions. If your spouse works in the business, they can join the plan, doubling household savings. 

Best for: Owner-only businesses or couples who want high savings with low administration. 

SEP IRA: Simple and scalable 

A Simplified Employee Pension (SEP) IRA is one of the easiest plans to start. In 2025, you can contribute the lesser of $70,000 or 25 percent of compensation, based on a $350,000 cap. 

SEPs don’t allow employee deferrals or age 50 catch-ups, but they’re flexible: you can skip or adjust contributions if profits dip. If you hire, you must contribute the same percentage for eligible employees as you do. Thanks to Secure Act 2.0, some providers let you make Roth contributions in a SEP.  

Best for: Owners who want low-cost simplicity and plan to add employees. 

Cash balance and defined benefit plans: Saving at scale 

Pension-style plans can deliver outsized benefits for owners with substantial profits and fewer years until retirement. A defined benefit plan promises a set payout at retirement, while a cash balance plan uses a formula to create a notional account. 

Contribution limits can reach six figures beyond IRA or 401(k) caps. These plans require actuarial oversight and a steady commitment, but the tax deductions are powerful. Many owners pair them with a 401(k) to maximize contributions and flexibility. 

Best for: High-income owners in their 50s or 60s who want to accelerate savings. 

SIMPLE IRA: Easy for small teams 

A SIMPLE IRA is designed for businesses with 100 or fewer employees. Employees can contribute; you must match their contributions or provide a small fixed percentage. Limits are lower than SEPs or Solo 401(k)s, but administration is light and costs are low.  

Best for: Small businesses that want to offer a retirement plan with minimal effort. 

How Does the One Big Beautiful Bill Change Retirement Planning? 

The One Big Beautiful Bill, passed in July 2025, introduced essential tax updates. It permanently extended the lower Tax Cuts and Jobs Act rates, added a new deduction for people 65 and older from 2025 through 2028 ($6,000 for singles and $12,000 for couples), raised the federal estate tax exemption to $15 million per person and $30 million per couple starting in 2026, and temporarily increased the SALT deduction cap to $40,000 for households earning under $500,000 through 2029. 

For business owners, this creates planning opportunities. Stable tax brackets make Roth conversions and withdrawals easier to time. The age-based deduction can offset larger contributions in your 60s. And the higher estate exemption offers more room for legacy planning.  

How Can You Move Forward with a Tax Smart Plan? 

Business owners have more tools than most to build retirement wealth. A Solo 401(k) provides high limits for owner-only businesses, an SEP IRA offers simple flexibility for those adding staff, cash balance and defined benefit plans allow substantial tax-deductible contributions, and SIMPLE IRAs give small teams an easy benefit. 

With the OBBBA locking in lower rates and expanding deductions, now is the time to take action. The right plan can help you maximize savings, reduce taxes, and create the retirement you want—while strengthening the future of your business. 

Frequently Asked Questions (FAQs) 

1. Which plan allows the highest contribution?
   A Solo 401(k) allows up to $70,000 in 2025 before catch-ups. Defined benefit and cash balance plans can allow even larger deductible contributions.  
2. Is a SEP IRA a good choice if I plan to hire employees?
   Yes. A SEP IRA includes eligible employees and requires equal percentage contributions for them, making it a strong option for growing businesses.  
3. Can business owners use Roth features in these plans?
   Yes. Solo 401(k)s often allow Roth contributions, and Secure Act 2.0 expanded Roth options for SEP IRAs through certain providers.  

The post Tax-Smart Retirement Planning for Business Owners appeared first on Walter Shuffain.

Why this matters: Qualified Small Business Stock (QSBS) offers one of the most powerful tax benefits available to business owners and investors: the potential to exclude millions of dollars in capital gains from tax. But taking advantage of QSBS isn’t automatic. The structure of your business, the timing of incorporation, and the way you hold stock all determine whether you qualify. Recent changes under the One Big Beautiful Bill (OBBB) expanded opportunities, but they also make planning with your tax advisor from the very beginning more critical than ever.

