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One Big Beautiful Bill Act + SECURE Act 2.0
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One Big Beautiful Bill Act + SECURE Act 2.0
The result is classic American tax legislation: a mixture of helpful improvements, confusing implementation, and a few “who asked for this?” provisions. But instead of walking through the 800+ pages of legislative sausage, we’re focusing on what matters most to WCG clients—business owners, real estate investors, W-2 employees including high earners, parents, and retirees.
Let’s break down the big pieces, how they interact, and where the real tax planning opportunities sit.
Keep in mind two things-
- Treasury Regulations usually follow tax legislation to offer more guidance and overall explanation. That has not happened yet with OBBBA.
- Tax forms following major tax legislation are routinely delayed by the IRS and more critically by the state (since some adopt, some decouple, and some just use new tax code as an excuse to delay working on tax form updates).
100% Bonus Depreciation Returns for 2025–2030
Let’s start with the heavy hitter. Bonus depreciation returns to a full 100% for assets placed in service between January 19, 2025 and December 31, 2030. This is extremely good news for landlords, short-term rental hosts, and business owners who rely on equipment purchases or cost segregation studies.
The timing benefit is enormous. A rental property with a $400,000 depreciable basis (the building) might have generated $50,000 of first-year depreciation under the stepped-down rules (the crummy 40% bonus rule). Under 100% bonus depreciation, the same asset can easily produce $80,000 to $100,000 or more in the first year. For high-income taxpayers who can take the tax deduction, that difference can swing your tax bill by tens of thousands of dollars.
A few cautions remain:
- No retroactive fix for 2023 or 2024 purchases. Bummer.
- Funny tax language about binding contracts for properties going under contract before Jan 19 but closing on Jan 19 or later.
- Section 179 still exists, but its quirks remain: inability to create a loss at the entity level, limitations on 15-year property for residential real estate, and personal-level income limits.
- States hate bonus depreciation and many decouple from it. Don’t be surprised if you see a massive federal deduction and a fairly normal state tax bill. Section 179 still has some shine in certain states.
Still, for 2025–2030, 100% bonus depreciation is back to being an incredible tax benefit, and not just for rental properties… but heavy vehicles, machinery and other property used in businesses. This is also a lever many pull using advanced tax strategies like structured equipment leasing.
SALT Limit Increases to $40,000 (But Not for Everyone)
The TCJA-era $10,000 cap on the state and local tax (SALT) deduction has been one of the most contentious parts of the tax code. Starting in 2025, OBBBA increases the cap to $40,000 (married filing jointly) or $20,000 (single). This finally gives W-2 taxpayers and small business owners in higher-tax (income, property or both like California) states some breathing room.
But every good thing has a catch. The tax code is like a teeter-totter, right?
The expanded SALT cap is subject to income limits. Taxpayers with MAGI above approximately $500,000 begin losing the expanded cap in chunks like the soup until it effectively collapses back toward the old $10,000 limit. Just how chunky? At $600,000 your SALT limit is back to $10,000. Yup, chunky!
The expanded cap also includes a built-in 1% annual inflation bump from 2026 to 2029 after which it all sunsets and returns to $10,000 in 2030 unless Congress acts again (and they likely will since this is so contentious). For middle- and upper-middle-income households with meaningful property taxes and state income taxes, this is a genuine improvement. For high earners, the planning hasn’t changed much—you’re still living in a $10,000 world (as we just highlighted).
And for business owners who have relied on the pass through entity tax elections, things get more complicated. Entity-level SALT deductions still matter, but the value changes now that personal SALT capacity is higher. We’ll recalibrate our PTET state-by-state models (our “should I stay or should I go now?” tables) as IRS forms and state conformity updates roll out.
In summary, 2025 thru 2029 tax return years are impacted (for tax returns prepared and due in 2026 thru 2030).
Sidebar: Rental Properties and PTET
Thinking of moving rentals into a spousal partnership to lock in QBID? The real ROI isn’t the “optics” (you can often secure QBID via the Safe Harbor election for free), but the ability to use PTET to bypass the SALT cap—though the added compliance costs only make sense at specific profit thresholds.
