CLOTAX
Tax & Accounting Service
FAQ & News
1. One, Big, Beautiful Bill Act Top Highlights
​
What is One, Big, Beautiful Bill?
The bill was formally introduced to Congress on May 20, 2025, with an amended version being approved by a 51-50 vote on July 1, 2025. The bill was then presented to President Trump, who signed it into law on July 4, 2025. Note: The legislation advanced through Congress using the budget reconciliation process, which allowed passage with a simple majority and was marked by intense partisan debate and close votes. Except as otherwise noted, the tax provisions described below are effective for taxable years beginning after December 31, 2025.
​
New deductions for itemizers and non-itemizers. Recent legislation provided for four new deductions that take effect beginning in 2025. If you are eligible, you can claim these deductions if you take the standard deduction or if you itemize on Schedule A (Form 1040). For more information on these deductions, see the instructions for Schedule 1-A (Form 1040).
The new deductions are as follows:
-
No tax on tips. You may be eligible to take a deduction for qualified tips paid to you in 2025. You can’t deduct more than $25,000 of those tips. Your deduction will be limited if your modified adjusted gross income is more than $150,000 ($300,000 if married filing jointly). To be eligible, you and/or your spouse who received the tips must have a valid social security number (SSN). If you are married, you must file a joint return.
​​
-
No tax on overtime. If you earned qualified overtime, you may be eligible to deduct up to $12,500 ($25,000 if married filing jointly) of your qualified overtime compensation. Your deduction will be limited if your modified adjusted gross income is more than $150,000 ($300,000 if married filing jointly). To be eligible, you and/or your spouse who received the overtime must have a valid SSN. If you are married, you must file a joint return.
​​​
-
No tax on car loan interest. If you paid or accrued qualified passenger vehicle loan interest on a vehicle you purchased in 2025 for personal use, you may be eligible to deduct up to $10,000 of that interest. Your deduction will be limited if your modified adjusted gross income is more than $100,000 ($200,000 if married filing jointly).
​​
-
Enhanced deduction for seniors. If you were born before January 2, 1961, you may be eligible for an enhanced senior deduction. Your deduction will be limited if your modified adjusted gross income is more than $75,000 ($150,000 if married filing jointly). To be eligible, you and/or your spouse must have a valid SSN. If you are married, you must file a joint return. The maximum amount of the deduction is $6,000 ($12,000 if both spouses are eligible).
2. ITIN - Renew Expiring Tax ID Numbers and Non-Resident Alien
Renew Expiring Tax ID Numbers:
If your ITIN wasn’t included on at least one U.S. federal tax return for the last 3 consecutive tax years, it expires on December 31 of the third consecutive tax year, and must be renewed before being used again on a U.S. federal tax return. If your ITIN was assigned before 2013 and was never renewed, you'll need to submit a renewal application with your U.S. federal tax return. See How To Apply, later, for more information. ITIN not needed for estimated tax payments or extensions. If you receive income such as self-employment income without having taxes withheld, you may have to make estimated tax payments even if you don't have an ITIN when you earn the income. If you're making an estimated tax payment using Form 1040-ES or Form 1040-ES (NR) or filing an application for an extension of time to file using Form 4868, mail payments to the IRS with an estimated tax payment voucher or Form 4868 and complete all required information on the voucher except enter.
"ITIN TO BE REQUESTED" wherever your social security number or ITIN is requested. Don’t file Form W-7 with the forms or voucher. An ITIN will be issued only after you file a tax return and meet all other requirements. See Form 1040-ES or Form 1040-ES (NR) and its instructions for more information on completing the voucher and when estimated tax payments are required.
​
We are Certified Acceptance Agents (CAA) and we can help to apply or renew your ITIN for you with the right documents to the IRS. You don’t need to travel to the IRS office by yourself for your spouse/dependents or submit an original passport to the IRS.
​
Nonresident Alien:
(see our checklist last page to determine if you are a tax residence or not)
If you are a nonresident alien and earn wages subject to U.S. income tax withholding, your 2025 U.S. income tax return Form 1040NR is due by April 15, 2025. If you don't earn wages subject to U.S. income tax withholding, your return is due by June 15, 2026. If you are a U.S. citizen or resident, are living outside the United States and Puerto Rico on the due date of your return, and your main place of business or post of duty is outside the United States and Puerto Rico—OR if you are in the military or naval service on duty outside the United States and Puerto Rico—you are allowed an automatic 2-month extension without filing form 4868 (until June 15, 2026). However, if you pay the tax due after the regular due date (April 15, 2026), interest will be charged from that date until the date the tax is paid in full.
