🧾 Prepared for: General Public & Business Community
📅 Effective Period: Various provisions starting post-2025
📚 Source: Internal Revenue Code (IRC), Amended by 2025 Tax Act

🚀 Expansion of Qualified Small Business Stock (QSBS) Gain Exclusion

📌 What’s New:

• Gain exclusions now depend on how long QSBS is held:
  • 📅 3 years → 50% gain excluded
  • 📅 4 years → 75% gain excluded
  • 📅 5 years → 100% gain excluded

📈 New Limits:

• $15 million aggregate gain exclusion for post-July 4, 2025 stock acquisitions.
• Indexed for inflation with rounding to nearest $10,000.

🏢 Gross Assets Threshold: Increased from $50M to $75M.

🔖 Reference: Code Sec. 1202 (Act Sec. 70431)

🏭 Advanced Manufacturing Investment Credit Boost

📌 What’s New:

• 💳 Credit increased from 25% to 35% for property placed in service after Dec 31, 2025.
• Applies to semiconductor and chip manufacturing investments.

🔖 Reference: Code Sec. 48D (Act Sec. 70308)

💳 1099-K Reporting Threshold Reverts

📌 What’s New:

• De minimis threshold reverts to $20,000 & 200 transactions.
• Avoids $600 threshold introduced by ARPA.

🔖 Reference: Code Sec. 6050W (Act Sec. 70432)

🌾 Capital Gains Installment for Farmland

📌 What’s New:

• Eligible farmland sellers can now pay capital gains over 4 years.
• Strict eligibility based on 10-year farm use and post-sale land use restriction.

🔖 Reference: Code Sec. 1062 (Act Sec. 70437)

🤝 Partnership Recharacterization Authority Expanded

📌 What’s New:

• IRS no longer needs regulations to recharacterize partner-property or service transactions.
• Applies to transfers or services after July 4, 2025.

🔖 Reference: Code Sec. 702(a)(2) (Act Sec. 70602)

👔 Executive Compensation Deduction Limit Expansion

📌 What’s New:

• $1M compensation cap now applies to broader controlled & affiliated service groups.
• Not limited to top officers only.

🔖 Reference: Code Sec. 162(m) (Act Sec. 70603)

🍽️ Business Meal Deduction Exceptions

📌 What’s New:

• Food on fishing vessels and certain northern fish-processing sites remains deductible.
• Clarifies that bona fide sales are excluded from meal limits.

🔖 Reference: Code Sec. 274 (Act Sec. 70305)

⚡ Advanced Energy Project Credit Limit Capped

📌 What’s New:

• The $10B cap is now final — revoked project allocations won’t be added back.

🔖 Reference: Code Sec. 48C (Act Sec. 70515)

📉 Excess Business Loss Limit Made Permanent

📌 What’s New:

• Applies permanently for non-corporate taxpayers.
• Adjusted inflation benchmark shifted to 2024 base year.

🔖 Reference: Code Sec. 461(l), (j) (Act Sec. 70601)

🛡️ Enforcement of COVID-Era Employee Retention Credit (ERC)

📌 What’s New:

• $1,000 penalty for COVID-ERTC promoters failing due diligence.
• Limit on claims filed after Feb 1, 2024.
• 6-year assessment window for fraudulent or excessive claims.

🔖 Reference: Code Sec. 3134, 6676 (Act Sec. 70605)

💵 No Tax on Tips (Temporary Deduction)

📜 Background:

Historically, cash tips were fully taxable income. Employees had to report them, employers had to withhold income/payroll taxes, and only employers received limited tax relief via the FICA tip credit (Code Sec. 45B).

🆕 What’s New (2025 Tax Act):

• 📌 New Deduction for Qualified Tips — Up to $25,000/year.
• 💡 Available to occupations where tipping was customary before Jan 1, 2025.
• 🧾 Codified in Code Sec. 225 (Act Sec. 70201).

✅ Eligibility & Conditions:

• Tips must be voluntary and properly reported.
• Not available for tips in specified service trades under Code Sec. 199A(d)(2).
• Joint filing and valid SSN required.
• Non-itemizers can claim it — works with the standard deduction.

