Name: jeff kuzmich - Migrate_CPE_2025_Tax_Bill_07242025_4983526
Uploaded: 2026-02-26T05:53:34.354Z
Duration: 1 h 48 s
Description: jeff kuzmich - Migrate_CPE_2025_Tax_Bill_07242025_4983526

Transcript for "jeff kuzmich - Migrate_CPE_2025_Tax_Bill_07242025_4983526": Hello and welcome to today's CPE webinar. Today's audio is through your computer speakers only. There is no call in number. If you need to refresh your browser at any time please follow the prompts on screen. To download and print today's content and to access additional resources refer to the files and resources window. If you have questions during today's webinar use the ask us a questions window. Please note we may not be able to address each question individually however all questions are valuable to help us develop future resources for you and your clients. To earn one CPE credit for today's event, you must remain online for at least fifty minutes and respond to three of four attendance polls. The polls will pop up on your screen along with a ringtone. There is no right or wrong answer. Click submit to record your attendance. To ensure you see all polls, be sure you disabled all pop up blockers on your device. Instructions are available in the files and resources window. Once you meet all CPE requirements green check marks will appear then you can download your certificate. In mobile view tap your screen to display the toolbar and click the certify tab to access this view. After today's webinar we will also send a follow-up email which includes a link to download your CPE certificate. At the close of the webinar we invite your feedback on our session evaluation. Finally, this presentation does not constitute legal advice and is for informational purposes only. Thank you again for joining us. We will now transition into today's topic. Hey everybody and welcome. Thank you so much for joining us today. My name is Gene Marks. I am thrilled to be here. We have a full hour of information that we are going to be sharing with all of you guys all about the new tax bill, everything that you need to know as a CPA. We can only get into a certain level of detail in the time that we have, but we're going to be covering a lot. And you're going to hear a lot from me during this presentation as well. I'll be moderating a panel about the opportunities that we have as fellow CPAs because as much as you might know about this bill, you're going to learn more things. But I can guarantee you our clients don't because they're really not paying attention to this stuff as closely as we are. And I think that just provides for us a lot of opportunities to help them with consulting and also some tax advice. This is the time to do it. I speak to a lot of companies, lot of business owners all across the country in all the presentations that I do and all the reporting that I do. And I've been telling them all, man, when this thing gets settled and signed off, which it just did, get ready to talk to your accountant this summer. So the time is now. It is now time for business owners to be talking to you and to me and for us to be giving our clients advice. And so the goal of this webinar is to try and give you as much information as possible so you can give the best advice possible to your clients. Okay. So let's talk about who's on the panel today. I have sitting beside me here in Rochester, New York, Zach Keeps. Zachary, thank you very much for joining. Gene, great to be here. Yep. Glad to have Zachary. Zachary is a Compliance Risk Manager at Paychex, so he is going to be walking us through a lot of the tax legislation from this bill. And on the line from sunny Florida is Barbara Weltman, my old friend. She's an attorney and small business advocate. Her company is Big Ideas for Small Business Inc. She's also the author of the JK Lasser Tax Guide as well, which I've relied on Barbara's advice for years. She's awesome. So I'm really thrilled that you are here. Barbara, thank you very much for joining us. It's great to be here. Hi everyone. Glad that you are here as well. So let us talk about what the agenda is for today and what we're going to cover. Okay? We're going go through the key provisions. It's mostly business provisions, but there are some individual provisions as well. But this is the stuff that's going to be impacting your clients, both businesses and individuals. We're going to talk about some strategies so we can help our clients adapt and plan ahead because what it's only fifteen, twenty, 25% of their income, not like it's important or anything. So hopefully we can come up with some good advice and recommendations for our clients. Also the end, I'll walk you through some resources and some consultative opportunities and stuff that's available for you. So all of that is there. All of that is available. So you didn't come here to hear me talk. You came here to learn. So let's jump into it. So Zach, I'm going to turn over to you first. We're talk going to about some of the new rules around capital investments. Okay, great. Gene, thank you so much. Before we start talking about bonus depreciation, which I know is a hot topic, I want to take one quick step back. You know, we're going to move at a pretty fast clip today. We have a lot to cover. It is not called the big beautiful bill for nothing. It touches all of us. One thing to keep in mind though, is that this is just the start. The bill is passed and that's great. There's exciting stuff here, but there's going to be regulation. There's going to be much more to come with us. And I would just encourage everybody in the audience, you know, number one, if you have questions, avail yourself of that chat function. I have some of my colleagues very knowledgeable. They're standing by to answer those questions. But also, maybe even just as importantly, be aware that Paychex is going to continue to keep everybody updated as all of the rulemaking unfolds in the coming weeks, months, maybe even years, depending on how it goes. So with that, let's take a look at bonus depreciation. This I think is a big one. It's not gonna affect everybody, but it's going to affect many of us. What we have here is basically a write off for the purchase of large eligible assets. As you can see, that's retroactive for any eligible property that is bought and placed in service on or after 01/19/2025. So this is, it's a great thing for the businesses that qualify. And I think my colleague, Barbara, might have a couple of pointers for, for how to you can help your clients prepare to, leverage this. Absolutely, I think it's a great time to look at your business plan, to look over your equipment, your machinery to see if it's time to upgrade, add additional items. The write off applies also to leasehold improvements, so maybe build outs are warranted now. Decide if you can afford it, what your budget will permit. Keep in mind that if you finance