Key Takeaways:

• The timing of when you incorporate as a C-corporation matters—your holding period and eligibility clock starts when stock is issued, not when the business begins operating.
• Changes under OBBB expanded benefits, including a shorter holding period for partial exclusions and higher asset and exclusion thresholds.
• Early consultation with a tax advisor can prevent costly missteps—like missing out on millions in tax-free gains due to entity choice or timing.
• QSBS is most beneficial when planning is aligned with growth expectations, funding strategies, and exit timelines.

Why Planning Early Matters

As our team has seen firsthand, the biggest risk with QSBS is not the complexity of the rules—it’s missing the window of opportunity. In two recent client cases, businesses that began as LLCs later converted to C-corporations, but too late. One missed the five-year holding requirement by less than a year. Another had grown so quickly that by the time it incorporated, its valuation exceeded the $50 million limit (now $75 million under OBBB). In both cases, millions in potential tax-free gain were lost.

These scenarios highlight the core message: when you become a C-corporation matters. If incorporation happens after substantial growth or too close to a potential sale, eligibility for QSBS may be lost.

Recent Changes Under the One Big Beautiful Bill (OBBB)

Legislation passed as part of the OBBB in 2025 expanded QSBS opportunities:

• Partial exclusions sooner: Investors acquiring stock directly from a QSBS after July 4, 2025, can now receive a 50% exclusion after three years, with phased increases leading to 100% at five years (previously only available at the five-year mark).
• Higher asset threshold: For stock issued after July 4, 2025, the gross asset cap for qualifying as a small business increased from $50 million to $75 million.
• Higher per-taxpayer cap: The lifetime exclusion per Qualified Small Business Corporation (issuer) cap rose from $10 million to $15 million for QSBS acquired after July 4, 2025.

These adjustments create more flexibility for founders and investors. They also mean that even companies experiencing rapid growth have a larger window of opportunity to plan and qualify.

The Role of Your Tax Advisor

QSBS rules aren’t intuitive. For example:

• Forming an LLC and later converting doesn’t “backdate” your holding period—you must start the QSBS holding period clock when C-corp stock is issued.
• The stock must be acquired directly from the corporation.
• Not all industries qualify (healthcare, law, accounting, financial services, insurance, banking, athletics, and hospitality are excluded).
• Loss utilization strategies in early years may conflict with QSBS planning.

A tax advisor can help weigh these trade-offs. In some cases, it may make sense to accept early-year losses in a pass-through entity. In others, starting as a C-corp may be worth it to secure long-term benefits, especially when federal C-corporation rates (21%) are lower than individual rates (up to 37%)

Planning conversations should start as soon as a business is formed or when a new investment is considered. An upfront investment of time and cost to understand QSBS can prevent multi-million-dollar surprises later.

When to Start the Conversation

• Founders: If you believe your idea has high-growth potential, consider QSBS eligibility before forming your entity.
• Investors: Evaluate QSBS qualification as part of due diligence—this can tip the scales when comparing opportunities.
• Businesses nearing $50–$75 million in assets: Timing is critical. Incorporating before crossing the threshold may preserve eligibility.
• Those anticipating an exit in under five years: The new phased-in exclusions may still provide meaningful tax savings.

Final Thought

QSBS planning isn’t about memorizing the technical details—it’s about avoiding costly mistakes by structuring your business the right way from the start. The opportunity is significant: millions of dollars in potential tax-free gains. But it requires foresight. If you’re launching, investing in, or growing a business, the most valuable move you can make is to bring your tax advisor into the conversation early.

FAQ: Qualified Small Business Stock

How do I know if a stock is qualified for small business?
Only stock issued by a domestic C-corporation that meets the gross asset and active business requirements may qualify. Stock acquired from third parties does not.

What businesses are not QSBS eligible?
Exclusions include professional services such as health, law, accounting, athletics, financial services, insurance, banking, and hospitality.

Does the period operating as an LLC before incorporating count toward the holding period?
No. The clock starts when stock is issued by a C-corporation, not when the LLC began operations.

What are the benefits of QSBS?
Depending on the investment, holding period, and when the stock was acquired, the greater of up to $15 million—or 10 times your basis—of capital gains can be excluded from federal tax. With OBBB, partial exclusions are available after three years.