📉 Phaseout:

• Starts at $150,000 MAGI ($300,000 for joint filers).
• Reduced by $100 per $1,000 over the threshold.

🧮 Reporting & Compliance:

• Enhanced W-2/1099/1099-K reporting (Code Secs. 6041, 6041A, 6050W).
• IRS will list approved tip-earning occupations within 90 days of enactment.

🛑 Expires After:

Tax years beginning after Dec 31, 2028.

🕒 No Tax on Overtime (Temporary Deduction)

📜 Background:

Overtime compensation has always been taxable under IRC. No prior deduction existed. Reported on W-2s or 1099s.

🆕 What’s New:

• 📌 Deduction up to $12,500/year ($25,000 for joint filers) for “qualified overtime compensation.”
• Codified as Code Sec. 226 (Act Sec. 70202).

✅ Eligibility:

• Must be FLSA-qualified overtime.
• Joint filing and valid SSN required.
• Cannot double-deduct with tip deduction.
• Non-itemizers eligible.

📉 Phaseout:

• MAGI-based phaseout begins at $150,000 ($300,000 joint).

🧮 Reporting & IRS Guidance:

• IRS to revise withholding rules by 2026.
• Overtime must be separately reported on W-2s or 1099s.

🛑 Expires After:

Tax years beginning after Dec 31, 2028.

👶 Enhanced Paid Family & Medical Leave Credit

🆕 What’s New:

• Made permanent (Act Sec. 70304).
• Employers can claim credit on:
  • 🔹 Wages paid (12.5%–25% credit).
  • 🔹 Insurance premiums paid (even if no leave is taken).

✅ Key Provisions:

• Employees must work ≥20 hrs/week.
• Can apply for employees with just 6 months tenure (down from 1 year).
• State/local paid leave now counts toward eligibility.
• Aggregation rule updated to include affiliated employers (Code Sec. 414).

📅 Effective Date:

Tax years beginning after Dec 31, 2025.

🧒 Employer-Provided Child Care Credit Boost

📈🆕 Enhancements (Act Sec. 70401):

• Credit rate increased:
  • 40% for regular businesses.
  • 50% for small businesses.
• New caps:
  • 💰 $500,000 (regular)
  • 💰 $600,000 (small businesses)
• Inflation adjustment begins 2027.

🏢 Eligible businesses:

• Defined using a 5-year gross receipts test.
• Expanded eligibility to:
  • 👥 Third-party arrangements
  • 🏫 Jointly operated child care centers

📅 Effective Date:

Applies to costs after Dec 31, 2025.

🎓 Student Loan Repayment by Employers – Exclusion Made Permanent

📌 Under Code Sec. 127:

• Employers can exclude up to $5,250/year in student loan payments from employees’ income.

🆕 What’s New (Act Sec. 70412):

• Exclusion made permanent.
• Inflation-adjusted starting in 2027.

📅 Effective:

For payments after Dec 31, 2025.

🧒 Dependent Care Assistance – Exclusion Limit Raised

🆕 Change (Act Sec. 70404):

• Limit increased to $7,500/year.
• $3,750 if married filing separately.

📅 Effective:

Tax years beginning after Dec 31, 2025.

🚑 Premium Tax Credit (PTC) – Repayment Cap R🚴 Bicycle Commuting Reimbursement – Permanently Eliminated

❌ Old Rule:

• $20/month exclusion (suspended 2018–2025) was set to return in 2026.

🆕 What’s New:

• Permanently eliminated (Act Sec. 70112).
• Other transportation benefit inflation base year changed to 1997.

📅 Effective:

Tax years after Dec 31, 2025.

⚡ Energy Property Accelerated Cost Recovery Repealed

🛠️ Old Rule:

• Energy property classified as 5-year MACRS (e.g., solar, geothermal).

🆕 What’s New:

• 5-year MACRS eliminated (Act Sec. 70509).
• Affects projects starting after Dec 31, 2024.

⚠️ Observation:

Reduces tax benefit for clean energy investments.

