Major Tax Legislation: What Business Owners Need to Know
Sunbridge Advisory Client Newsletter | August 2025
Tax Update
It has now been over a month since the new tax bill has been passed. I expect most of you have seen headlines but I wanted to share updates based on how we envision it will impact most of our clients.
In the table below, I broke the changes down to the main areas that have seen changes:
Information reporting - New 1099 threshold etc.
Business deductions
Individual tax provisions
Retirement and other savings tax
This newsletter focuses on the technical provisions that directly impact our clients, without commentary on the political process or broader economic policy debates.
We also have some special notes for our clients in the hospitality and real estate sectors. Happy Labor Day!
Summary of Major Tax Changes
Category | Previous Rule | New Rule |
|---|---|---|
Information Reporting | ||
1099-NEC/MISC | $600 threshold | $2,000 threshold (inflation-indexed from 2027) |
1099-K | $600 (not fully implemented) | $20,000 AND 200 transactions |
Backup Withholding | $600 | $2,000 (inflation-adjusted from 2027) |
Business Deductions | ||
Bonus Depreciation | 80% | 100% (permanent) |
QBI Deduction | 20% | 23% (permanent) |
Section 179 Expensing | $1M cap | $2M cap |
R&D Expenses | 5-year amortization | Immediate expensing |
Individual Tax Provisions | ||
SALT Deduction Cap | $10,000 | $40,000 (2025-2029) |
Estate Tax Exemption | $13.99M | $15M ($30M couples, permanent) |
PMI Deduction | Expired | Restored (permanent) |
Vehicle Expense Rate | $0.56/mile | $0.70/mile |
Retirement & Savings | ||
Senior Bonus Deduction | Not available | $6,000/$12,000 additional deduction |
529 Plans | College tuition/fees only | Expanded to career/training expenses |
Minor IRA | Not available | New "Trump Account" available |
Information Reporting and Compliance Changes
1099-NEC and 1099-MISC Reporting:
Threshold increased from $600 to $2,000 for payments made after December 31, 2025
Applies to freelancers, independent contractors, gig workers, and non-wage service providers
Backup withholding threshold also increased to $2,000
Both thresholds will be indexed for inflation beginning in 2027
Note: All income remains taxable regardless of whether a 1099 is issued
1099-K Third-Party Payment Networks:
The $600 threshold requirement has been repealed
Threshold reverts to $20,000 AND 200 transactions per year (retroactive to 2024)
Significantly reduces reporting burden for small sellers using PayPal, Venmo, and similar platforms
These changes will eliminate thousands of 1099 forms for most businesses but the most important changes do not come into effect until 2026.
Retirement Savings and Personal Tax Provisions
"Senior Bonus" Deduction:
New additional deduction for taxpayers age 65+: $6,000 (single and head of household) / $12,000 (married filing jointly)
Stacks on top of standard deduction and existing age-65+ additional standard deduction
Phases out: $75,000-$175,000 AGI (single) / $150,000-$250,000 AGI (joint)
Effective starting 2025
New Minor IRA ("Trump Account"):
Allows parents and minors to make contributions to encourage early retirement savings
Treasury will release specific contribution limits and withdrawal rules
529 Plan Expansion:
Qualified expenses expanded beyond traditional college tuition and fees
Now includes training programs, certificate programs, and career development expenses
Provides greater flexibility for educational planning
ABLE Account Changes:
Higher contribution limits for individuals with disabilities
Employer Student Loan Payment Exclusion Removed: These payments are now taxable to the employee
Restaurant and Food Service Operations
Payroll and Employment Tax Changes:
Tips and overtime compensation excluded from federal income taxation
Pass-through entity deduction increased from 20% to 23%
Simplified tip reporting requirements implemented
Equipment and Asset Purchases:
Bonus depreciation restored to 100% (from 80%)
Bonus depreciation allows businesses to immediately deduct a large percentage of the cost of qualifying property in the first year it’s placed in service, rather than spreading those deductions over several years
Section 179 expensing limit increased from $1M to $2M
Immediate expensing applies to kitchen equipment, POS systems, and restaurant fixtures
Technical Note: These changes affect current-year tax planning and should be incorporated into Q3 and Q4 equipment purchase decisions.
Real Estate Professionals and Property Transactions
State and Local Tax (SALT) Deduction:
Deduction cap increased from $10,000 to $40,000 for tax years 2025-2029
Affects clients in high-tax jurisdictions (CA, NY, NJ, CT, etc.)
Real Estate Professional Benefits:
Qualified Business Income (QBI) deduction increased to 23%
Vehicle expense rate increased to $0.70 per mile (from $0.67)
Home office deduction: $5 per square foot up to 300 square feet
Please note that medical and moving purposes expenses are at $0.21/mile and miles for charitable purposes are at $0.14/mile. Don’t forget to track them this year!
Client Transaction Impacts:
Private Mortgage Insurance (PMI) deduction made permanent
Mortgage interest deduction limits ($750K) made permanent
Estate tax exemption increased to $15M per individual ($30M married couples)
Next steps to take advantage of this new bill
Start Tracking ALL Your Miles Now: Use apps like MileIQ, Everlance, or TripLog to automatically track business ($0.70/mile), medical ($0.21/mile), moving ($0.21/mile), and charitable ($0.14/mile) mileage. Even non-business miles add up – a weekly 20-mile medical trip saves you $218 annually.
Time Equipment Purchases Strategically: 100% bonus depreciation and $2M Section 179 limits only reduce taxable income. If your business will show a loss this year, delay major purchases until you have profits to offset – otherwise you're creating unusable deductions.
Bunch State Tax Payments (2025-2029 Only): In high-tax states, pay multiple quarters of estimated state taxes in the same calendar year to maximize the temporary $40,000 SALT cap. Consider paying Q1 2026 estimated taxes in December 2025.
Review QBI Structure Before Year-End: The increased 23% pass-through deduction requires W-2 wages and asset basis tests. Consider converting contractors to employees or purchasing depreciable assets to meet the limitations if your income exceeds $191,950 (single)/$383,900 (joint).
Sunbridge Advisory
Your dedicated finance and tax team
DISCLAIMER OF TAX ADVICE: Any discussion contained herein cannot be considered to be tax advice. Actual tax advice would require a detailed and careful analysis of the facts and applicable law, which we expect would be time consuming and costly. We have not made and have not been asked to make that type of analysis in connection with any advice given in this e-mail/newsletter. As a result, we are required to advise you that any Federal tax advice rendered in this e-mail is not intended or written to be used and cannot be used for the purpose of avoiding penalties that may be imposed by the IRS. In the event you would like us to perform the type of analysis that is necessary for us to provide an opinion, that does not require the above disclaimer, as always, please feel free to contact us