The newly proposed “Big Beautiful Bill Act” aims to transform personal taxation for millions of diligent Americans. Here are some key features:
Standard Deduction Enhancements:
- $15,750 for Single Filers
- $23,625 for Heads of Household
- $31,500 for Married Filing Jointly
- Retroactive to 2024, offering immediate financial relief
Exemption of Tips & Overtime from Federal Tax:
- While these earnings are exempt from federal tax, employment taxes and state/local income taxes may still apply.
Enhanced Section 199A QBI Deduction:
- Increased from 20% to 23%
- Permanently extended, providing long-term stability for small business owners, freelancers, and pass-through entities.
Previously, under the TCJA, this deduction was set to expire in 2025. The passing of this bill makes it permanent and increases the deduction.
The government encourages the growth of small and medium businesses, advocating for the creation of LLCs or S-Corps. Forming an S-Corp allows businesses to benefit from the Section 199A Deduction and exempts profits from Social Security and Medicare tax, though with strict eligibility.
About the Author:
Haresh Ratnagrahi
Chief Strategy Officer