​
3. Changes for SALT and Residential Mortgage​​
Qualified Residence Interest Limited
163(h)(3) A taxpayer may claim an itemized deduction for mortgage interest paid with respect to a principal residence and one other residence of the taxpayer. Under the TCJA, a taxpayer could treat no more than $750,000 as acquisition indebtedness ($375,000 in the case of married taxpayers filing separately) for acquiring, con structing, or substantially improving a residence. However, for taxable years be ginning after December 31, 2025, a taxpayer could treat up to $1,000,000 ($500,000 in the case of married taxpayers filing separately) of indebtedness as acquisition indebtedness, regardless of when the indebtedness was incurred. BBB Change The deduction for qualified residence interest, also known as the home mortgage interest deduction, was set to increase from the first $750,000 in home mortgage acquisition debt to $1 million after December 31, 2025. However, the BBB permanently lowers the deduction for qualified residence interest to the first $750,000 in home mortgage acquisition debt. Additionally, the provision treats certain mortgage insurance premiums on acquisition indebtedness as qualified residence interest.
​
Home Equity Indebtedness
§163(h)(3)(C) The TCJA suspended the deduction for interest on home equity indebtedness. The suspension ended for taxable years beginning after December 31, 2025. BBB Change The BBB makes permanent the repeal of deductions for interest on home equity indebtedness.
Deduction For State & Local Taxes (SALT)
§164 Prior to TCJA, an individual could claim an itemized deduction for State and local government income and property taxes paid (§164). In lieu of the itemized de duction for State and local income taxes, individuals could claim an itemized de duction for State and local government sales taxes. Property taxes may be allowed as a deduction in computing adjusted gross in come if incurred in connection with property used in a trade or business; otherwise, they are an itemized deduction. In the case of State and local income taxes, the deduction was an itemized deduction, notwithstanding that the tax could be imposed on profits from a trade or business. In determining a taxpayer’s alternative minimum taxable income, no itemized deduction for property, income, or sales tax was allowed. Under the TCJA, unless paid or accrued in carrying on a trade or business, or an activity described in §212 (relating to expenses for the production of income), individuals are not allowed an itemized deduction for State and local: (1) income (2) sales taxes, or (3) property taxes.
Exception: A taxpayer may claim an itemized deduction of up to $10,000 ($5,000 for a married taxpayer filing a separate return) for the aggregate of (i) State and local property taxes not paid or accrued in carrying on a trade or business, or an activity described in §212, and (ii) State and local income, war profits, and excess profits taxes (or sales taxes in lieu of income, etc., taxes) paid or accrued in the taxable year. However, foreign real property taxes may not be deducted under this exception. In the case of an individual, the itemized deduction for state and local taxes is capped at $10,000 ($5,000 for a married taxpayer filing a separate return) (the “SALT cap”). The SALT cap was set to expire for taxable years beginning after December 31, 2025.
BBB Change
The BBB increases the SALT cap to $40,000 ($20,000 for a married taxpayer filing a separate return) for taxable years beginning after December 31, 2024. In the case of a taxpayer with modified adjusted gross income (MAGI) over $500,000 ($250,000 for a married taxpayer filing a separate return), the cap would phase down by 30 percent of the excess of MAGI over the threshold until it reaches $10,000 ($5,000 for a married taxpayer filing a separate re turn). Both the $40,000 cap and the $500,000 income threshold would in crease by 1% per year from 2026 through 2029. Thus, in 2026, the cap will be $40,400, and then will increase by 1% annually, through 2029. Starting in 2030, it will revert to the current $10,000. The BBB also includes several changes to prevent the avoidance of the SALT cap, specifically targeting the popular pass-through entity tax (PTET) worka rounds that many states have implemented since the TCJA. Generally, this provision clarifies and modifies the list of taxes subject to the SALT cap ("specified taxes”); provides that certain payments that substitute for specified taxes are also subject to the SALT cap; requires partnerships and S corporations to treat specified taxes as separately stated items; imposes an addition to tax in certain cases where a partnership makes a state or local tax payment, one or more partners receives a state or local tax benefit, and the allocation of the tax payment differs from the allocation of the tax benefit; prevents the capitalization of specified taxes; and grants the Secretary of the Treasury regulatory authority to prevent avoidance of the SALT cap.