the purchase, it doesn't impact the deduction in any way. So, claiming, putting property in service and taking this write off could even help cash flow because you're getting the full deduction even though you're paying down the line. That's something really important. Two more points, because of 100% bonus depreciation, it may pay for cost segregation studies to optimize this and finally for pass throughs, taking this deduction may entitle you to a greater or the ability to claim the qualified business income deduction because by reducing your income, you may get a bigger write off for the QBI deduction and we'll talk about that one later. Okay, great. Actually, before we ever transition to Zach, one other thing I wanted to mention, I have clients that sometimes don't realize that this is not only just a deduction and a benefit for them and their business, but for their customers as well. So if you have clients that are selling machinery and equipment or furniture and fixtures or in the technology selling hardware or software, they need to know at least their salespeople need to know to be communicating to their customers that like, hey, there is this new permanent deduction that's available for you. It's now permanent and it's bigger. So you can now buy our products and get tax benefits from doing that. So my advice again is not just thinking about your client and how they can be saving money this deduction, but to encourage them to be using this as a potential sales tool to sell their products if those products are eligible for that deduction. Okay. Research and development cost, Zach. R and D. That's a big one. You know, we're gonna see certain themes emerge. And I think one of the themes of the big beautiful bill is helping to foster innovation. A big part of that is businesses are going to have the option to expense domestic r and d costs, and that's going to be permanent. This is here to stay for costs incurred in 2025 and beyond. And as a business looks at this, as you're as you're counseling your clients on this, you should know they have a couple of options. They can deduct the r and d costs in the year that they're incurred. They can amortize those costs over the useful life provided that's not more than sixty months, or they can simply spread that out over a ten year period. So a significant opportunity, but a business is going to have a couple choices to make with respect to how they take advantage of it. Barbara, do you have anything to add on this one? Yeah, I do, because the law permits small businesses that did engage in R and D in 2022, 2023, 2024 that had been amortizing their write off to go back and retroactively claim it and claim a refund and this is a way to put cash in your pocket here. It applies to small businesses, meaning the gross receipts test, average annual gross receipts in the three prior years not exceeding $31,000,000 that's the 2025 test. We'll have to watch for IRS guidance on how to do this. All businesses, regardless of size, can now accelerate any remaining unamortized expenses. So that's more opportunity to have, to get more of a tax savings now that can be plowed back into R and D. I think it's a great opportunity to watch for. And Barbara, I have to say I have some clients that were really bummed out when this expired back in 2022, and now the ability of them to go back retroactively, it's gotta be a big deal for a lot of businesses. Do you not agree? Oh, I think it's going to be tremendous and think about the dollars involved. It's not nothing, it's going to be substantial for those that qualify. Agreed. And one final thing everybody, I'm just thinking specifically of a client of mine. They're in Bucks County, Pennsylvania. They're a manufacturer of paper and film. They have about like 100, 125 employees. They actually take this research and development deduction themselves. I mean, it's not as if you have to be in the pharmaceutical industry. They do that because they're constantly working on new variations of their products, new product lines. They do market research studies as well. So they have costs both from outside consultants as well as internal employees, materials that are used for samples. A lot of that stuff is eligible for this deduction. So I learned that as well, that it just does not necessarily have to be some company that's in the research field or the scientific field. It could be manufacturers, distributors, other companies, even service firms that are working on new products as well. So that's just something else to keep in mind. It's something that I've learned from my client base. Okay, Zach, let's move on now. We're going to talk about first year expensing of, section one seventy nine. Okay. Great. So here emerges the next theme with the bill, I think, Jean. And that is large increases to, to maybe some opportunities that already exist. Section one seventy nine, that deduction limit is increasing to $2,500,000 for twenty twenty five. Obviously, the previous limit was 1,000,000. So we see a significant increase. And obviously, this is gonna be for qualified property and equipment that is, acquired after 01/19/2025. That's gonna be eligible. Interestingly, the initial amount that was proposed for this was 1,250,000.00. So as this piece of legislation kind of moved through the machinery of congress, it changed into, again, really significant increase. The phase out threshold is also increasing. It was 2,500,000.0, now up to 4,000,000. And as if all of that is not enough, after 2025, we're gonna tie this to inflation. So we're going to see, as inflation, hopefully, there's not much, but if it does continue like we've been seeing it, this limit is going to increase as well. So Barbara, what would an accountant or a small business want to think about with this? I think you want to think about all of the things we said with respect to bonus depreciation, meaning what's your business plan, what can you do, can you afford it, financing options, I think that business owners should be looking towards their vendors who may be offering attractive financing as a way to sell their product and that's really a good first way to finance. I think the one thing to keep in mind is that you can't benefit from first year expensing unless you're profitable. In other words, were not profitable or on the cusp and you took bonus depreciation, it could increase the net operating loss. But with first year expensing, that's not going to happen. So think about this if you're profitable and I hope all your clients are profitable. Barbara, I don't mean to throw you this curveball, but I've got to ask a stupid question here because I've never, this tells you my limits as an accountant. What is the difference between bonus depreciation and the Section 179 deduction? How do you differentiate the two of them? Well, right now there isn't a whole lot because of 100% bonus