How long do I need to hold QSBS?
Full exclusion requires a five-year holding period, but for QSBS stock acquired after July 4, 2025, partial exclusions begin after three years.

Can an S corporation qualify?
No. Only C-corporation stock may qualify.

The post Planning Ahead with Qualified Small Business Stock appeared first on Walter Shuffain.

The post How the One Big Beautiful Bill Impacts Business Owners: A Strategic Overview appeared first on Walter Shuffain.

Individual Provisions

1. Permanent Tax Rates and Inflation Adjustments

What changed: The seven-bracket rate system enacted under the Tax Cuts and Jobs Act (TCJA)—10%, 12%, 22%, 24%, 32%, 35%, and 37%—is made permanent. Additionally, the 10% and 12% brackets will receive one extra year of inflation indexing before consolidation.

Why it matters: The permanence of the rate structure removes uncertainty for individuals and families planning long-term financial strategies. It ensures that lower- and middle-income earners continue to benefit from favorable tax brackets, and allows for more accurate forecasting.

To plan: Taxpayers should review multi-year projections to coordinate retirement income strategies, Roth conversions, and capital gains harvesting in light of known future rates. Financial advisors may wish to incorporate these assumptions into updated financial plans.

2. Standard Deduction and Temporary Additional Deduction for Senior Taxpayers

What changed: The elevated standard deduction introduced in 2017 is locked in permanently, beginning at $15,750 for single filers and $31,500 for joint filers in 2025 (indexed). A temporary $6,000 additional deduction—the “senior bonus”—is available from 2025 to 2028 for taxpayers age 65 and older, phasing out at $75,000 (single) or $150,000 (joint) MAGI.

Why it matters: A permanent standard deduction and the new senior deduction significantly reduce taxable income for retirees and low- to middle-income earners. It also simplifies filing for those not benefiting from itemized deductions.

To plan: Seniors should consider how distributions from IRAs, pensions, and Social Security affect their MAGI. Timing income across tax years may help preserve eligibility for the senior bonus. Coordinating the deduction with Qualified Charitable Distributions (QCDs) may further optimize tax outcomes.

3. Section 24 Child Tax Credit

What changed: The credit increases to $2,200 per qualifying child in 2025, with $1,400 refundable. The credit is indexed to inflation and retains existing phaseout thresholds. Only one spouse must now provide a valid Social Security number (SSN) for joint returns.

Why it matters: This change provides larger direct financial support for families with children while simplifying eligibility requirements, especially for mixed-status households.

To plan: Families should ensure dependents meet age, residency, and relationship tests. Confirm accurate SSNs are reported for the child and at least one parent. Tax planning to manage AGI could preserve eligibility for families near the income phaseout.

4. Child and Dependent Care Credit

What changed: The maximum credit is expanded to 50% of qualifying care expenses, subject to a sliding scale based on adjusted gross income. The top benefit is available to households earning up to $15,000, with a phase-down thereafter.

Why it matters: This supports working families with young children or dependents requiring care. It aims to offset the rising costs of daycare, eldercare, and after-school programs.

To plan: Taxpayers should retain detailed records of care expenses, including provider names, taxpayer identification numbers, and payment documentation. Households near the AGI phaseout should consider adjusting withholdings or deferrals to preserve eligibility.

5. Estate and Gift Tax Exemption

What changed: Beginning in 2026, the lifetime estate and gift tax exemption increases to $15 million per individual ($30 million per couple), indexed annually for inflation.

Why it matters: This adjustment extends the ability to transfer significant wealth without incurring federal estate or gift tax liability. It supports both intergenerational giving and business succession planning.

To plan: High-net-worth individuals should revisit estate plans, trust structures, and gifting strategies. Now may be an opportune time to use spousal lifetime access trusts (SLATs), grantor-retained annuity trusts (GRATs), or other advanced planning vehicles.

6. Above-the-Line Deduction for Service and Hourly Wage Income

What changed: A new above-the-line deduction allows individuals to deduct up to $25,000 in tips and $12,500 in overtime compensation for tax years 2025 through 2028. The deduction phases out at $150,000 (single) or $300,000 (joint) MAGI.