The “Break-Even” net profit needed to justify a $900 partnership tax return (Form 1065… our fee is $1,000 but we are assuming a small savings on the 1040 side):
- Low-Tax States (e.g., CO @ 4.4% for the 2025 tax year): You need roughly $80,000 in net rental profit to break even. The 20% QBID interaction dilutes the benefit, making it hard to justify for smaller portfolios.
- High-Tax States (e.g., CA/NY @ ~9.3%): The math works much faster here; you only need about $38,000 in net profit for the tax savings to outweigh the extra tax return preparation fees.
Section 199A (QBID) Gets Permanent Status
Another bit of stability comes from the Qualified Business Income Deduction (QBID). The 20% pass-through deduction is now effectively permanent, settling earlier fears of a 2025 sunset. Nothing dramatic changed in the rules, and the SSTB (specified service trade or business) classifications remain, but the phase-out improvements and extension give S corporations, partnerships, and many rental property owners long-term clarity that was missing before. Sure, rental property owners structured as a pass-through entity such as partnership don’t see this as much unless they have net rental profits (either a mature rental property with low mortgage interest or incredible revenue relative to purchase price and operating costs).
For most WCG business clients, this permanency removes a major tax-planning wildcard as we head into 2026.
Auto Loan Interest Becomes Deductible Again
Yes—again. We’ll get to that in a bit. But first, with EV credits fading after September 30, 2025 and many home-energy incentives phasing out soon after, Congress introduced something straight out of 1985: an auto loan interest deduction.
Before the Tax Reform Act of 1986, personal interest was deductible across the board, including car loan interest. TRA eliminated the tax deduction beginning in 1987, and personal auto loan interest has been nondeductible ever since. Ah, the good old days.
Taxpayers may deduct up to $10,000 per year of interest on loans used to purchase a new, Yes NEW, passenger vehicle that is assembled in the United States (not just North America as other tax credits or incentives have used in the past). It is an above-the-line deduction that reduces adjusted gross income (AGI) directly and does not require itemizing. In other words, and in true accounting geek speak, it is a deducting for AGI versus a deduction from AGI which is an important distinction when using the standard deduction versus itemized deductions (Schedule A).
The deduction phases out for single filers between roughly $100,000–$150,000 MAGI and for married couples between $200,000–$250,000 MAGI.
This is not a reason to buy a car you don’t need. But if you were already planning to finance a qualifying vehicle, the economics just improved. Also, for some people, needs and wants occupy the same space in their brains so not needing a car but wanting a car is a good enough reason (but taxes is not a reason).
Tips and Overtime: No Federal Income Tax up to a Combined Cap
This provision mostly benefits workers in hospitality, utilities, healthcare, manufacturing, and industries where overtime and tips are common. Beginning in 2025, employees may exclude:
- Up to $25,000 of reported tips, and
- Up to $12,500 of overtime premium pay,
- From federal income tax.
FICA taxes (Social Security and Medicare taxes) still apply, and Colorado, WCG’s home state, and many other states have chosen not to conform—so state tax still applies.
This is not automatic; the amounts must actually be reported, which raises administrative questions about new Form W-2 boxes, overtime coding, and tip reporting. But for the right households, this can provide thousands of dollars in tax savings per year.
This provision sunsets after 2028 (so the 2028 tax returns prepared in 2029 will be the last year).
Dependent Care FSA Finally Modernizes
For the first time in decades, the Dependent Care FSA (DCFSA) gets a meaningful update. The old $5,000 Dependent Care FSA limit has been in place since 1986—literally unchanged for nearly four decades. Aside from a one-year temporary increase in 2021 under the American Rescue Plan, the limit has never been indexed for inflation and has not kept pace with the cost of childcare.
Beginning with plan years starting in 2026, the DCFSA limit increases from $5,000 to $7,500 per household. Don’t get too excited, using inflation rates from 1986 to 2025, $5,000 back then is around $14,000 to $15,000 today. Yuck.
Between rising childcare costs and the limited value of the Child and Dependent Care Credit for higher-income taxpayers, this additional $2,500 of pre-tax wages is a welcome change albeit small relative to actual costs. As always, the FSA remains “use-it-or-lose-it,” so budgeting matters. More importantly, unused FSA funds not used for qualified child and dependent care becomes taxable income to you, but the cash is lost forever. Double whammy for sure.