depreciation. There is a distinction when it comes to riding off vehicles where you have a certain order because there are limits for dollar limits involved and so it does come into play with riding off vehicles but because of a 100% bonus depreciation, just go for it now from machinery and equipment other I eligible have to go pretty far to throw a curveball by you, Barbara. I knew you'd be able to handle that. Thank you. I appreciate that. I just wasn't sure of myself. All right, Zach, let's talk a little bit about this new deduction for production property. It's huge. So walk us through this. Yeah. And again, this is tied to that theme of fostering innovation, fostering maybe some at home manufacturing. So there is a 100% deduction for certain for qualified, as you can see, production property. What is qualified? Well, what's nice is we've got a little bit of clarity with this one. We're not necessarily waiting on too much regulation. That's gonna include manufacturing, refining, agricultural facilities, and chemical production facilities. So a large swath of businesses might have the opportunity to leverage something like this. We also know that some folks won't be able to take advantage of that. Those are gonna be your office buildings, malls, hotels, lodgings. And if you have a parking lot, you know, once again, no help for you. Now the other thing we need to keep in mind, the dates with this I think, Jean, get a little bit complex. Because if you're gonna build a new chemical manufacturing facility, you're not gonna get it done by next week if you start today. So let's talk about the effective dates. Construction would have needed to have begun on or after 01/19/2025. There's that date again. And it needs to be wrapped up before 01/01/2029, and it needs to be in service before 2031. So if a business is going to take advantage of this, the clock is kind of ticking, right? Barbara, I think you might have had some thoughts about that if memory serves. Well, I think this is an amazing opportunity here because usually you have to write off a cost of a commercial building over thirty nine years. So here you're going to get right upfront accelerated write off. Because as you point out, the limited time frame here, you gotta get started now because we know how long it takes, you have to acquire the land, you have to get the architectural plans, you have to get the permitting and the financing of course. So a lot involved here. SBA financing for this kind of construction could be helpful for the right business. I think there's a lot to think about here and a lot to get going. Yeah, I want to give a shout out as well. Barbara, you mentioned the SBA financing. So I'm seeing a lot of my clients lean in that way. Obviously we know that financing costs are still high. I mean, the prime rate in this country right now is 7.5%, but that's for your best clients. My clients are paying 9%, 10% for some of their equipment loans. But the SBA is a really good place to go for this, the seven loan and the five zero four loan. You want to encourage your clients to look for SBA certified bankers. The process itself has really been streamlined. It's a lot faster. As you know, it's guaranteed by the federal government, at least like 80 to 90% of it. So it's easier for businesses to get those loans. Those banks have quotas and this is all about financing growth and financing capital expenditures so they can take advantage of these big deductions and at the same time get relatively good financing opportunities through an SBA certified banker. So just recapping this whole section, I think you're getting the point. There were some significant advantages and significant benefits for investing in capital equipment, right? Section 179 bonus depreciation. You're building a manufacturing facility. There's like huge deductions for doing that as well and just investing in research and development as well. So this bill itself is really trying to encourage businesses to spend. The biggest takeaway is that most of these things are now permanent because we all know, we know every few years this comes back up for will this be extended, will it not be extended? Now because a lot of these things are permanent, I think this is going to have a big change to your clients and some of their long term capital investment decisions. And I think that we as CPAs can go right along with them. I think they need to know that this stuff isn't going to change. They can make some more strategic decisions for the long term. So I think it's great stuff. More to cover. So, Zach, I'm going turn it back over to you. We've got some other business write offs to talk about. We sure do. Yes. Let's talk about the interest expense deduction. It's, you know, I I really this is a reversion, I think, more than a change. For a long time, EBITDA was the way to go. Then it revert it changed to just EBIT. And now in, 01/01/2025, so today, we're adding a couple more letters back into the acronym. What does that mean? Well, the return to EBITDA is really going to, it's gonna impact pretty much everyone because interest payments can now be deducted under the limitation rule. So I think this is probably a fairly wide reaching provision of the bill. I think it's a good reversal and it's gonna help a lot of businesses. Barbara, anything to add on this one? Well, just a couple of things. Just to emphasize that the automatic exemption for small businesses from this interest deduction limitation has not been changed. And farming businesses, real property businesses can still elect out of this limitation, so that's still there. The will, again, the dollar limits as you see in your slides will adjust for inflation annually and if you have excess losses, they do get to carry over, they become part of net operating losses. So they're not lost forever, but you can only use your NOLs against 80% of your taxable income, so hopefully our businesses are profitable and they won't see losses, but this is something that owners of pass through entities need to keep in mind, this loss limitation. Thank you. That's great. All right, we're going to pivot now. We've been talking before about making investments in your business, capital equipment. Obviously, there's some help with loss limitations as well. Let's now talk about workplace and your employees. When I speak to my clients and again, just sharing with you because they don't study this stuff like we do. They're not aware a lot of the benefits that are available for them to help them provide benefits for their employees. So, we're going to go through both Zach and Barbara are going to discuss certain changes and certain increases and permanence and certain tax credits and deductions that are related to employee benefits. And you, we all know that one of the biggest issues that's facing our clients this year, just like us and our own firms, is attracting