4. Child & Dependent Tax Credit
Child & Dependent Care Work Expenses Tax Credit
§21 A taxpayer with one or more qualifying individuals, such as a child or other dependent, may claim a credit against income tax liability for employment-related expenses for child and dependent care. This credit allows a taxpayer a credit of up to 35% of eligible child care expenses for children under 13 and disabled dependents. This can sum up to $3,000 for one child and $6,000 for two or more children.
​
Note: Employment-related expenses refer to expenses for household services and expenses for the care of a qualifying individual. Thus, in 2025 and 2024, the maximum dependent care tax credit is up to $1,050 if there is one qualifying individual, and $2,100 of eligible expenses) if there are two or more qualifying individuals.
​
However, this 35% credit rate will be reduced by one percentage point for each $2,000 of adjusted gross income above $15,000, though not surpassing below 20%. Therefore, the credit percentage is reduced to 20% for taxpayers with AGI over $43,000 in 2025 and 2024.
How Does BBB Impact This?
The BBB increases the maximum credit rate to 50 percent, which is currently at 35. It will be reduced by one percentage point for each $2,000 by which the taxpayer’s AGI exceeds $15,000, but not surpassing below 35%. For AGIs between $43,001 and $75,000 (or $86,001 and $150,000 in the case of a joint return), the credit rate is 35 percent. This credit rate is further brought down to 20 percent for AGIs between $75,001 and $105,000 (or $150,001 and $210,000 in the case of a joint return). This provision is effective for taxable years after December 31, 2025.
Employer-provided Child Care Credit
§45F The employer-provided child care credit under §45F provides businesses a non-refundable tax credit of up to $150,000 per year on up to 25 percent of qualified child care expenses provided to employees. Therefore, an employer must spend at least $600,000 on child care-related expenses to receive the full credit. The credit has remained unchanged since its creation in 1986.
How Does BBB Impact This?
The BBB permanently increases the employer-provided child care credit, creating a separate credit amount for qualified small businesses and indexing the maximum credit amounts for inflation. Specifically, this provision increases the maximum credit from $150,000 to $500,000 and also increases the percentage of qualified child care expenses covered from 25 percent to 40 percent. Therefore, a business must spend at least $1.25 million on child care-related expenses to receive the full credit. Additionally, §45F is further strengthened for small businesses by increasing the maximum credit to $600,000 and the percentage of qualified child care expenses covered to 50 percent. Therefore, a small business must spend at least $1.2 million on child care-related expenses to receive the full credit. An eligible small business refers to one that meets the gross receipts test of less than or equal to $25 million (inflation adjusted) based on the 5-year period preceding the taxable year. Additionally, this provision allows for small businesses to pool their resources to provide child care to their employees and for businesses to use a third-party intermediary to facilitate child care services on their behalf.
Child Tax Credit
§24 An individual may claim a tax credit for each qualifying child under the age of 17. Prior to the TCJA, the amount of the credit per child was $1,000 and the aggregate amount of child credits that might be claimed was phased out by $50 for each $1,000 of AGI over $75,000 for single filers and $110,000 for joint filers (§24). Neither the $1,000 credit amount nor the AGI thresholds were indexed for inflation. The taxpayer had to submit a valid taxpayer identification number (TIN) for each child for whom the credit is claimed. To the extent the child credit exceeds the taxpayer’s tax liability, the taxpayer was eligible for a refundable credit equal to 15% of earned income in excess of $3,000. The taxpayer was not required to have a Social Security number (SSN) to claim the refundable portion of the credit. Under the TCJA, the child credit was increased to $2,000 per qualifying child and the maximum refundable amount of the credit was increased from $1,100 to $1,400. The credit is further modified to temporarily provide for a $500 nonrefundable credit for qualifying dependents other than qualifying children, such as an elderly parent. The phase-out for the combined child credit, the non-child dependent credit, and the credit for other taxpayers was increased from $110,000 (for joint filers) under current law to $400,000 (for joint filers), and from $75,000 (for single filers) to $200,000 (for single filers). This increase in the phase-out eliminated the marriage penalty in the credit. Taxpayers were required to provide a Social Security number (SSN) to claim the refundable portion of the credit. The TCJA changes apply to taxable years beginning after 2017 and before 2026. Thus, the child tax credit was scheduled to return to pre-2017 levels after December 31, 2025. This meant that the credit amount would have dropped from $2,000 to $1,000 per child, the child's Social Security number (SSN) requirement would have been eliminated, and fewer families would have been qualified for the credit as the income phase-out levels returned to much lower thresholds. Additionally, the $500 nonrefundable credit for non-child dependents would have expired after December 31, 2025.
​
How Does BBB Impact This?