Trump Accounts: A New Long-Term Savings Vehicle for Kids
Babies born between 2025 and 2028 qualify for a new “Trump Account,” which provides a $1,000 federal contribution once the account is created. Families may contribute up to $5,000 per year per child, and employers can contribute up to $2,500 tax-free to the employee.
Withdrawals are prohibited before age 18. After age 18, the account follows Traditional IRA rules, meaning early withdrawals generally trigger income tax and potentially a 10% penalty unless an exception applies (first-time home purchase, qualified education, etc.). This is not a free-for-all savings bucket—more like a long-term, tax-deferred investment vehicle for families who want to give their children a financial head start.
From recent noise and chatter, banks and financial advisors alongside their custodians are still trying to navigate how to set up these accounts.
Adoption Tax Credit Changes
Starting in 2025, the first $5,000 of the Adoption Tax Credit is now refundable. Previously, this credit could only reduce your tax bill to zero. Now, if your credit exceeds your tax liability, the IRS will send you up to $5,000 of the difference as a refund check. The total credit limit (roughly $17,000+) remains, but getting $5,000 of it as guaranteed cash is a major win for adoptive families.
Also, the $1,000 federal kickstart for “Trump Accounts” is strictly for children born between 2025 and 2028. If you adopt a newborn born in that window, yes—they qualify. If you adopt an older child born before 2025, you can still open a Trump Account for them (and contribute up to $5,000 per year), but they won’t receive the $1,000 government deposit. Bummer.
Charitable Giving Gets a Small Revival
OBBBA quietly revives an above-the-line charitable deduction for people who take the standard deduction. Starting in 2026 (so tax returns due in 2027), non-itemizers can deduct up to $1,000 of cash gifts ($2,000 for married couples). It must be cash to regular public charities—no donor-advised funds or private foundations—and it reduces AGI, which is always nice.
Itemizers, however, get a new wrinkle: also beginning in 2026, charitable deductions face a 0.5% of AGI floor, meaning smaller donations won’t generate any tax benefit. Higher-income taxpayers may also see reduced value from itemized deductions under OBBBA’s new top-bracket limitation. In other words, this makes 2025 a critical planning year—it’s the last chance for high earners to deduct donations without the new floor or the value cap.
Standard-deduction filers get a modest new incentive to give. Itemizers—especially high earners—need to be more intentional, because the rules now trim the benefit around the edges.
The New $6,000 Senior Deduction
However, the deduction is means-tested. It begins phasing out at $75,000 modified adjusted gross income (MAGI) for singles and $150,000 for married couples, disappearing completely once MAGI reaches roughly $175,000 and $250,000 respectively. This functions as a soft “Social Security shield,” reducing taxable income for middle-income retirees.
In summary, 2025 thru 2028 tax return years are impacted (for tax returns prepared and due in 2026 thru 2029).
Retirement Planning: SECURE 2.0’s Provisions Now Matter Even More
While OBBBA made headlines, SECURE Act 2.0 continues to shape retirement planning. Several provisions deserve attention.
RMD Ages Increase, and Roth Plan RMDs Disappear
Required Minimum Distributions now begin at age 73, increasing to 75 starting in 2033 (yeah, like forever from now) for those born in 1960 or later. This creates valuable low-tax years between retirement and RMD age—ideal for Roth conversions and capital-gains management.
Even better, beginning in 2024, Roth 401k and Roth 403b accounts are no longer subject to lifetime RMDs, aligning them with Roth IRAs. This is nice since you don’t have to rush out and roll your 401k Roth funds into an IRA just to dodge the hit (and for some people, they weren’t allowed to do what is called an “in-service rollover” if still working).
Roth-Only Catch-Up for High Earners
Starting January 1, 2026, catch-up contributions for employees aged 50+ must be Roth if their prior-year W-2 wages with that employer exceed $145,000, indexed for inflation. This rule is employer-specific: multiple W-2s from unrelated employers are not combined which is nice. However, this will be messy for payroll and human resource departments.
Plan providers received transition relief, and real-world implementation may take until 2027, but employees need to know this is coming. In other words, the IRS gave employers a grace period for the new Roth-only catch-up rules, recognizing that most payroll systems such as ADP, Gusto, Paychex, etc and plan providers won’t be ready by January 1, 2026. The rule still “starts” in 2026 after already being delayed once, but many companies won’t fully enforce it until 2027, so expect a messy transition year where some payroll providers and / or plans flip the switch early and others take longer to catch up. Yay. (not!)