and retaining good talent. And the main takeaway from this section that we're going to talk about is we can provide these benefits and the federal government will help us, We'll literally provide some funding through the form of tax credits and deductions so we can provide better benefits to our employees and hopefully attract and retain good people. So let's jump into the first one, which is the paid family and medical leave credit, which I I love this credit and it just seems it just seems, Zach, that, like, not a lot of business owners are really aware of it. Yeah. That's a great point. And, you know, Jean, know you and I were chatting a little bit earlier and you talked how one of the other themes, you know, the first theme is big increases. The next theme is helping businesses. Now we're seeing that third theme, and that is helping businesses help their employees. Right. Which, as you mentioned, is also good for the business, right? Because they're attracting the highest quality employees. So one area where we're gonna see this is paid family and medical leave. That credit is now permanent, effective in 2026. There are some other changes as well. First, that credit is gonna be claimed even if you're in a state where paid family medical leave is required by state or even local law. The other thing you can think about is that an employer, your client, can use the credit to offset premiums paid for insurance for employees working not less than twenty hours a week. And then on the employee side, I thought this was, sort of a nice add in. You know, an employee is eligible for this now after six months. That used to be one year. So what we have is kind of lowering the bar, making this just a little bit more accessible. And this is right around the corner. This is, gonna be effective 01/01/1926. So just a couple months to go. Barbara, don't know if you wanted to share any thoughts on this one. Well, think you've touched on a lot of great points here. I think that employers need to look at the impact of what the credit does for their out of pocket costs. It's going to reduce their costs of providing this benefit. It's enabling them to provide the benefit. And especially if they're doing it through insurance, which they will now be able to do, which is not, they're not paying dollar for dollar out of pocket, they're just paying insurance premiums and claiming the credit on it. So I think now's the time for employers to be looking ahead and deciding are they gonna move forward in 2026 if they are not already offering this benefit. So as you guys know, I mean, you have more than 50 full time employees, you are required under the Family Medical Leave Act to provide unpaid leave, right? For various circumstances. If your clients have less than 50 employees, they're not required to do that. But many of my clients do and not a few of my clients learned about this credit we became aware of it. It's been around. It's just been obviously enhanced this year so that they can be like, hey, if we're providing unpaid leave to this employee, maybe we can provide some of that with paid leave, even if it's just a portion of their salary or half of their salary or whatever. And we'll get a credit back from the government for a portion of that, which is basically the government saying, hey, listen, help your employees out, provide paid leave when they're even if you're not required to do so. And we're going to help you pay for that. And that's what this credit is designed to do and I'm really glad that it's still there and it's also been enhanced this year. It's just another benefit that we need to make sure that our clients are aware of. Right, so Zaccha, back to you. Jean, I just want to make one comment here that I think we're, I want to point out that what we're talking about here are the tax breaks at the federal level. But the rules at the state level could be very different. For example, going back to where you said, you put that question to me about bonus depreciation section 179 deductions. States may have different treatments and for those kinds of write offs and you have to think about how that impacts state income taxes, the same is true for this credit, many states require even smaller than 50 employees to provide family and medical leave. So I think we're just pointing out that going forward, we're talking at the federal level. Yeah, you know, actually I'm glad you bring that up because this is a federal discussion. Obviously state rules are different. We're going to talk a little bit later about the state taxes and we know that are different state rules for that example. And I'll bring back to the paychecks people. If you're watching this and you want to leave a comment or a question, I think this type of webinar would be really, really helpful if we localized it more. We said, let's do the same thing, but we'll focus on California businesses or Illinois businesses or New York State businesses because those companies should be aware of the federal issues. But I think all of us as CPAs can use a refresher on what the state laws are as well. So, it's a great point. It's a great point and something that we should do. If you guys agree, put that in the chat because that's something we'd love to consider. Okay. Childcare credit. Yes. That's it. This is another big one. I, I actually had to double check, Jean, when when I read some of these amounts. There is an increase that is effective in 2026. Right now, we're at 150,000. That increase in just a few months is a whopper of an increase, going up to $500,000, half $1,000,000, even more $600,000 for small employers. So what we see here is for the employers that are playing in this space, that is a massive, massive increase. And the calculation rate, the credit rate is changing as well. Right now, 25%. We're going up to 40% next year. Unless you're a small business, then we're in that 50% range. So, I I was fascinated. I would love to know the story behind why the increase was so large. In any case, I think it's a tremendously positive thing for the employers who do this. No, I know why it's large. I mean, it's just, it's been demanded by the public. I mean, we have so many working parents that are out there and then they get disrupted when a child is out of school. Right, certainly plays well, doesn't It's huge. It's also a, know, it's just from an employer perspective, I'll speak selfishly. It's when your employees are distracted by childcare needs. They're gonna be there. It hurts our productivity and they don't come to work and, you know, so I'm glad that the government is stepping up with this. But there's a couple things to be aware of. You might not see this noted on this slide. If up to $5,000 might be exempt from both FICA and FUDA, also federal withholding. The other thing that we need to keep in mind is that total benefit, does will need to be reported on w