The BBB makes the doubled child tax credit permanent, with credit of $2,000 per child and refundable child tax credit of $1,400, adjusted for inflation ($1,700 in 2025). It also makes permanent the increased income phase-out threshold amounts of $200,000 ($400,000 in the case of a joint re turn), as well as the $500 nonrefundable credit for each dependent of the taxpayer other than a qualifying child. Additionally, this provision permanently increases the nonrefundable child tax credit to $2,200 per child beginning in tax year 2025 and also permanently indexes the nonrefundable credit amount for inflation beginning after tax year 2025 (rounded down to the nearest $100). Further, the aforementioned requirement that the child’s SSN be provided for purposes of claiming the credit is now made permanent and expanded upon to also require the taxpayer’s SSN and, for joint filers, at least one of the spouses’ SSNs, in order to claim the credit. The SSNs provided must be considered work-eligible in order to claim the credit.
5. Business Related Changes
Business Income of Individuals (20% Deduction)
§199A Businesses organized as sole proprietorships, partnerships, limited liability companies, and S corporations are generally treated for Federal income tax purposes as “pass-through” entities subject to tax at the individual owner or share holder level rather than the entity level. Under the TCJA, sole proprietors, S corporation shareholders, and partners in a partnership became entitled to a deduction equal to 20% of their allocable share of qualified business income (§199A).
However, there were several limitations, including:
-
The deduction could not generally exceed 50% of the taxpayer’s share of the W-2 wages paid by the business or, in the alternative, 25% of the taxpayer’s share of the W-2 wages paid by the business, plus 2.5% of the unadjusted basis of property used in the production of in come
-
Certain personal service businesses were not eligible for the deduction unless their taxable income is less than $197,300 in 2025 (if single; $394,600) if married (the “SSTB limitation”).
This deduction for qualified business income (QBI) was set to expire for taxable years beginning after December 31, 2025.
How Does BBB Impact This?
The BBB makes the deduction for qualified business income permanent. This provision also expands the deduction limit phase-in range by increasing the $50,000 (non-joint returns) and $100,000 (joint returns) amounts to $75,000 and $150,000, respectively. The provision eases the impact of the limitations for both SSTBs and those pass-through entities subject to the wage and investment limitation. Additionally, this provision introduces a new, inflation-adjusted, minimum deduction of $400 for taxpayers who have at least $1,000 of QBI from one or more active trades or businesses in which the taxpayer materially participates. This ensures small business owners with a certain QBI level are entitled to an enhanced baseline deduction.
Qualified Production Property Depreciation
§168 Taxpayers generally must capitalize the cost of property used in a trade or business held to produce income and recover such cost over time through periodic deductions for depreciation or amortization. In general, nonresidential real property is depreciated over a 39-year recovery period. BBB Change The BBB allows taxpayers an additional first-year depreciation deduction equal to 100 percent of the adjusted basis of qualified production property.
Qualified production property is nonresidential real property that meets the following requirements
-
The property must be used by the taxpayer as an integral part of a qualified production activity
-
The property must be placed in service in the U.S. or a U.S. territory
-
The original use of the property must begin with the taxpayer
-
The construction, reconstruction, or erection of which by the taxpayer begins after January 19, 2025, and before January 1, 2029
-
The property must be placed in service after the date of enactment and before January 1, 2031, except in cases of Acts of God, in which case the Secretary can extend the date by up to two years “Qualified production property” does not include the portion of any nonresi dential real property used for offices, administrative services, lodging, park ing, sales activities, software development or engineering activities, or other functions unrelated to manufacturing, production, or refining of tangible per sonal property.
“Qualified production property” does not include any property to which the alternative depreciation system applies, or any food or beverage prepared in the same building as a retail establishment in which such property is sold. A “qualified production activity” is the manufacturing, production, or refining of a qualified product. Such activities of the taxpayer must result in a substantial transformation of the property comprising the product.
This provision also provides a special acquisition rule that allows a taxpayer to claim the qualified production property deduction for nonresidential real property
-
Which is acquired by the taxpayer after January 19, 2025, and before January 1, 2029
-
Which was not used in a qualified production activity (without regard to the substantial transformation rule) at any time during the period beginning on January 1, 2021, and ending on May 12, 2025
-
Which was not used by the taxpayer or a related party at any time prior to such acquisition
-
Which is used by the taxpayer as an integral part of a qualified production activity
-
Which is placed in service in the United States or any possession of the United States
-
Is placed in service after the date of enactment and before January 1, 2031, except in cases of Acts of God in which case the Secretary can extend the date by up to two years. Recapture rules apply in certain cases where, during the 10-year period after qualified production property is placed in service, the use of the property changes. This provision is effective for property placed in service after the date of enactment. Form 1099-K threshold under the One, Big, Beautiful Bill; dollar limit reverts to $20,000
​
How Does BBB Impact This?