Super Catch-Up Contributions at Ages 60–63
Beginning in 2025, employees ages 60–63 qualify for an enhanced catch-up—the greater of the regular catch-up amount or 150% of it. Based on today’s limits, that means an $11,250 catch-up window during those four years using your age on December 31.
Combined with delayed Social Security and the increased RMD age, this four-year window is becoming a prime Roth-conversion and tax-diversification opportunity.
Emergency Savings and $1,000 Penalty-Free Withdrawals
SECURE 2.0 allows one $1,000 emergency withdrawal per year from retirement accounts without the 10% early-withdrawal penalty. The withdrawal is taxable, but it can be repaid over three years.
Employers may also add a small Roth-style emergency savings account (up to $2,500) attached to a 401k for rank-and-file employees. While not a substitute for a real emergency fund, this helps reduce the need for hardship withdrawals from typical retirement accounts and plans like a 401k.
Not a $1,000 really spends like it used to or blow anyone’s hair back (reference the dependent care FSA nonsense above). Might be better just using a credit card and some interest expense for the trouble.
Business Owners: Key OBBBA + SECURE 2.0 Opportunities and Obligations
The combination of OBBBA and SECURE 2.0 creates one of the most favorable planning environments for business owners in years. Several provisions enhance deductions, expand retirement plan incentives, and reshape long-term tax strategy.
A. 100% Bonus Depreciation and Enhanced Deductions (2025–2030)
Business owners once again have access to full first-year depreciation on qualified assets placed in service between 2025 and 2030. This greatly strengthens deductions for:
- Equipment purchases
- Tenant improvements
- Cost segregation studies and accelerated real estate depreciation (leveraging the grouping election with your self-rental as well)
With 100% bonus depreciation restored, tax planning around capital expenditures and year-end purchases becomes far more meaningful. This also improves timing options for those considering an eventual business sale.
B. Expanded SALT Deductions and PTET Recalibration
The new $40,000 SALT deduction cap (through 2029) provides additional itemized deduction room for many business owners. However, because the expanded cap phases out at higher incomes, planning becomes more nuanced:
- The value of PTET elections must now be weighed against a larger federal SALT deduction.
- Some owners may benefit more from entity-level SALT payments; others may prefer the individual deduction.
This new landscape requires year-by-year modeling to optimize tax outcomes.
C. Section 199A (QBID) Permanence Stabilizes Pass-Through Planning
Making the 20% Qualified Business Income Deduction permanent removes the uncertainty that previously clouded S corporation and partnership planning. Business owners now have long-term clarity around reasonable compensation, entity structure, and income thresholds.
D. Retirement Plan Credits and Employer Incentives Become Much Stronger
Small employers launching a new 401(k), SIMPLE IRA, or SEP now qualify for substantial incentives under SECURE 2.0:
- A tax credit covering up to 100% of administrative start-up costs, and
- A credit covering a portion of employer contributions in the plan’s early years.
This eliminates one of the biggest barriers to starting a plan and encourages more employers to offer competitive benefits.
E. New Retirement Plan Design Tools for Recruiting and Retention
Retirement plans now offer more flexibility and employee appeal than ever:
- Student loan matching, treating loan payments as deferrals for match purposes
- Roth employer contributions, allowing tax-free growth on match dollars
- An optional emergency savings sidecar (Roth-style) for non-highly-compensated employees
These features allow employers to tailor benefits to workforce needs and improve retention.
F. Auto-Enrollment Requirements for New Plans
New 401(k) and 403(b) plans must automatically:
- Enroll employees at 3–10% of pay, and
- Increase contributions by 1% per year until reaching 10–15%.
Existing plans are grandfathered, but redesigns or provider transitions may trigger compliance with the new rules.
G. Long-Term Part-Time Employees Must Be Included
SECURE 2.0 requires employers to allow long-term part-time employees into the retirement plan after a defined number of years with at least 500 hours. This raises plan eligibility counts and modestly increases matching obligations for employers with large part-time workforces.