twos. So there's some administrative work to be aware of. There are some additional benefits to be aware of. But again, for the employers who do this, maybe encouraging like you say, Jean, a couple of employers to get into this space. Very positive thing. Now, I feel a little bit like I'm on an infomercial, but wait, there's more. I think, Barbara, why don't you talk about some of the other tax credits that are out there? You know, we've been talking about all the positives, but there are some negative results from the new law. One is the employee retention credit which you may recall was an incentive for employers to keep employees on the payroll during the pandemic. And while the credit ended in 2021, refund claims could be filed because time hadn't expired yet. Well, the new law says that the IRS will not issue any refunds for claims filed after 01/31/2024. I saw a statistic saying that as of April, are about 600,000 unprocessed claims and so some of them will be processed because they were timely filed but not all of them will be paid. What's more, because there were erroneous claims, there were fraudulent claims, there was a lot of promotion by promoters saying everybody's entitled and that wasn't necessarily true and so a lot of claims were filed. So now the IRS has given more time to pursue these claims that shouldn't have been made in the first place and so there'll be clawbacks and penalties. We have to watch out for that. The other change that didn't happen is the work opportunity credit which is a credit that's been around for many years. It's been extended, extended, extended but it wasn't extended at this time and it's set to expire at the end of this year. It only applies for eligible employees who begin work by 12/31/2025. And who are eligible employees? Well, there are people who fall within certain targeted groups, long term unemployed, certain veterans, ex felons, a whole list of targeted groups. Could this be extended in another law? I think yes. I know people on the Hill are talking about it, but it's just something we'll have to monitor. Very good and thanks Barbara. And by the way to your point earlier, there are some states that continue to have the Work Opportunity Tax Credit, so that might be something that you can consider as you want to look that up in your state. Barbara, you taking this next slide as well, the employer provided fringe benefits? Yeah, in fact, Zach actually alluded to this because we have a dependent care assistance plans currently for 2025, the limit that employers can offer either directly paying for these costs or allowing employees to pay for them through salary reduction plan, an FSA, a flexible spending account for dependent care, it's $5,000 in 2025 but it's increasing to $7,500 next year. And of course, just to point out that when it comes to employee benefits, almost all of them are not subject to payroll taxes. So it's a way for employers to help their employees pay for these desired benefits without incur, if you just increase their pay, you would pay employment taxes as well. So now you're giving them the benefit with no employment tax cost. Educational assistance plans also have been, the ability for employers to pay student loans either directly or through reimbursement under these plans is permanent. It was supposed to end at the 2025. Plus for the first time, the dollar limit, which has been in place for as long as I can remember, will be indexed for inflation starting next year. Yeah. It's pretty awesome stuff. Remember everybody, these are deductions, not tax credits. And also, I mean, they're a great employee benefit. I have a client in Lancaster, Pennsylvania that they're an architecture firm and they provide education assistance for their company. It doesn't have to be the whole $5,000 They do a thousand bucks per employee and their only requirement is has to be something not related to their business, which they're still allowed to deductions. Take They have employees using the money to go and take basket weaving or origami or whatever. And it's a great employee benefit to provide because they don't get taxed on it and the employer gets a deduction. All right. Here's the next big thing, which has been getting all the news out of here. I know Zach has been excited to talk about it. This whole no tax on tips thing. Yes. Walk us through what this rule really means. Yeah. Well, it's, you're right, Jean. This is the one that has gotten a lot of press, but I I it's it's quite accurate to say no tax on tips. I'm not sure. Mhmm. Think we I think we skipped the slide by mistake. Yeah. Let's go back. That's it. That's the correct slide. Okay. Thank you, Jean. Yep. So, you know, what we have here is a situation where this isn't this isn't necessarily the most permanent thing. This is gonna be effective 2025, so now through 2028. There's gonna be no real change with withholding or payroll taxes, and employees are gonna basically be claiming this as a deduction up to what? 20 or for up to $25,000. And it's something that's gonna be handled probably through the w two. So there is just, a little bit of work that's gonna need to be done. It's not quite as simple as saying there's no tax on tips ever. The employer is gonna need to be aware of some things. There's also potentially a phase out for gross income. So for an individual whose income exceeds 150,000 or 300,000 if filing jointly, The deduction is gonna be reduced by $100 for every thousand you go over that $1.50 or 300 limit. So important to be aware, it's not quite as simple as saying no tax on tips. Still a very positive thing if you're getting tips, think. Barbara, would you agree with that? Absolutely, and going back to the no tax on overtime, Jean, think Yeah, this let's go slide back and is screw up a the slide, Barbara. I'm screwing up the slide. There we go. There we go, okay, go ahead. The no tax on overtime, it kind of mirrors a lot of the things that Zach said, the same temporary basis, the same income phase out. The point about the no tax on overtime pay, individuals who can take an above the line deduction, whether they itemize or take the standard deduction, it doesn't matter. It only applies to the bonus for overtime. So for example, if you are earning $20 an hour and you get $30 for overtime, the deduction only applies to the $10 The excess over regular pay is what the law says. These rules don't change what happens on the employer level, in other words, employers still have to do the withholding, they still have to pay employment, deal with the payroll taxes and there will be some, special reporting on the W-2s for this, a transition rule, just employers will have to approximate using any reasonable method to call out the overtime. Couple of comments on this and then we'll move on to tax rates. But both the no tax on tips thing and the no tax on overtime, I do feel has an indirect