The BBB retroactively reinstated the reporting threshold in effect prior to the passage of the American Rescue Plan Act of 2021 (ARPA) so that third party settlement organizations are not required to file Forms 1099-K unless the gross amount of reportable payment transactions to a payee exceeds $20,000 and the number of transactions exceeds 200.
Form 1099-K is an IRS information return used to report certain payments to improve voluntary tax compliance. The requirement to file a Form 1099-K can be triggered when payments are received for goods or services through a payment settlement entity.
​
Threshold For Requiring Information Reporting (1099s)
The reporting threshold for payments by a business for services performed by an independent contractor or subcontractor and for certain other payments is generally $600. In some cases, the reporting threshold is based on payments made during the taxable year.
How Does BBB Impact This?
The BBB generally increases the threshold to $2,000 and adjusts it for inflation for taxable years beginning after December 31, 2025. The new threshold is based on payments during the calendar year. This provision applies to payments made after December 31, 2025.
6. Education Incentive​
Employer-provided Educational Assistance
§127 An individual cannot deduct education unless such expenses are incurred to maintain or improve the skills of their existing employment (Reg. §1.162-5(a)). Educational expenses paid directly by the employer are normally not taxable to the employee if business related. However, §127 liberalized these provisions, making employer-provided educational assistance nontaxable to the employee if the plan is written and nondiscriminatory. Under §127, the first $5,250 of employer-provided educational assistance is excluded from an employee’s gross income. Employer-provided education assistance includes the payment, by an employer, of an employee’s educational expenses (including, but not limited to, tuition, fees, and similar payments, books, supplies, and equipment). This also includes an employee’s qualified student loan payments in the case of payments made after December 31, 2025.
How Does BBB Impact This?
The BBB makes permanent the exclusion from gross income for qualified education loan payments under IRC §127(c)(1)(B). This section also indexes for inflation the maximum exclusion from gross income for educational assistance programs under §127(a)(2) for taxable years beginning after 2026.
Qualified Tuition Program
§529 A qualified tuition program is a program established and maintained by a State or agency or instrumentality thereof, under which a person may make cash contributions to an account that is established for the purpose of satisfying the qualified higher education expenses of the designated beneficiary of the account, provided it satisfies certain specified requirements (§529). Contributions are not tax deductible but are treated as a completed gift eligible for the gift tax annual exclusion. Amounts in the account accumulate on a tax-free basis and qualified distributions are exempt from tax. The TCJA modified §529 plans to allow such plans to distribute not more than $10,000 in expenses for tuition incurred during the taxable year in connection with the enrollment or attendance of the designated beneficiary at a public, private, or religious elementary or secondary school. This limitation applies on a per-student basis, rather than a per-account basis.
​
Any excess distributions received by the individual are treated as a distribution subject to tax under the general rules of §529. The TCJA also modified the definition of higher education expenses to include certain expenses incurred in connection with a homeschool. Those expenses are: (1) curriculum and curricular materials; (2) books or other instructional materials; (3) online educational materials; (4) tuition for tutoring or educational classes outside of the home (but only if the tutor or instructor is not related to the student); (5) dual enrollment in an institution of higher education; and (6) educational therapies for students with disabilities.
​
How Does BBB Impact This?
The TCJA modifications were set to expire after December 31, 2025. However, the BBB makes permanent the TCJA modifications. In addition, the BBB allows tax-exempt qualified higher education expense distributions from §529 savings plans to include “qualified postsecondary credentialing expenses” in connection with “recognized postsecondary credential programs” and “recognized postsecondary credentials.” The provision applies to distributions made after the date of enactment.
Educational Credits SSN Requirement
§25A A student, taxpayer, or spouse must have a valid taxpayer identification number (TIN) issued or applied for on or before the due date of the return (including extensions) in order to claim the American Opportunity Tax Credit (AOTC) and/or Lifetime Learning Credit (LLC). A TIN is a Social Security number (SSN), an individual taxpayer identification number (ITIN), or an adoption taxpayer identification number (ATIN). The AOTC and/or LLC cannot be claimed if the TIN is issued after the due date of the return (including extensions).
​
How Does BBB Impact This?
