Senate Bill 132; Signed 6/27/25.

Pass through entity payments (PTE) under AB150 available to partnerships, LLCs and S Corporations were due to expire 12/31/2025. They have been extended through 12/31/2030.

[Note that in the original wording of the One Big Beautiful Bill signed 7/4/25, use of the PTE was to be limited. However, the final version of the OBBB removed that limiting language].

See the article in this section dated 7/28/21 entitled “SALT Limitation Partial Work Around.” Please call if you have additional questions.

Ref: OBBBA signed by President Trump 7/4/2025

States: California does NOT conform to any of these changes. Some states such as Utah and New Mexico have “rolling conformity” and will likely adopt many of these changes. Non-California clients should check their individual state adoption.

Business selected highlights (not all sections of the OBBBA):

1. QBI 20% deduction: Enjoyed by most small businesses since 2017 has been made permanent.
2. Bonus Depreciation: Restores to 100% for property placed in service on or after 1/19/25. This is now permanent.
3. Research & Development: Allows businesses to IMMEDIATELY EXPENSE R&D again. You no longer have to capitalize and amortize these costs. ALSO businesses that have been capitalizing the costs from 2022 through 2024 can elect to accelerate the remaining balance in the capitalized accounts over a one or two year period. (We’ll await regulations on how to accomplish this).
4. 1099-MISC and 1099-NEC: Starting for payments made in 2026, reporting threshold moves from $600 to $2,000.
5. Form 1099-K: Threshold for reporting by third-party services (e.g. Paypal) moves to $20,000 on more than 200 separate transactions.
6. Termination of clean energy credits: Terminates for vehicles purchased after September 30, 2025.

Ref: OBBA signed by President Trump 7/4/25

STATE TAX: California does NOT conform to any of these changes. Some states such as Utah and New Mexico have “rolling conformity” and will likely adopt many of these changes. Non-California clients should check their individual state adoption.

Individual selected highlights:

1. SALT limitation: From 2025 through 2029: New limit of $40,000 reduced for modified adjusted gross income over $500,000.
2. Standard deduction: Starting in 2025: $15,750 single; $23,625 head-of-household and $31,500 married joint.
3. Estate/gift tax exemption: $15 million starting in 2026.
4. 529 plans: Starting 2026: Annual limit on distributions of $20,000 and can be used for elementary or secondary schools in addition to post-secondary.
5. Charitable for those who don’t itemize: Starting in 2026, up to $1,000 ($2k for married) for cash gifts.
6. Tip income deduction: Above the line deduction up to $25k for tips in industry which customarily and regularly receives tips INCLUDING INDEPENDENT CONTRACTORS. Phases out when modified AGI exceeds $150k ($300k married joint). For years 2025 – 2028. UPDATE: The IRS has promised to publish a list of “occupations where tips are traditionally received” by October 2, 2025.
7. Overtime deduction: Up to $12,500 ($25k married) for qualified overtime compensation. Phase out when modified AGI is over $150k ($300k married).
8. Senior deduction: Additional deduction of $6,000 per individual age 65 or over from 2025 – 2028. Phase out when modified AGI is over $75k ($150k joint)
9. US assembled car interest: Deduction up to $10k of interest on us assembled vehicle for years 2025 – 2028. Phased out when modified AGI exceeds $100k ($200k on joint return).
10. Mortgage insurance premiums: Starting in 2026… deductible if itemizing. Phased out for modified AGI over $100k ($50k married filing separate).
11. Termination of Clean Energy Credits: For vehicles purchased after September 30, 2025.