H. Car Loan Interest Deduction Creates New Personal Planning Options
OBBBA introduces an above-the-line deduction of up to $10,000 per year for interest on qualifying new, U.S.-assembled vehicles. While not a business deduction, this benefits owners replacing business-adjacent personal vehicles—assuming income limits and vehicle qualifications are met. This is not a big deal since the business use of a personal vehicle is likely a better tax incentive / position.
I. R&D Expensing is Back (And It’s Glorious)
For the last three years, business owners who innovate, write code, or manufacture products have been living in a tax nightmare. Due to a legislative glitch (thanks, Tax Cuts and Jobs Act, not), companies were forced to capitalize and amortize domestic R&D expenses over five years instead of deducting them immediately. It created “phantom income” and massive, artificial tax bills.
OBBBA fixes this mess starting January 1, 2025. Yeah, retro fix.
If you spend money on domestic research and experimentation (R&E), you can once again deduct 100% of it in the year you spend it. No more 5-year spread. No more “tax on income I didn’t actually keep.” (Note: If you do your research overseas, you’re still stuck with the 15-year amortization. Congress wants you hiring American engineers, obviously.)
The cleanup for 2022–2024 is a little tricky. The law offers two different paths to fix the damage from the last three years, depending on your size:
- Small Businesses (Under ~$31M Gross Receipts): You get a time machine. You can file amended tax returns for 2022, 2023, and 2024 to retroactively claim the full deduction. For many of you, this means a refund check is in your future (but it also means amending both business and individual tax returns).
- Everyone Else: You can’t amend the past or put 1.21 gigawatts into a flux capacitor, but you get a massive catch-up deduction. You can take all those “leftover” unamortized costs from the last three years and deduct them all at once in 2025, or spread them over 2025 and 2026. Tax planning is a must based on your 2025 profits and projected 2026 profits, and compare individual marginal tax rates.
This is arguably the single biggest cash-flow win in the entire bill for software developers, manufacturers, and engineers. Yay!
I. Exit and Succession Planning Opportunities Expand
With 100% bonus depreciation restored, QBID stabilized, SALT capacity expanded, and RMD ages pushed to 73 and later 75, business owners have more flexibility when planning:
- Roth conversions during low-income transition years
- Timing of equipment purchases and depreciation recognition
- Multi-year exit or acquisition planning
The next decade creates a unique window for optimizing income, deductions, and long-term retirement outcomes.
Rental Property Owners: Key OBBBA Takeaways
OBBBA fundamentally reshapes rental property planning—especially for short-term rental owners and investors using cost segregation studies. Here are the most important changes.
A. 100% Bonus Depreciation Supercharges Rental Tax Benefits
The return of 100% bonus depreciation for 2025–2030 dramatically improves:
- First-year write-offs on new rental properties
- Tax efficiency of renovations and improvements
- The effectiveness of cost segregation studies
For STR operators who materially participate, these deductions can offset W-2 or business income under the STR loophole—reviving one of the most powerful tax planning strategies in the rental world.
B. Cost Segregation Regains Its Full Power
With full bonus depreciation reinstated:
- Cost segregation studies generate much larger first-year losses,
- Depreciation accelerates across 5-, 7-, and 15-year components,
- The economics of purchasing rental real estate improve significantly (assuming you can deduct the rental loss with STR loophole or real estate professional status)
Investors considering acquisitions may want to time closings after January 19, 2025 to capture full bonus eligibility.
C. Section 179 Still Exists—but Its Limitations Remain
While bonus depreciation becomes the preferred tool again, Section 179 continues to carry familiar constraints:
- It cannot create an entity-level loss for partnership-owned rentals.
- It applies more narrowly to certain improvements.
- It has personal income limitations that bonus depreciation avoids.
For most rental owners, Section 179 remains a secondary option especially when considering state problems with bonus depreciation.
D. State Decoupling from Bonus Depreciation Remains a Major Issue
As alluded to just a minute ago, many states do not conform to federal bonus depreciation rules. Real estate investors may see:
- A large federal loss in year one, and
- A much smaller (or nonexistent) state loss.
Planning must include state-level projections, particularly for multi-property investors or those with significant W-2 income.
F. Energy Credits Phase Out After 2025
Home solar, energy-efficiency upgrades, and related incentives disappear under OBBBA. Investors planning major upgrades should evaluate whether 2025 installations are necessary to secure remaining credits.
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