I donât know about you, but I had hoped that my Fourth of July weekend would involve some lounging aroundâit was, after all, a day off.
However, in a show of solidarity that took most by surprise, the House passed the Senateâs version of the One Big Beautiful Bill Act (OBBBA) on July 3 in a narrow 218 to 214 vote. It now moves to the Presidentâs deskâheâs expected to sign it around 5 p.m. ET on July 4, meaning that by the time comes across your screen, it will be law.
That meant I had a little reading to do: The bill is 887 pages long. Fortunately for you, I read it so that you donât have to. You can review the highlights here. A few nuggets in the meantime:
The bill makes permanent several of the expiring tax cuts from the Tax Cuts and Jobs Act, including individual income tax rates and the increased standard deduction.
The state and local tax deduction cap was boosted to $40,000 with a 1% increase in the cap each year, but only until 2029 (it goes back to $10,000 in 2030). And remember those pass-through entity tax (PTET) deductions that allow pass-through entities (like partnerships and S-corporations) to pay state income taxes at the entity level, rather than individual owners paying at the personal level, effectively reducing the pass-through entity’s income? They were preserved.
There are also new deductions. Seniors are also entitled to claim a new, temporary deduction of $6,000 beginning in 2025âthe deduction would expire in 2028. The deduction begins to decrease when income hits $150,000 for taxpayers filing jointly and $75,000 for all other taxpayers. This is a stand-in for the âno tax on Social Securityââthere is no separate provision. According to the White House, under current law, 64% of seniors do not pay tax on Social Security benefits, and that will bump up to 88% under OBBBA.
Tip income will also be temporarily deductibleâonly for tax years 2025 through 2028âfor individuals in traditionally and customarily tipped industries. The deduction is limited to $25,000 of reported tips and you donât have to itemize to claim it. And donât let those social media threads on âcash only tipsâ throw youâthe deduction applies to cash or cash-equivalent tips (including credit cards).
Workers who receive overtime will be eligible for a deduction for qualified overtime pay of $12,500 ($25,000 for married filing joint filers). The deduction would apply to the tax years 2025 through 2028. The deduction phases out for taxpayers with income over $150,000 ($300,000 for married filing jointly). And yes, this likely means that Form W-2 will be redesigned.
OBBBA eliminated most individual credits for clean energy, including the clean vehicle credits for cars, the energy-efficient home improvement credit, the residential clean energy credit, and the new energy-efficient home credit. The repeal takes effect 180 days from the date of the bill (if the bill is signed on July 4, 2025, that should be December 31, 2025) except for the new energy-efficient home creditâthatâs eliminated 12 months from the date of enactment (so, likely July 4, 2026).
There will also be impacts on colleges and universities. While some will be subject to higher excise taxes, others got something of a tax cut.
And yes, businesses got breaks, too. The only way OBBBA was going to get through the business-friendly Senate was to extend some tax benefits to corporations, too. Keep in mind that many of the TCJA provisions for businesses, like tax cuts, were already permanent, so there wasnât any need to extend those.
(The entire wrap-up is here. You can find out more about how the law might impact you here.)
What didnât make it into the bill? A few things, including a higher tax rate on carried interest and the so-called âmillionaireâs taxâ on those earning over $2.5 million annually. An excise tax on litigation funding, which worried litigation funders and lawyers, was also excluded.
The bill is not cheap. The Congressional Budget Office, a nonpartisan group responsible for scoring the budget, projects that the bill would increase federal deficits over the next 10 years by nearly $3.3 trillion.
With the budget bill now in place, D.C. can now tackle tariffs. Tariffs, especially those on China, have been a central theme of President Trumpâs economic policy. The Trump Administration raised tariffs on Chinese imports as high as 145% earlier this year before dropping the rate to 30% in May (thatâs on top of the existing 25% tariffs for most goods). The two countries reached something of an agreement in May, but that truce is slated to end in mid-August. Itâs uncertain where the numbers might land after that time.
During the last trade war, Trump exempted a few items, including fireworks, from the tariffs. That was important because the U.S. gets almost all of its fireworks from China. And I really do mean almost all. About 99% of fireworks sold in the U.S. come from Chinaâthatâs a huge chunk of the $2 billion industry in the U.S.