The BBB adds requirements for the student and taxpayer (if filing on behalf of the student) to include their SSN on their tax return in order to receive either the AOTC or LLC under §25A. This provision applies to taxable years beginning after December 31, 2025.
Discharge Of Student Loan Indebtedness Expansion
§108 Any debt that is forgiven constitutes income. Under an exception to this general rule, gross income does not include any amount from the forgiveness (in whole or in part) of certain student loans, provided that the forgiveness is contingent on the student’s working for a certain period of time in certain professions for any of a broad class of employers (§108). The TCJA modified the exclusion of student loan discharges from gross income by including within the exclusion certain discharges on account of death or disability.
​
Loans eligible for the exclusion under the provision were loans made by:
-
The United States (or an instrumentality or agency thereof)
-
State (or any political subdivision thereof)
-
Certain tax-exempt public benefit corporations that control a State, county, or municipal hospital and whose employees have been deemed to be public employees under State law
-
An educational organization that originally received the funds from which the loan was made from the United States, a State, or a tax-exempt public benefit corporation
-
Private education loans (for this purpose, private education loan is defined in §140(7) of the Consumer Protection Act).
Under the TCJA, the discharge of a loan as described above was excluded from gross income if the discharge was pursuant to the death or total and permanent disability of the student. Additionally, the provision modified the gross income exclusion for amounts received under the National Health Service Corps loan repayment program.
​
How Does BBB Impact This?
The treatment of discharge income from student debt due to death or disability was set to expire after December 31, 2025. However, the BBB permanently extends the exclusion from a taxpayer’s income of any income resulting from the discharge of student debt on account of death or total disability of the student. The BBB also adds a requirement that the taxpayer provide a work-eligible Social Security number in order to claim such an exclusion. This provision applies to discharges after December 31, 2025.
7. New MAGA Accounts
MAGA Accounts for Children
The BBB creates Money Accounts for Growth and Advancement (“MAGA Accounts”), a new kind of savings account designed to incentivize education, entrepreneurship, and homeownership while promoting financial security. The accounts are administered by a bank or similar financial institution and the overall program is overseen by the Department of the Treasury.
Note: This provision reflects the text included in the House-passed H.R. 1 to establish Trump accounts, a new kind of savings account designed to build financial security for the next generation. The accounts are administered by a bank or similar financial institution and the overall program is overseen by the Department of the Treasury. Starting January 1, 2026, parents of any child under the age of eight years old may open a MAGA account for their child. These accounts allowable for children born before January 1, 2024, are eligible to receive contributions from parents, relatives, and other taxable entities, as well as non-profit and government entities facilitated by the Treasury Department. To be eligible to open an account, the child must be a U.S. citizen and at least one parent must provide their SSN. The SSN provided must be considered work-eligible in order to open an account. MAGA account funds must be invested in a diversified fund that tracks an established index of U.S. equities.
Contributions Taxable entities may contribute up to $5,000 annually of after-tax dollars to a MAGA account. The $5,000 contribution limit is indexed for inflation. Contributions provided to MAGA accounts from tax exempt entities, such as private foundations, are not subject to the $5,000 annual limit. These contributions from unrelated third parties must be provided to all children within a qualified group (i.e., all children in a state, specific school district, or educational institution, etc.). No additional contributions of any kind shall be made to MAGA accounts after the beneficiary has attained age. Distributions MAGA account holders may not take distributions until age 18. Account holders may access up to 50 percent of funds for higher education, training programs, small business loans, or first-time home purchases. At age 25, accountholders may withdraw any amount up to the full balance of the account for these limited purposes. At age 30, account holders have access to the full balance of the account for any purpose. Distributions taken for qualified purposes are taxed as long-term capital gains, while distributions for any other purposes are taxed as ordinary income.
Pilot Program
The BBB also creates a newborn pilot program for MAGA accounts. For U.S. citizens born between January 1, 2024, and December 31, 2028, the federal government will contribute $1,000 per child into every eligible account. For newborns, MAGA accounts may be opened by parents or guardians. To be eligible to open an account and receive the $1,000 contributions, the child must be a U.S. citizen and both parents must provide their Social Security numbers (SSNs). The SSNs provided must be considered work-eligible in or der to claim the credit. If the Secretary of Treasury determines that an eligible individual does not have an account opened for them by the first tax return where the child is claimed as a qualifying child, the Secretary shall establish an account on the child’s behalf, taking into account, to the extent possible, the parents preferred custodian and investment fund. Parents will be provided the option to opt out of the account.