Why it matters: This provision offers targeted relief to workers in the service and hourly labor sectors, who may otherwise be unable to access significant deductions due to reliance on the standard deduction.

To plan: Workers should document reported tips and verify accuracy on W-2s or 1099s. Employers should offer educational resources on payroll transparency. Taxpayers approaching income thresholds may benefit from timing compensation or using pre-tax benefit elections to reduce MAGI.

7. Section 163 Interest Deduction for Personal-Use Vehicles

What changed: Taxpayers may deduct up to $10,000 in interest paid on loans for personal-use vehicles assembled in the United States. The deduction applies for purchases between 2025 and 2028.  The deduction phases out at $100,000 (single) or $200,000 (joint) MAGI.

Why it matters: This novel deduction provides tax relief for middle-income Americans financing automobile purchases while encouraging domestic manufacturing.

To plan: Confirm eligibility by verifying the VIN and assembly location before purchasing a vehicle. Retain the loan and purchase documentation. Taxpayers nearing the MAGI cap should consider timing the vehicle acquisition to preserve the deduction.

8. Charitable Contribution Rules

What changed: Non-itemizing taxpayers may now deduct up to $1,000 (single) or $2,000 (joint) in charitable donations annually. A new floor requires deductions exceeding 0.5% of AGI for itemizers to qualify. Corporations must now exceed a 1% AGI floor.

Why it matters: The expansion to non-itemizers encourages broader philanthropic participation. The new AGI floors aim to limit nominal deductions while promoting meaningful giving.

To plan: Consider bunching donations into a single year to exceed the AGI floor or utilizing donor-advised funds. Maintain contemporaneous receipts and written acknowledgments for all contributions over $250.

9. SALT Deduction Cap

What changed: The cap on the deduction for state and local taxes (SALT) is temporarily raised to $40,000 from 2025 through 2029, indexed for inflation. A phase-down applies above $500,000 in MAGI. Pass-through entity tax (PTET) workarounds remain available.

Why it matters: This change restores a larger deduction for residents of high-tax states while retaining an upper-income limitation. It provides relief to many households affected by the prior $10,000 cap.

To plan: Taxpayers in high-tax jurisdictions should coordinate with their accountants to assess the interplay between the federal SALT cap, PTET elections, and state-level planning strategies.

10. Section 199A Qualified Business Income Deduction (QBI)

What changed: Section 199A is made permanent, preserving the 20% deduction for qualified pass-through income. The phase-in thresholds for specified service trades or businesses (SSTBs) increase to $150,000 (joint) and $75,000 (single). A $400 minimum deduction is now available for eligible companies with at least $1,000 in QBI.

Why it matters: This ensures continued tax benefits for small business owners, independent contractors, and professionals in eligible trades.

To plan: Evaluate entity choice and compensation structure to optimize QBI benefits. SSTBs should monitor income relative to phase-in thresholds and explore retirement contributions or income deferral strategies.

11. Repeal of Section 68 Itemized Deduction Limitation and Introduction of Uniform Cap for High-Income Taxpayers

What changed: The One Big Beautiful Bill permanently repeals the Pease limitation, which previously reduced itemized deductions for high-income taxpayers by 3 percent of income above certain thresholds. In its place, the new law limits the tax benefit of itemized deductions to $0.35 per dollar deducted for taxpayers in the top income bracket, effective beginning in 2026. This simplified cap applies to all itemized deductions, including SALT, mortgage interest, and charitable contributions.

Why it matters: By capping the value of deductions instead of phasing them out, the new rule provides clarity and predictability. While the limitation still affects high earners, it avoids the complexity and stealth tax effect of the former Pease formula.

To plan: Taxpayers near the top marginal bracket should work with advisors to evaluate the real after-tax value of their deductions under the new cap. Strategic adjustments may include timing of deductions, use of donor-advised funds, or reallocating between deductible and nondeductible outflows.

12. Section 530A Tax-Preferred Savings Accounts for Minors

What changed: New tax-advantaged savings vehicles, dubbed “Trump Accounts,” are created for minors. Contributions are tax-deferred, with a $1,000 federal match provided annually between 2025 and 2028. Withdrawal restrictions apply until age 18 unless used for qualified educational or health expenses.

