One Big Beautiful Bill: What Canadian Business Owners Need to Know About the New U.S. Tax Reform

On July 4^th, President Donald Trump signed into law the nearly 900-page, “One Big Beautiful Bill Act"(OBBBA), by a razor–thin 218-214 vote.

This bill is significant for long-term tax planning, which made permanent many of the 2017 “Tax Cuts and Jobs Act” (TCJA), which was expected to sunset, as well as some new tax breaks.

The bill locks in low tax rates, enhances deductions and credits, and long-term certainty for businesses and families. Here is a breakdown summary of some of the most important provisions.

‍

Extension of Expiring TCJA Tax Provisions

‍

The TCJA provisions made permanent, among many others, include:

‍

     · Lower income tax brackets with the top rate at37% instead of 39.6% (Sec. 70107);

     · The higher standard deduction, with an additional $6,000 deduction for taxpayers age 65 and over ($12,000 for married taxpayers who are both age 65 and older) (Sec. 70102);

     · The $750,000 mortgage interest limitation, with a renewed deduction for mortgage insurance premiums (Sec. 70108);

     · The elimination of 2% miscellaneous itemized deductions, which includes investment advisor fees, tax preparation fees, and unreimbursed employee business expenses (except that qualified educators will be allowed to deduct many of their unreimbursed expenses);

    · The increased Child Tax Credit, which previously increased the credit from $1,000 per child to $2,000 per child, and now increases to $2,200 per child with that figure being indexed for inflation(Sec. 10704);

     · Permanent extension of the §199A 20% qualified business income deduction for business owners, with minor modifications (Sec.70105); and

     · The increased unified estate and gift tax exclusion, with a bump up to $15 million on January 1, 2026 (Sec. 70106).

‍

State and Local Tax Deductions (SALT) (Sec. 70120)

The itemized deduction for SALT is temporarily increased from $10,000 to $40,000 for five years. Taxpayers who own pass-through business entities and make a pass-through entity elective tax election can still use the election to maximize their SALT deductions. For those living in the US, the SALT itemized deductions include residential real estate taxes, state income taxes, and for Washington state residents, sales tax paid on large items such as vehicles and home improvements.

‍

Charitable Contribution Deductions

‍

Charitable contributions are subject to three new OBBBA provisions:

‍

     · Non-itemizers can claim a $1,000 charitable deduction ($2,000 for married taxpayers filing jointly) (Sec. 70424);

     · Charitable contribution itemized deductions are now subject to a one half of one percent (0.5%) of AGI floor, providing another limitation to claiming the deduction (Sec. 70425); and

     · Taxpayers who make charitable contributions to certain scholarship–granting organizations that fund scholarships for K-12 students can choose to claim either an itemized deduction or a new tax credit of up to $1,700 (Sec. 70411).

     · Of note is that the limitation on itemized charitable contributions will not affect the full benefit for Qualified Charitable Distributions (QCD), or the new non-itemized charitable deduction described above.

‍

Alternative Minimum Tax (Sec. 70107)

‍

The Alternative Minimum Tax (AMT) is an income tax that ensures that individuals and corporations that benefit from various exclusions, credits, and deductions will pay at least some tax.

The AMT is assessed on an adjusted amount of taxable income above a specified threshold. Under the One Big Beautiful Bill Act, the AMT exemption amounts were permanently extended, but the income thresholds at which the exemption phases out were reduced to 2018 levels ($500,000 – single filers, and $1 million joint filers).

It is possible that we start to see the AMT hit more taxpayers, especially those with large amounts of capital gains taxed at lower preferential rates.

‍

New Deductions In OBBBA

‍

Three brand new deductions for individual taxpayers are available starting in 2025. These deductions often referred to in the news as: no tax on tips (Sec. 70201), no tax on overtime (Sec. 70202), and no tax on qualified car loan interest (Sec 70203).

For each of these items, new income tax deductions are available for taxpayers who receive certain tip income, are paid overtime by their employers, and who incur interest on the purchase of a new vehicle assembled in the United States. Each of these provisions contains multiple limitations that should be discussed if any of these deductions potentially apply to you.

Of note is that the highly publicized “no tax on social security benefits” did not pass with this bill.

‍

Specific Disaster Relief Provisions

‍

Taxpayers impacted by federally declared disasters in 2025may qualify for additional tax relief.

‍

Repealed Energy Credits Under OBBBA: Act Now! (Sec. 70506)

‍

OBBBA repeals many energy credits, including all three clean vehicle credits for vehicles acquired after September 30, 2025.

Additionally, both energy credits available to home owners who make certain energy efficient improvements or install solar property, home batteries, and heat pumps, among other items are no longer available after December 31, 2025.

If you’re planning to take advantage of these tax credits, act quickly to ensure you qualify before they’re repealed.

‍

Key Provisions For Your Business

‍

In addition to the tax provisions applicable for individual taxpayers, OBBBA contains many business provisions, including:

‍

     · A permanent 100% bonus depreciation rate for assets acquired after January 19,2025. Assets placed into service between January 1, 2025, and January 19, 2025 are qualified for only 40% bonus depreciation (Sec. 168(k));

     · An increased §179 expense limitation for assets placed in service after December 31, 2024 (from $1 million under previous tax law to $2.5 million under the new tax bill) (Sec. 70306);

     · Immediate expense of research expenses with a special election to immediately deduct previously amortized research expenses (Sec. 70302).

‍

Non-U.S. Persons IRS Enforcement and Structuring Implications

‍

OBBBA enhances IRS enforcement, bolstered by the Inflation Reduction Act funding, which in turn increases audit exposure particularly for cross-border taxpayers, especially high-income earners and entities with foreign financial assets. The IRS can run this through AI-driven detection of non-compliance in FATCA, FBAR, and PFIC regimes.

Bottom line: non-residents will face tougher over sight with the new OBBBA rules, increasing the chances of audits on things like the remittance excise tax and tighter Foreign Tax Credit limits. Lodder CPA steps into that gap to ensure not only compliance but above and beyond optimization.

‍

Cross-Border Tax Planning After OBBBA

‍

The OBBBA retains worldwide taxation for U.S. citizens abroad, with no shift to residency-based taxation, increasing risks of unintended U.S. tax residency for non-residents who meet the Substantial Presence Test or Green Card Test, especially those frequently moving between countries.

International clients should review their structures to ensure compliance with tightened CFC rules, like the introduction of Foreign Controlled U.S. Shareholder (FUSSH) provisions and the rebranded Net CFC Tested Income (NCTI) regime, which eliminates exclusions for tangible asset returns, potentially increasing tax exposure.

It’s a lot to navigate, so working with a tax professional now can help avoid audit headaches later and keep your cross-border setup on track.

‍

Talk to Our Tax Experts

‍

The ever-evolving tax law is difficult to keep up with–which is why Lodder CPA has a team of tax professionals who do it for you.

This bill provides the opportunity to engage in long-term planning. Yet that still requires a strategy that benefits from thoughtful experts who apply tax law to your specific situation and goals.

Book a free call to review your structure and tax exposure, as well as take advantage of the new opportunities that this extensive bill provides.