8. Energy Credit
Clean Vehicle Credit Termination
§30D Taxpayers may claim a tax credit of up to $7,500 for clean new vehicles placed in service in a given taxable year. The maximum credit is comprised of two equal parts: the first $3,750 credit value is determined based on the critical mineral sourcing of the vehicle’s battery and the second $3,750 credit value is determined based on the sourcing of the battery components. The credit is limited to incomes of $150,000 for single filers, $225,000 for head of household filers, and $300,000 for joint filers. The credit is available to vans with a Manufacturer’s Suggested Retail Price (MSRP) of $80,000, SUVs with an MSRP of $80,000, pickup trucks with an MSRP of $80,000, and other vehicles with an MSRP of $55,000. The credit is set to expire on December 31, 2032.
How Does BBB Impact This?
The BBB terminates the credit for vehicles acquired more than 180 days after enactment.
​
Previously-owned Clean Vehicle Credit Termination
§25E Taxpayers may claim a tax credit for previously owned clean vehicles. The credit is worth the lesser of $4,000 or 30 percent of the sale price and is limited to 30 incomes of $75,000 for single filers, $112,500 for head of household filers, and $150,000 for joint filers. The credit is set to expire on December 31, 2032.
How Does BBB Impact This?
The BBB terminates the credit for vehicles acquired more than 90 days after enactment.
​
Commercial Clean Vehicles Credit Termination
§45W Taxpayers may claim a tax credit for commercial clean vehicles placed in service in a taxable year. For vehicles weighing less than 14,000 pounds, the credit value is $7,500 and for other vehicles, the credit value is $40,000. Unlike new clean vehicles, commercial clean vehicles are not subject to MSRP, income, assembly, or sourcing limitations. The credit is set to expire on December 31, 2032.
​
How Does BBB Impact This?
The BBB terminates the credit for vehicles acquired more than 180 days after enactment. This provision also subjects commercial vehicles with a gross vehicle weight rating of less than 14,000 pounds to limitations like those applicable to new clean vehicles, effective as of the date the legislation was introduced.
Alternative Fuel Refueling Property Credit Termination
§30C Taxpayers may claim a tax credit for advanced refueling property placed in ser vice in a given taxable year. The credit value is 30 percent of the cost of the property, not exceeding $100,000. The credit expires December 31, 2032.
How Does BBB Impact This?
The BBB terminates the credit with respect to property placed in service af ter the date that is 12 months after the date of enactment.
Energy-Efficient Home Improvement Credit Termination
§25C Taxpayers may claim a tax credit for household energy-efficient improvements. The value of the credit is 30 percent of qualified energy-efficient improvements, residential energy property, or home energy audits not exceeding $1,200 annually ($2,000 if for heat pumps and biomass stoves). The credit expires December 31, 2032.
How Does BBB Impact This?
The BBB terminates the credit with respect to property placed in service after the date that is 180 days after the date of enactment.
Residential Clean Energy Credit Termination
§25D Taxpayers may claim a credit for residential expenditures for solar electric property, solar water heating property, fuel cell property, small wind energy property, geothermal heat pump property, and battery storage property placed in service by December 31, 2024. The value of the credit is 30 percent of the expenditures through December 31, 2032, 26 percent of expenditures in taxable year 2033, and 22 percent of expenditures in taxable year 2034.
How Does BBB Impact This?
The BBB terminates the credit with respect to expenditures made after the date that is 180 days after enactment.
​
Energy-Efficient Commercial Buildings Deduction Termination
§179D Taxpayers may deduct certain energy-efficient commercial building property expenditures, specifically those installed as part of interior lighting systems, HVAC and hot water systems, or the building envelope. The base deduction is calculated on a per square foot basis, with base values ranging from $0.50 per square foot to $1.00 per square foot depending on how much energy/power costs are certified to be reduced (with these values $2.50 to $5 per square foot where prevailing wage and apprenticeship requirements are met.
How Does BBB Impact This?
The BBB terminates the deduction with respect to property constructed after the date that is 12 months after enactment.
​
Energy Efficient Home Credit Termination - §45L Contractors may claim a credit for homes built that meet certain Energy Star standards. Homes that are considered Zero Energy Ready are eligible for a $5,000 credit and homes certified at a lower energy efficiency level are eligible for a credit of either $2,500 or $1,000. The credit expires December 31, 2032.
How Does BBB Impact This?
The BBB terminates the credit for homes acquired after the date, which is 12 months after the date of enactment.