Why it matters: These accounts are designed to foster savings among children and young adults, particularly in low- to middle-income families. The federal match creates an incentive for early financial literacy and participation.

To plan: Parents and guardians should consider contributing annually to maximize the federal match. Monitor compliance with withdrawal rules to avoid penalties. Financial institutions may begin offering specialized custodial account structures to facilitate participation.

13. 529 Plans

What changed: The annual limit for distributions to cover K–12 tuition has doubled—from $10,000 to $20,000 per beneficiary. Additionally, qualified expenses now include a broader range of educational and vocational expenses, such as online learning materials, tutoring fees, educational therapies, dual enrollment fees for college courses, and fees for acquiring or maintaining professional credentials.

Why it matters: These enhancements reflect a growing acknowledgment that education extends beyond traditional college paths. Families now have greater capacity to use tax-advantaged savings to support a wider variety of academic and career-building pursuits. The increased cap for K–12 expenses also provides relief to families facing rising tuition costs at private and parochial schools.

To plan: Account holders should revisit their savings goals and contribution strategies in light of the expanded uses. Consider adjusting automatic contributions to take advantage of the higher distribution limits if paying for K–12 tuition. Those considering alternative education paths—such as trade schools or homeschool curricula—should verify that their anticipated expenses qualify under the new rules.

Business & Nonprofit Provisions

1. Bonus Depreciation

What changed: The bill reinstates and makes permanent 100% bonus depreciation for qualified property placed in service after January 19, 2025. It also expands the definition of bonus-eligible assets to include qualified production property such as tooling and molds used in manufacturing.

Why it matters: Bonus depreciation allows businesses to deduct the full cost of qualifying assets in the year placed in service, rather than depreciating them over time. This improves cash flow and incentivizes immediate reinvestment in productive equipment.

To plan: Businesses anticipating significant capital expenditures should schedule purchases on or after the effective date. Careful documentation of in-service dates and asset classification will be essential. Firms should coordinate depreciation strategy with broader financing plans to optimize tax efficiency.

2. Section 179 Expensing

What changed: The maximum expensing limit under Section 179 increases to $2.5 million, with a phaseout threshold starting at $4 million. Moving forward, these amounts will be indexed for inflation.

Why it matters: Section 179 is a critical tool for small and midsize businesses to write off the full cost of specific tangible personal property and off-the-shelf software. The limit increase ensures broader applicability and reduces the chance of hitting the phaseout cap.

To plan: Businesses should evaluate their expected equipment and software investments and model out Section 179 usage against available bonus depreciation. Planning purchases within the qualifying year and below the phaseout range will ensure full deductibility.

3. R&D Expensing (Section 174)

What changed: The bill restores the ability to immediately expense domestic research and experimental (R&E) expenditures beginning in 2025. Small businesses may also apply this treatment retroactively for tax years 2022 through 2024. Foreign research must still be amortized over 15 years.

Small businesses are defined as those with less than $31M of gross receipts for the first year beginning in 2025. Larger businesses can elect to expense the remaining unamortized R&D from 2022 to 2024 over one or two years starting in 2025.

Why it matters: This eliminates the burdensome amortization rule imposed in 2022, allowing companies to better match R&D expenses with revenue. It also supports innovation and reduces compliance costs.

To plan: Companies should properly separate domestic and foreign R&D expenditures in their accounting systems. Amending prior returns for retroactive application could yield refunds or tax savings. Advisors should review eligibility carefully before proceeding with amended filings.

4. Interest Deduction Limitation (Section 163(j))

What changed: The limitation on business interest expense deductibility permanently reverts to an EBITDA-based formula rather than EBIT. This change allows depreciation and amortization to be added back when calculating the 30% cap.

Why it matters: EBITDA-based calculations allow businesses to deduct more interest expense, particularly in capital-intensive sectors. This supports expansion and financing flexibility.

To plan: Companies with significant debt or planned leverage should recalculate interest deductions using the new formula. Modeling should include anticipated changes in EBITDA and asset purchases.

5. Employer-Provided Childcare Credit

What changed: The credit for employer-provided childcare services increases from 25% to 40% of qualified expenses, with an expanded limit of $500,000 in fees ($600,000 for businesses with fewer than 50 employees).