benefit for employers mainly because when I look at no tax on tips, the more that our employees can put into their pockets, the better off they are and the less pressure that puts on to employers to pay them. I think that that's kind of an incentive. The same thing with overtime. Again, we have to be very, very careful. Remember, it's not all the overtime pay Barbara, right? It's just that differential that you mentioned, but it's still a benefit. And again, for those employees or businesses that have employees serving overtime, at least they know that they wanted to pay any tax on that differential and that might ease the pain a little bit for them and also benefit the employers. So I think there are these indirect benefits for employers with these two rules. We still haven't clarified the tipped workers yet. Guess we're waiting for that list to come out as to what workers are clarified, but it's the general we can use as a rule of thumb for our clients out of typical industries that have tipped workers right now. So we'll go for that until the rules themselves become more clarified. Okay, let's turn now to tax rates. I'm going to have Barbara talk about this slide, the tax rates in general. Go ahead Barbara. Well, there was talk about reducing the corporate tax rate and that didn't happen. So the corporate tax rate is still a flat 21%. With respect to individual tax rates and they're very important to our clients who own pass through entities because that's the rate they're going to pay on their share of business income, those rates have now become permanent. The rates that were lowered under the Tax Cuts and Jobs Act are now permanent. So nothing's changed with that. But what I think is important for us and to help our clients between now, going forward, is to look at what the tax rates plus all the other changes mean for 2025 because our clients may be able to reduce the remaining two estimated tax payments for 2025, the one due in September for calendar year C corporations and individuals and the final estimated tax payment for 2025 due December 15 for C corporations, 01/15/2026 for individuals, maybe they can shell out less. Fair enough. Fair enough. All right. And now the big thing, this is my favorite part of the legislation. And it's this, as a pass through business myself, I have an S corporation. We're waiting for this to become permanent extended. Zach, you're going to talk about this. By the way, just so you guys know this 20% deduction that we have here, there is talk about still increasing it to 23%. They tried to do that. They passed that in the House. The Senate did not agree to that. The new bill has this 20% deduction, but I just want you guys to know that there is talk in Washington about, you know, a supplemental bill that may increase to 23%, which is like, wow. That would be great. But, Zach, walk us through what the the this deduction is. Yeah. We'll make it quick, Jean. It's interesting. Everybody has their own favorite section of the bill. Yeah. I find that fascinating. You pretty much summed it up. You know, $1.99 a, this is, effectively going to be made permanent at that 20%. No interruption from the current state, And it's gonna be phased in amounts. It's gonna increase to $75,000 for an individual taxpayer and 150 for joint returns. Barbara? Wanna clarify some of this information, Barbara? Sure, the phase out ranges are going to increase. The dollar limits that apply to taxable income limits will continue to be adjusted annually for inflation which is great. The point of the QBI deduction is that it's a personal deduction based on your share of business income and you don't have to expend anything extra, you get it because you're entitled to it. It's not like if you have advertising expense, you have to pay for advertising to get the Here you get the deduction because you're entitled to it. And if you are on the top tax bracket, it effectively reduces the tax on your business income to 29.6%, so that's really great. I think the increased phase out range means more owners will be able to claim the credit and that minimum deduction amount will, you know, it's not, dollars 400 is not a whole lot, but for a lot of people that have side hacks, could be very helpful. Good. Side hat? Is that what it is? You just called a side gig, isn't it? Let's Excuse move on. Is this your side hack? Yeah. This is my side hack. Alright. State and local taxes. This is another big one. This is a lot of contention in this. So Zach, give us an update on that. Yeah. This sure is a big one. Effective now, if you are an itemizer, the salt limit is temporarily it's gonna be $40,000 Phased out if your income is over $500,000, and then it's going to stay at that higher level, increased to $40,000 starting 2026. And then, again, tied to that 1% increase year over year between 2027 and 2029. But all good things must come to an end, Jean. It's gonna revert back to $10,000 in 2030, which will be here before we know it. So something that, if this is of interest to you, now is the time to act. This is, act quickly, don't delay. There's that infomercial again. Fair enough, fair enough. Barbara, what do you have to add? Well, only about 10% of individuals actually itemize. But with this higher SALT cap, I think that more people might itemize and so we have to kind of run the numbers for our clients to see whether they can benefit from this. There was talk to eliminate the pass through entity tax that many states offer as a way to kind of get around the soft cap limit. I think you have to pay attention and see if you have to make an annual election and take action to benefit if you are an owner in order to benefit from the PTET. All right, that is great. Thank you very much. All right, Barbara, I'm going give you this one. This is like your favorite deduction that there is, right? This is like your favorite benefit, the qualified small business stock, right? Tell us why. Well, how many times can you get something tax free? So this is really a wonderful incentive. It's been around for a while, but it's been made even better. So the changes that I'm gonna talk about apply effective on July 4. So any stock issued after that date can benefit from this. There is an exclusion now, in the past you used to have to hold the shares for more than five years in order to get an exclusion. Now if you hold it for more than three years, you get a 50% exclusion, four years at 75% exclusion, five years a 100% exclusion, plus the amount you can exclude, 10 times the value of your stock up to $15,000,000 and that's gonna be indexed for inflation. I mean, how great is that? Definition of small business changed because the amount of assets that the business can have and qualify is great. But of course, go to the next slide please, Jean. Sure. Think you have to watch that it only applies to certain businesses. It's primarily designed for