Cost Recovery of Clean Energy Facilities
§168(e)(3)(B) Taxpayers generally must capitalize the cost of property used in a trade or business held to produce income and recover such cost over time through periodic deductions for depreciation or amortization. In lieu of the recovery period and method that would otherwise apply, a special five-year recovery period applies to certain energy investment credit property, including zero-emission electric generation facilities, qualified biogas property, microgrid controllers, certain electrochromic glass, and energy storage technology.
How Does BBB Impact This?
The BBB terminates the special recovery period for these types of property for property placed in service after the date of enactment.
9. Charitable Deduction
Charitable Deduction for Nonitemizers
Under §170, only taxpayers who itemize have generally been able to deduct their charitable contributions. However, in 1982, a temporary "above-the-line" deduction for charitable contributions was introduced for taxpayers who did not itemize their deductions. That provision expired at the end of 1986. Later, the CARES Act also temporarily allowed nonitemizers to claim an "above-the-line" deduction for charitable contributions from 2020 through 2021. Thus, only taxpayers who elect to itemize can receive a deduction for charitable contributions.
​
How Does BBB Impact This?
The BBB creates a permanent deduction for taxpayers who do not elect to itemize. Specifically, for taxable years after December 31, 2025, non itemizers can claim a deduction of up to $1,000 for single filers ($2,000 for married filing jointly) for certain charitable contributions.
​
Charitable Contributions for Itemizers
Under §170, a taxpayer may claim an itemized deduction for charitable contributions. To be eligible, a contribution must be made by the last day of the tax year for which a return is filed. Thus, for a calendar year taxpayer, a contribution must be made on or before December 31 to be included on a tax return for that tax year, which must be filed by April 15 of the following year. A charitable contribution deduction is limited to a certain percentage of the individual’s adjusted gross income (AGI). The AGI limitation varies depending on the type of property contributed and the type of exempt organization receiving the property. In general, cash contributed to public charities, private operating foundations, and certain non-operating private foundations may be deducted up to 50% of the donor’s AGI. Contributions that do not qualify for the 50% limitation (e.g., contributions to private foundations) may be deducted up to the lesser of:
-
30% of AGI
-
OR the excess of the 50% of AGI limitation for the tax year over the amount of charitable contributions subject to the 30% limitation
Capital gain ( i.e ., appreciated) property contributed to public charities, private operating foundations, and certain non-operating private foundations may be deducted up to 30% of AGI. Capital gain property contributed to non-operating private foundations may be deducted up to the lesser of:
-
20% of AGI
-
OR the excess of the 30% of AGI limitation over the amount of property subject to the 30% limitation for contributions of capital gain property
​​
If an individual contributes more than the applicable AGI limits, the excess contribution generally may be carried over and deducted in the following five tax years, or 15 years in the case of qualified conservation contributions. In general, a charitable deduction is disallowed to the extent a taxpayer receives a benefit in return. A special rule, however, permits taxpayers to deduct as a charitable contribution 80% of the value of a contribution made to an educational institution to secure the right to purchase tickets for seating at an athletic event in a stadium at that institution.
​
When computing the deduction for a charitable contribution in the form of use of a passenger vehicle, a taxpayer is generally allowed to claim a standard rate of 14 cents per mile.
In certain cases, the charitable contribution deduction is subject to special rules. In general, a deduction is allowed for a contribution of $250 or more only if the taxpayer provides a contemporaneous written acknowledgment by the organization to which the contribution is made, meeting certain informational requirements. However, this requirement is waived if the donee organization files a return including the information otherwise required.
​
Under the TCJA, several changes were made to the rules applicable to charitable contributions:
-
AGI Percentage for Cash Contributions Increased
-
The 50% limitation for cash contributions to public charities and certain private foundations is increased to 60%. The 5-year carryover period is retained to the extent that the contribution amount exceeds 60% of the donor’s AGI.
-
-
College Athletic Event Seating Rights Repealed
-
The special rule that provides a charitable deduction of 80% of the amount paid for the right to purchase tickets for athletic events is repealed.
-
-
Substantiation Exception for Donee Reported Contributions Repealed
-
The exception that relieves a taxpayer from providing a contemporaneous written acknowledgment by the donee organization for contributions of $250 or more when the donee organization files a return with the required information is repealed.
-
How Does BBB Impact This?
The BBB imposes a 0.5-percent floor on charitable contributions for taxpayers who elect to itemize for taxable years after December 31, 2025. Specifically, the amount of an individual’s charitable contributions for a taxable year is reduced by 0.5 percent of the taxpayer’s contribution base for the taxable year. Additionally, the provision would permanently extend the increased contribution limitation for cash gifts made to qualified charities.