Why it matters: This provision incentivizes businesses to support employees through direct child care services, aiding workforce participation and retention.

To plan: Employers should assess the viability of offering on-site childcare or contracting with third-party providers. Those already offering support should ensure costs are properly documented and eligible under IRS guidelines.

6. Qualified Small Business Stock (QSBS)

What changed: The bill modifies Section 1202 to retain the 100% exclusion for gains on Qualified Small Business Stock but introduces tiered exclusions for shorter holding periods. Taxpayers now qualify for a 50% exclusion after three years, 75% after four years, and 100% after five years. The gross assets threshold for a business to qualify as a “small business” is also raised to $75 million.

Why it matters: Qualified Small Business Stock offers a powerful tax incentive for investors and founders in early-stage companies by excluding capital gains on the sale of eligible stock. The tiered approach provides earlier partial relief while preserving the maximum benefit for long-term holders. The raised asset threshold expands eligibility to a broader range of growing businesses.

To plan: Founders and investors should review stock issuance documentation to ensure it meets the statutory requirements at the time of issuance. Holding period tracking should be carefully maintained to determine which exclusion level applies. Businesses nearing the gross assets threshold should consult with tax advisors before purchasing new capital or significant assets.

7. Unrelated Business Income Tax (UBIT) Modernization

What changed: The Senate-approved version of the One Big Beautiful Bill (OBBB) treats expenses for qualified transportation fringe benefits incurred by tax-exempt organizations as unrelated business taxable income (UBTI), effectively codifying the prior disallowance under the Tax Cuts and Jobs Act (TCJA). A specific exception is provided for church organizations. This change is effective for amounts paid or incurred after December 31, 2025

Why it matters: Although the provision doesn’t overhaul the broader UBIT framework, it reintroduces the inclusion of certain fringe benefit expenses as UBTI. This reimposes compliance requirements that some organizations may have set aside after the TCJA provision expired. Organizations previously exempt from UBIT for transportation benefits will need to revisit their reporting practices.

To plan: Tax-exempt organizations should assess whether they provide qualified transportation fringe benefits (e.g., transit passes, parking) and determine the potential tax impact starting in 2026. Church organizations are explicitly exempt, but others may need to resume UBTI reporting and consider cost or benefit changes. Consultation with a nonprofit tax advisor is advised to ensure compliance and evaluate options.

Clean Energy Credit Changes

1. Termination of Federal Clean Energy Credits

What changed: The OBBB terminates or phases out a wide range of clean energy credits introduced under the Inflation Reduction Act (IRA). Key provisions include:

• • • EV and clean vehicle credits (Sec. 30D and 25E) sunset after September 30, 2025
    • Residential energy credits (Sec. 25C and 25D) end December 31, 2025
    • Commercial energy efficiency deduction (Sec. 179D) ends for projects begun after June 30, 2026
    • Hydrogen, sustainable aviation fuel, and clean electricity credits phase out by 2027 or 2028

Why it matters: The rollback of federal support significantly alters the economics of green investments, especially for developers and individual homeowners. Many taxpayers will need to accelerate projects to benefit.

To plan: Taxpayers considering solar, EV, or energy-efficient improvements should complete purchases or construction before expiration deadlines. Businesses should model ROI scenarios without the credits and investigate whether state-level incentives may supplement the loss.

International Provisions

1. Reform and Rebranding of GILTI and FDII

What changed: GILTI is renamed “Net CFC Tested Income,” and FDII becomes “Foreign-Derived Deduction Eligible Income.” The deduction rates are reduced to 40% (GILTI) and 33.34% (FDII), raising effective U.S. tax rates on foreign earnings.

Why it matters: These changes increase the U.S. tax burden on multinational companies’ foreign earnings. The renaming aims to reflect a more neutral tax base, but the lower deductions translate into higher tax obligations.

To plan: Multinational firms should reevaluate their international structures, IP location strategies, and tax credit optimization. Forecasting and compliance systems must also be updated to accommodate the new definitions and rates.