Two trade organizations, the National Fireworks Association and the American Pyrotechnic Association (APA), have asked the President to reconsider his stance, writing, âtariffs will only drive-up costs for American businesses, local governments, and consumers.â Their biggest worry? The impact on next year when many cities, including Philadelphia, have big plans to celebrate the nation’s 250th birthday. Thatâs also around the same time as the 2026 FIFA World Cup.
Speaking of soccer, there are still some Club World Cup matches to be played this weekend in Philadelphia, Atlanta, and New Jersey. I wonât say Iâm biased, but (whispers), Go Bayern!
Enjoy your weekend,
Kelly Phillips Erb (Senior Writer, Tax)
Questions
This week, a reader asked,
Is a hot dog a sandwich?
I realize this is not a traditional tax question, but since itâs the Fourth of July, Iâll bite (see what I did there?).
It probably wonât surprise you to learn that Iâve written about hot dogs beforeâfor National Hot Dog Day (itâs July 23, in case youâre wondering). But that article focused on a hot dog taxâthis question is quite different.
For most folks, the question of whether a hot dog is a sandwich hinges on the bread. In fact, Merriam-Webster defines a sandwich as “two or more slices of bread or a split roll having a filling in between”. This definition would most definitely include a hot dog.
The U.S. Department of Agriculture (USDA) generally agrees that a sandwich is âtwo slices of bread, or the top and bottom sections of a sliced bun, that enclose meat or poultry.â But thatâs where it gets tricky. Does an open-top hot dog bun make the cut? It might not. But then, neither would a grilled cheese or PB&J, since neither of those includes meat or poultry.
The question, however, does matter. In addition to being a fun philosophical question, it has real implications for tax purposes. If a hot dog is considered a sandwich, it may be taxed under the same rules as other sandwiches. For example, in New York, hot dogs are considered sandwiches for sales tax purposes so long as they are heated and served on a bun.
The presence of bread also makes a huge difference in my own state of Pennsylvania. The sale of ready-to-eat or heated hot dogs is generally taxable, while hot dogs sold as grocery or deli items (meaning that youâre going to eat them later) are typically exempt.
That tends to be the case in most statesâif a hot dog is heated, served on a bun, and sold as a ready-to-eat meal, it’s typically considered a prepared food item and subject to sales tax. But temperature can be a difference-maker. In Massachusetts, a hot dog can still be taxed if cold, so long as itâs ready to eat. Ditto in South Carolina. However, in California, hot food is generally taxable while cold food is notâthe opposite is true for take-out drinks, where hot drinks are generally taxable and cold drinks are not.
So, is a hot dog a sandwich? For sales tax purposes, the answer is almost always yes. As for me? I also say no (I have very strong feelings about what a sandwich looks like). For the record, the National Hot Dog & Sausage Council agrees with me, opining, âLimiting the hot dogâs significance by saying itâs âjust a sandwichâ is like calling the Dalai Lama âjust a guyâ.âThere you have it.
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Do you have a tax question or matter that you think we should cover in the next newsletter? We’d love to help if we can. Check out our guidelines and submit a question here.
Getting To Know You
What does a tax professional look like? This week, meet Nicole Davis, CPA. Nicole explains that her job is more than crunching numbers. âI help businesses, medium and small, redesign their business processes by reducing or automating non-value added tasks and focusing on improving productivity and quality,â she explains. Put another way, she advises business owners on operations and accounting.
When asked about the biggest change that sheâs seen in the tax profession in the last five years, she calls out âhow compliance is pretty much a tech product now.â
âWe are no longer chained to keyboard cranking out returns,â she explains. âOur job now is reading the story behind the numbers, then translating that into action steps on cash flow, entity tweaks, deal timing, and wealth plays. Firms that buddy-up with the bots and lean harder into human smarts? Theyâre sprinting past the pack.â
Nicole, who was also included on our Forbes Best in State Top CPAs List, is the next professional to be featured in our rebooted Getting To Know You Tuesday seriesâa chance to get to know all kinds of tax professionals and understand that the field of tax is bigger than April 15. If youâd like to nominate a tax professional to be featured, send your suggestion to kerb@forbes.com with the subject: Getting To Know You Tuesday.