🌬️ Wind Energy & Advanced Manufacturing Credit (Code Sec. 45X)

🔄 Key Changes (Act Sec. 70514):

• Wind credit ends after 2027.
• Credit phased out for critical minerals after 2030.
• Subcomponent rule narrowed – production must be domestic.
• Adds metallurgical coal at 2.5% credit (only through 2029).
• Adds stricter foreign influence & national security restrictions.

🏠 Energy Efficient Home Improvement Credit – Sunset Moved Up

📉 What’s Ending:

• Code Sec. 25C credit (30% of energy-efficient upgrades) now ends after Dec 31, 2025 (Act Sec. 70505).

🏡 Includes:

• Windows, doors, HVAC, insulation, audits — capped at $1,200/year.

🌞 Residential Clean Energy Credit – Ends December 31, 2025

What it Was: Under Code Sec. 25D(a), individuals could claim a 30% credit on qualified expenditures like:

• ✅ Solar electric systems
• ✅ Solar water heaters
• ✅ Fuel cell systems
• ✅ Small wind turbines
• ✅ Geothermal heat pumps
• ✅ Battery storage technology

New Rule: The credit terminates for any expenditures made after December 31, 2025. (Act Sec. 70506(a))

🏢 Commercial Building Energy Efficiency Deduction – Sunsets for Projects Starting After June 30, 2026

What it Was: A deduction under Code Sec. 179D(a) for costs related to energy-efficient commercial buildings.

New Rule: No deduction allowed for construction beginning after June 30, 2026. (Act Sec. 70507)

🚗 Previously-Owned Clean Vehicle Credit – Ends September 30, 2025

What it Was: Code Sec. 25E allowed up to $4,000 credit or 30% of vehicle price (whichever is lower), for qualified buyers.

Limitations Included:

• Vehicle must be 2+ years old
• Price cap: $25,000
• Must be purchased from a dealer
• Buyer’s income subject to caps

New Rule: Credit no longer available for vehicles acquired after September 30, 2025. (Act Sec. 70501)

🚙 Clean Vehicle Credit (New EVs) – Ends September 30, 2025

What it Was: Code Sec. 30D provided credits for new clean vehicles, with stringent battery and critical mineral sourcing requirements.

Critical Sourcing Criteria:

• Minerals must come from U.S. or free trade partner countries
• Components assembled in North America

New Rule:

• Credit terminates for vehicles acquired after September 30, 2025
• Mineral and battery criteria removed for vehicles placed in service after 2026

🚚 Tip: Credit eligibility is based on delivery date, not purchase date. (Act Sec. 70502)

🛻 Qualified Commercial Clean Vehicle Credit – Ends September 30, 2025

What it Was:

• Under Code Sec. 45W
• Credit: lesser of 15%-30% of cost or incremental cost
• Max: $7,500 (<14,000 lbs) or $40,000 (>=14,000 lbs)

New Rule:Ends for vehicles acquired after September 30, 2025. (Act Sec. 70503)

⚡ Alternative Fuel Vehicle Refueling Property Credit – Ends June 30, 2026

What it Was: Code Sec. 30C offered a credit for installing EV chargers in low-income/rural areas.

New Rule: Credit no longer available for property placed in service after June 30, 2026. (Act Sec. 70504)

🏠 New Energy-Efficient Home Credit – Ends June 30, 2026

What it Was: Code Sec. 45L gave credits to builders:

• $2,500 for ENERGY STAR certified homes
• $5,000 for Zero Energy Ready Homes
• $500-$5,000 per multifamily unit depending on standards & wage compliance

New Rule: No credit for homes acquired after June 30, 2026. (Act Sec. 70508)

Key Takeaways from the 2025 Tax Act (Public Law 119-21), structured for clear communication with the general public and business community:

📌 For Individuals & Families

💵 Tax Rates & Standard Deduction

• Permanent tax cuts: Retains 7 tax brackets (10%–37%) post-2025.
• Marriage penalty relief preserved (except at 37% bracket).
• Standard deduction increased:
  • $31,500 (joint)
  • $23,625 (head of household)
  • $15,750 (single/MFS)

👶 Child & Dependent-Related Benefits

📈 Increased to $15 million (from $10M) starting 2026

• Child Tax Credit: $2,200/child, inflation-adjusted from 2026; SSNs required.
• Other Dependents Credit: $500 made permanent.
• Child & Dependent Care Credit:
  • Up to 50% of expenses ($3,000 for 1 child, $6,000 for 2+).
• Senior Deduction: $6,000 (age 65+), replaces personal exemptions.
• Dependent Care Assistance Plans: Limit raised to $7,500.