2. Base Erosion and Anti-Abuse Tax (BEAT)

What changed: The BEAT rate is locked in at 10.5%, preventing a scheduled increase to 12.5%. However, the bill eliminates certain exceptions and broadens the base, making the tax applicable to a broader range of payments.

Why it matters: While the rate is lower than initially planned, the broadened application increases exposure, especially for U.S. subsidiaries of foreign multinationals and businesses making large cross-border payments.

To plan: Companies should analyze payment flows to foreign affiliates and third parties to identify BEAT exposure. Legal structures and transfer pricing arrangements may need revisited to mitigate risk.

3. Qualified Opportunity Zones: Permanence and Reforms

What changed: Qualified Opportunity Zones (QOZs) become a permanent fixture of the tax code, with new rules allowing rolling 10-year designations starting in 2027 and enhanced reporting requirements.

Why it matters: Permanency increases the utility of QOZs as long-term investment vehicles. However, enhanced compliance may limit speculative use or loosely governed structures.

To plan: Investors and fund managers should monitor the release of updated zone maps and qualification criteria. Real estate and private equity funds should align acquisition timelines and reporting processes with the new framework.

Strategic Considerations and Outlook

The One Big Beautiful Bill Act marks a significant shift in tax policy, blending long-term certainty with targeted relief. By locking in lower individual tax rates and extending business incentives, the law enables taxpayers to plan more confidently. Key changes, such as enhanced deductions, revised international rules, and phased credit terminations, make 2025 a critical year for proactive tax planning. Individuals and businesses should engage early with advisors to ensure timely action and long-term benefit.

The post The One Big Beautiful Bill Becomes Law: A Detailed Tax Breakdown for 2025 and Beyond appeared first on Walter Shuffain.

The IRS has recently released Form 7217, “Partner’s Report of Property Distributed by a Partnership,” as well as the accompanying instructions, reflecting a new reporting requirement for partners in investment partnerships, among others, for tax years beginning in 2024 or later.

This new reporting requirement applies to any partner in any partnership that receives from the partnership distributions of property other than cash and marketable securities treated as cash. In the context of investment partnerships, it applies to investors in private equity, venture capital, and hedge funds that make in-kind distributions of securities or other property. In addition, funds of funds that receive such distributions will also need to prepare this form. This requirement could also come into play in the context of fund restructurings, such as the formation of continuation funds.

Tax-Free Distributions from Investment Partnerships

Investment partnerships that meet certain requirements can distribute marketable securities to partners on a tax-free basis. The recipient partner can defer income recognition until the securities are later sold. Other partnerships are required to treat marketable securities as cash, resulting in more immediate tax consequences.

Each partner receiving a tax-free distribution of property, including marketable securities from an investment partnership, is required to file the new Form 7217. A separate Form 7217 is required to be filed for each date during the tax year in which a distribution was received and will be attached to the recipient’s tax return. The information reported must include the basis of the distributed property and any required basis adjustments to such property.

Insights

This new filing requirement is part of the IRS’s increased scrutiny of partnerships and basis-shifting transactions.  Fund managers should be prepared to receive additional requests from limited partners as they comply with Form 7217 reporting.

The post New Reporting Requirements for Distributions of Securities from Investment Partnerships appeared first on Walter Shuffain.

We’re continuing to monitor implementation and are committed to helping our clients understand the law’s implications for planning and operations.

What’s in the “One Big Beautiful Bill”?

The final version of the OBBB builds on earlier proposals from both chambers, with several notable revisions and additions. Key highlights include:

Individual Provisions

• Permanent Tax Rates: TCJA’s seven-bracket system becomes permanent, with inflation adjustments. The 10% and 12% brackets receive an extra year of indexing.

• Standard Deduction & Senior Bonus: The higher standard deduction is locked in. A $6,000 “senior bonus” deduction applies from 2025–2028, phasing out at $150,000/$300,000 MAGI.

• Child Tax Credit: Increases to $2,200 per child ($1,700 refundable), indexed for inflation. One spouse must have an SSN when filing jointly.

• Child & Dependent Care Credit: Expanded to 50% of eligible expenses with tiered AGI-based phaseouts.

• Estate & Gift Tax: Exemption rises to $15 million per individual in 2026, indexed.