tech companies, manufacturing, retail and wholesaling. It doesn't apply to service businesses like us. So we don't get to benefit from it but I still think it's great and especially for startups and I think it's something to think about because you have to be a C corporation and so businesses that are starting up now, this might be a consideration in choice of entity. And it is a great consulting opportunity for us as CPAs when we're working with startups or with investors that are looking to invest. This qualified small business stock is extremely important. Barbara, you want to talk a little bit about Opportunity Zones? What changes are made here? Sure, sure. We're kind of tight on time because we still have other things to cover, so I'm not going to go into every detail here, but Opportunity Zones were designed to encourage investments in rural low income areas that were designated as Opportunity Zones through qualified opportunity funds. And the incentive for doing so was the ability to defer gains from anything, you sold your business, you had a big win on the stock market, you could choose to invest those gains and defer reporting the tax on those gains for a certain period of time. And then if you continue to hold the shares in the QOF, those shares get stepped up in basis. So a lot of incentives for doing this and what the new law did was make this permanent. I don't think there was as much interest in this because this was so temporary. Now that they're permanent, let's see. Also, I think that if our clients are within these zones, there's an opportunity for them to get the financing from the QOF. So it goes both ways. I think this is a great thing to check out and I think that's going to be growing interest as time goes on. Sounds good. Alright. Well, there's a lot of other changes still that we wanna cover. We still have about ten or fifteen minutes ago, so everybody relax. You know, we can we can we can get through this. We know that there's a lot of things, but we wanna we don't wanna rush our way through it. So let's talk about some business tax credits, Zach, that are available. And this is different from the deductions from manufacturing What facilities do we mean by advanced manufacturing investments? Well, basically, what we mean is these investment credits are going to increase from the 2025% that we're at today to 35% starting 01/01/1926. So if a business is playing in this space, not for everybody, but I imagine a pretty significant portion of businesses might fall in this realm, they're gonna see that 10% increase. Like a couple of the other things we've talked about recently though, this is not forever. This is probably one of the shorter term increases that we're seeing. The credit is set to expire at the 2026. So not for everybody, not forever. But if it does affect you or if it affects one of your clients, it is a significant benefit. Okay, Barbara? Barbara, the credit is really pretty limited. It's designed basically to encourage ship manufacturing. So you have to be in the right business to take advantage of it and as Zach points out, you really need to act quickly because there's only a limited time to benefit from it. Very good. All right, Zach, information returns. There's been some changes made to that as well. Yeah. You know, I think if you take nothing else away from this slide that is pretty thick with numbers, ten ninety nine's are getting easier. Yep. That's how I would sum this up. The thresholds have changed just a little bit. The the threshold for 2025 for the miscellaneous, the NEC or the October r is $600. For 2026, that's gonna go to $2,000. And then after 2026, it's going to be indexed for inflation. If we look at the k, obviously, you can see it right there on the screen. The threshold is restored for this year to $20,000. So overall, the takeaway here without getting too far in the weeds is uncle Sam's trying to make the $10.99 easier for all involved. Yeah. And by by the way, it was always just standard ever since I can remember. If you have a ten ninety nine worker, anything over $600, you gotta do a ten ninety nine and report. Next year, goes up to $2,000. So that certainly makes things a lot easier for reporting. Barbara, this is also interesting to me as well as my wife runs a charity and she's trying to earn nonprofit. She's trying to figure out how this is going to affect donations to her nonprofit. Walk me through, sorry, walk me through a little bit this new change to charitable contribution deductions. Well, all of the changes that I'm about to describe apply starting in 2026, so they don't impact 2025 returns at all. The law introduces a threshold above, we have a threshold for itemized medical expenses, we have the 7.5% threshold, we're all used to that. So the first 7.5% don't get deducted as medical expenses, now they're introducing a threshold for charitable contributions. For C corporations, it's 1% of taxable income, for owners and other individuals, it's gonna be 0.5% of AGI. And so the first, the part covered by the threshold will not be deductible. That's kind of a negative. On the positive side, those 90% of individuals who don't itemize will get to deduct some of their charitable contributions, cash contributions up to $1,000 for individuals, 2,000 for joint filers. Remember a couple of years ago we did have a more modest above the line deduction for non itemizers but now this is a $1,000 $2,000 is nothing to sneeze at and again could benefit a lot of people. I think to your point, to your wife's consideration, I think businesses and individuals are going to be, once they become aware of this threshold, it might factor into their giving and how much they're able and willing to give. I think they want to meet that 1% threshold, you know what I mean? So they're just going to give more to get past that threshold. I think it'll be a net benefit to nonprofits, but who knows? Will have to see. All right, that is very helpful. Let's talk about estate taxes now. Zach? Yeah. If this is something that impacts you, this is a big change, Gene. You know, the exemption is now permanent. There's that theme, what we had has often been made permanent. And it's gonna go up. We're looking at 13,990,000.00. Next year, that's gonna go up to 15,000,000. And once again, after 2026, that's gonna be tied to inflation. My assets are like 10 times above that. I'm so I'm gonna start off saying, yeah, right? But that is a benefit for a lot of business owners. Without a doubt. Yeah. And Barbara, don't you agree? I mean, business owners worry about succession planning and estate planning and I think this makes the decision a lot easier, right? Well, for sure. For some small business owners, for example, the business may be the biggest asset in their estate but it may not push them over the exemption amount. They still need to do estate planning? Well, states have exemptions