🚗 New Car & Commute-Related Provisions

• New Car Loan Interest Deduction: Up to $10,000/year (2025–2028).
• Tip Income Deduction: Up to $25,000/year.
• Overtime Deduction: Up to $12,500 (single) / $25,000 (joint) per year.
• ❌ Bicycle commuting reimbursement permanently eliminated.

🏠 Homeowner & Real Estate Changes

• SALT deduction cap: Increased to $40,000 in 2025, with gradual indexation.
• Mortgage interest, energy improvements: Some energy-related credits expire in 2025–2026.
• ❌ Moving expense deduction permanently disallowed (except military/intel).

⚰️ Estate & Gift Tax

• Basic exclusion increased to $15 million from 2026, indexed annually.

💳 Education & Scholarship Incentives

• Scholarship Donation Credit: $1,700 (in select states).
• Expanded 529 Plan Uses: Covers more K–12 and credentialing expenses.
• Student Loan Repayment by Employers: $5,250/year exclusion made permanent.
• Education credits require: Student SSNs & school EINs.

🧾 For All Taxpayers

✅ Itemized Deductions & Credits

• ❌ Pease limitation repealed (less penalty on high itemized deductions).
• ❌ Miscellaneous deductions permanently eliminated.
• ✨ Charity deduction for non-itemizers: $1,000 (single) / $2,000 (joint).
• 💝 Charitable deduction changes: New 0.5% AGI floor; 60% AGI cash gift limit made permanent.

🚑 Healthcare Tax Credit (PTC) Overhaul

• Must repay all excess PTC no income-based cap.
• Stricter eligibility for certain immigrants and income-only special enrollment plans.

🏭 For Businesses

🛠️ Business Investment & Depreciation

• 100% Bonus Depreciation made permanent.
• Sec. 179 expensing limit raised to $2.5M; phaseout at $4M.
• New real property expensing for U.S. production activities (2025–2029).
• ❗ Clean energy property no longer gets 5-year MACRS; ends after 2024.

💼 Small Business & Startups

• QSBS (Qualified Small Business Stock):
  • 50%–100% exclusion depending on holding period (3–5 years).
  • Cap increased to $15M; asset test raised to $75M.
    
• QBI Deduction Enhanced:
  • Still 20%, now with $400 minimum.
  • Higher phase-in limits.

🧒 Family-Friendly Business Credits

• Child Care Credit Boost:
  • 40% (regular), 50% (small biz) rates.
  • Caps: $500K / $600K; inflation-adjusted from 2027.
• Paid Family & Medical Leave Credit made permanent.
• Adoption Credit: $5,000 refundable portion introduced.

📈 Income Reporting & Compliance

• 1099-MISC/NEC threshold increased to $2,000 (from $600).
• 1099-K threshold reverts to $20,000 & 200 transactions.
• Expanded IRS authority to reclassify partnership transactions.
• ERC enforcement includes a $1,000 penalty for bad promoters and a 6-year review window.

🌱 Energy & Environmental Changes

✅ Extended or Enhanced

• Opportunity Zones continue.
• Nuclear & domestic energy incentives added.
• Advanced Manufacturing Credit increased to 35% for semiconductors.
  

❌ Phased Out or Terminated

• Clean Vehicle Credits (new, used, commercial): End Sep 30, 2025.
• Residential Clean Energy Credit (solar, geothermal, batteries): Ends Dec 31, 2025.
• Energy-Efficient Home Credit & Deduction: End June 30, 2026.
• Alternative Fuel Charging Credit: Ends June 30, 2026.
• Wind & advanced manufacturing credits: Phase out through 2030.

🌍 International, Corporate & Specialized Provisions

🍼 New & Noteworthy