• Tips & Overtime Deductions: Above-the-line deductions up to $25,000 (tips) and $12,500 (overtime) for 2025–2028. Phases out at $150,000/$300,000 MAGI.

• Car Loan Interest: Deduct up to $10,000 on interest for U.S.-assembled personal vehicles (2025–2028), with MAGI-based phaseouts.

• Charitable Contributions: Non-itemizers can deduct up to $1,000 ($2,000 joint). Itemizers must exceed a 0.5% AGI floor.

• SALT Deduction Cap: Temporarily raised to $40,000 from 2025–2029, with inflation adjustments and a phase-down above $500,000 MAGI. PTET workaround remains intact.

• QBI Deduction: Section 199A is made permanent at 20%, with expanded phase-in limits and a $400 minimum deduction.

• Pease Limitation: Permanently repealed. A new cap limits itemized deduction value to 2/37 of excess income.
• Trump Accounts: Tax-deferred IRAs for minors with a $1,000 federal contribution (2025–2028) and structured withdrawal rules.

Business & Nonprofit Provisions

• Bonus Depreciation: 100% expensing restored permanently for property placed in service after Jan. 19, 2025.

• Section 179: Expensing limit increased to $2.5M with a $4M phaseout.

• R&D Expensing: Full expensing for domestic R&D from 2025. Retroactive relief to 2022 available for small businesses.

• Interest Deductibility: Section 163(j) returns to an EBITDA-based limit permanently.

• Childcare Credit: Credit expanded to 40% of expenses ($500K cap; $600K for small businesses), inflation-adjusted.

• Qualified Small Business Stock: Gains now excluded 50% (3 years), 75% (4 years), 100% (5+ years). Asset limit raised from $50M to $75M.

• Nonprofit UBIT Changes: Transportation fringe benefits and royalty income may again trigger unrelated business taxable income (UBTI).

• University Endowment Tax: Institutions with large endowments may face higher tax liabilities.

Clean Energy Credits

Multiple energy credits are terminated or phased out, including EV, solar, hydrogen, and energy-efficient property credits. See the full list at the IRS Clean Energy Credits Page here.

International Tax Changes

The bill introduces several international tax provisions that could impact Canadians with U.S. business operations, investments, or assets:

• GILTI and FDII renamed to “net CFC tested income” (NCTI) and “foreign-derived deduction eligible income,” (FDDEI) with reduced deductions and a 14% effective U.S. tax rate — increasing tax costs for Canadian businesses with U.S. subsidiaries or cross-border structures.

• Foreign tax credit rules tightened, raising the risk of double taxation for Canadian individuals and corporations with global income subject to both U.S. and Canadian tax.

• BEAT expansion lowers the threshold to 2% and removes the scheduled rate hike — potentially impacting more Canadian-owned U.S. entities making cross-border payments for services, royalties, or interest.

• Revised sourcing rules for U.S.-produced goods may affect Canadian manufacturers operating in the U.S. and exporting abroad, with implications for inventory and transfer pricing.

• Estate tax exposure for Canadians remains high through 2025, particularly for those owning U.S. real estate, securities, or interests in U.S.-based businesses.
• Treaty benefit erosion may arise due to conflicts between the bill and the U.S.-Canada tax treaty — complicating tax relief claims and increasing reporting burdens for cross-border taxpayers.

Economic Outlook and Legislative Path

The bill is projected to reduce federal tax revenue by $5 trillion over 10 years on a conventional basis. Supporters cite potential boosts in GDP, job creation, and capital investment. Opponents warn of rising deficits and reduced health care and social program funding.

What This Means for You

The “One Big Beautiful Bill” has broad implications across income levels and sectors. Whether you’re planning for retirement, managing a growing business, or overseeing a nonprofit, understanding the implications of this legislation is critical.

These are just a few of the many potential changes we expect over the coming months. We’re closely monitoring developments and will continue to provide updates with clarity, context, and a focus on what matters most to you.

If you have questions about how this legislation could impact your strategy or next steps, we encourage you to connect with your advisor.

The post The “One Big Beautiful Bill” Signed Into Law—Major Tax and Policy Changes Now Official appeared first on Walter Shuffain.