that are much smaller than the federal and so I don't think you can discard estate planning for tax purposes entirely and there are other reasons to do estate planning as well. Also, they did not make any change to the ability of the surviving spouse to use the unused amount from the deceased spouse. So if the first spouse to die is not the business owner, the business owner may in fact inherit additional exemption to really shield the estate. That is great. Well, definitely still talk to your estate planning attorney. Like you said, Barbara, there were still a lot of factors, state taxes when it comes to estate and also of course, you know, building a trust, having a will, there's still a lot of room for making sure estate attorneys are involved. But I do think that this makes some decisions for business owners a lot easier. All right. This we can run through fairly quickly. Barbara, And I guess you want to talk a little bit about international tax rules, some of the highlights here? Yeah, think first of all, if you and your clients are entirely domestic, This is, you don't really have to pay But too much attention if you have clients or if you're doing any kind of business overseas, you might want to watch what's happening here. The law, the big beautiful bill changed the terminology for some of these provisions and I believe it, I can't explain why. I don't know why the names of these things have changed. So like the GILTI, which we've been dealing with since the Tax Cuts and Jobs Act is going to be called the CTI, NCTI, the Net CFC Tested Income and the rates will have changed for some of these, provisions. There's a lot going on in the international sector and it's very, very complicated. Fair enough, fair enough. And how about, is there anything significant you want to talk about some of these changes? Well, yeah, I think the things to think about is that they're so complex that you really need somebody who's well versed in this area. This isn't for your general practitioner. It sort of reminds me if you will, back in the day when ERISA came about and all of a sudden all the ERISA experts came up and I think it's the same thing with international tax rules that they're so unique, so complex that you really need expertise. And if you have clients involved in this and you're not the expert, you're well advised to consult. Fair enough, fair enough. Hey, so all of this sort of has the same theme here and oh, by the way, we wanted to do a little mention on AI or not. Okay. Let's talk about some consulting opportunities that we have. As you can tell, there was a lot in this bill. We have a lot of clients that are making investment decisions. There are a lot of our clients that need help with providing benefits to their employees. We have clients that are still up in the air as to whether their tax entity is the correct or should there be a C corporation? Should there be a pass through corporation? Those rules have changed around that as well. So it might change your thinking as well. And even like Barbara said at the very end, I mean, there are we do have clients that are doing business overseas and there have been some changes in these international tax rates. These all consultative opportunities for us as CPAs. So I just want to just give a shout out. I mean, is a Paychex program. You have your backing of a huge company that specializes in HR. So if you are consulting with your clients on HR benefits that will have tax advantages for them, get some outside experts involved to help you and support you. And Paychex is a great resource to do just that. But I would look at this bill as not something that's a headache or something that's creating more work for us in the profession. I just think it's a bill that's creating a lot of opportunities for us. And by the way, just from a personal standpoint, yes, there are a lot of pros and cons in this bill. And I don't want to say that like all of us on this panel are like thrilled with every aspect of the big beautiful bill. But from a tax perspective, I mean, it couldn't be better stuff for business owners and individuals that I think most accountants and most business owners would agree on. There are some resources that Paychex is providing that I think that we need to make sure that we are aware of, please. There is a link here and you can download this. You'll have the ability to get this entire presentation where you can click on the link for the full tax bill that you go through and read. There is a great Works article on the tax and spending bill as well. We are diving into this topic on our Thrive podcast. We'll be doing multiple episodes on different aspects of this tax bill, you can see us there for the Thrive podcast, both on YouTube and on our podcast page. Obviously, there's a link there as well to state resources. Whereas I thought a lot of these things were just federal impact, they're opening up a lot of changes at the state and local level. And those are the kinds of things that we as CPAs, particularly if we have companies that are operating out of our States or have employees that are employed out of our States, think we need help. And that's why it's good to go to these resources that can provide that kind of information for us. All right. So we tried really hard to keep this on time and I think that we have one final mention is a great platform called the Paychecks Partner Pro. This is allowing you as a CPA to see what is going on with your clients' HR and payroll systems. It gives you full access or at least allows you the access that your client will allow you and will provide more opportunities for you to kind of look at, get metrics, get KPIs, get information about how your clients are paying their employees, what kind of benefits that they are providing, what their cost of compensations are. So you can provide insights to them on what is likely one of their biggest line items in their P and L, which is their compensation and their employees. So consider getting Paychex Partner Pro. It is a way for you to stay that much more connected to your clients and to provide that much more services and hopefully to sell them additional services to help them out. Hey, I just want to say not only thank you guys for being here and attending this session, but a huge thank you to Zach. You're awesome. Barbara, you are awesome. I really appreciate all the great insights that you guys have provided in this webinar. So thank you very much. I know Zach is going off to hike on some mountain somewhere in the Pacific Northwest and Barbara's going to stay inside her air conditioned house down in Florida. So best of luck to both of you guys. Thank you for the information that you have provided. Great being here. Right. Thanks everyone for attending. Hope you enjoyed and got some great information from this webinar and look forward to seeing you again next time.