Statistics, Charts and Graphs
Congress may have some more work to do. A recent Quinnipiac University national poll of registered voters found that 53% of voters opposed the One Big Beautiful Bill Act, while 20% had no opinion.
Thatâs consistent with a Pew study that found that nearly half (49%) of voters oppose the bill, while 29% favor it. Another 21% are not sure.
Whether respondents supported the bill tended to hang on the specific provisions. Most supported an increase in the state and local tax (SALT) deduction, along with higher taxes on colleges and universities. However, voters werenât enthusiastic about losing green tax credits, opposing the end of consumer credits for electric vehicle purchases, and business credits for wind, solar, and nuclear energy production.
Details about the bill have been less than clearâthe talking points in the press have struck a chord, but across most polls, providing more information about the bill has produced less support. In fact, support among MAGA voters dropped by more than 20% when spending cuts were featured in the question.
Why does any of this matter? The 2026 midterm elections will be here soon (primaries are already heating up). Whatâs at stake? There are 468 seats in Congress up for election in 2026âthatâs all 435 House seats and 33 Senate seats. You can bet that both parties will bring up OBBBAâand hope that the numbers are on their side.
A Deeper Dive
The One Big Beautiful Bill Act isnât the only business that Congress has on its plate this summer. Last month, the U.S. Senate passed the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act. The Act now heads to the House of Representatives to be reconciled with the Houseâs Stablecoin Transparency and Accountability for a Better Ledger Economy (STABLE) Act.
Stablecoins are a class of cryptocurrency designed to maintain a stable value by tying their worth to traditional assets, such as the U.S. dollar. This tie reduces the volatility associated with other cryptocurrencies, like Bitcoin.
Stablecoins peg their value on a 1:1 basis to an underlying asset, meaning that for every stablecoin in circulation, there is an equivalent amount of that asset held in reserve to back it. These coins are housed and exchanged on decentralized networks (blockchains), which act as a transparent ledger to account for all transactions. Unlike traditional payment systems, such as credit cards or wire transfers, these decentralized structures do not need intermediaries, which means that consumers can move funds rapidly and without additional intermediary and exchange fees. It also means that there may not be a reporting trail.
The GENIUS Act introduces a federal regulatory framework that provides clearer rules for operation, issuance, and reserve requirements. If the legislation passes, it could lead to the mainstream adoption of stablecoins for digital payments and drive growth in the stablecoin industry. However, it will also give rise to some tricky tax questions, and require some clarity when it comes to reporting requirements (especially those that apply to foreign assets, like FATCA). Itâs clear that even if the GENIUS Act passes, the Treasury will need to issue guidance for taxpayers.
Tax Filings And Deadlines
đ September 30, 2025. Due date for individuals and businesses impacted by recent terrorist attacks in Israel.
đ October 15, 2025. Due date for individuals and businesses affected by wildfires and straight-line winds in southern California that began on January 7, 2025.
đ November 3, 2025. Due date for individuals and businesses affected by storms in Arkansas and Tennessee that began on April 2, 2025.
Tax Conferences And Events
đ July 1-September 16 (various dates), 2025. IRS Nationwide Tax Forum in Chicago, New Orleans, Orlando, Baltimore and San Diego. Registration required (discounts available for some partner groups).
đ July 18-19, 2025. Tax Retreat “Anti Conference.” Denver, Colorado. Registration required.
đ July 21-23, 2025. National Association of Tax Professionals Taxposium 2025. Caesars Palace, Las Vegas, Nevada. Registration required.
đ July 22-24, 2025. Bridging the Gap Conference. Denver Marriott Tech Center, 4900 S. Syracuse Street, Denver, Colorado. Registration required.
đ July 28-30, 2025. Tax Summit 2025. Grand America Hotel, Salt Lake City. Registration required.
đ September 17-18, 2025. National Association of Tax Professionals Las Vegas Tax Forum. Paris, Las Vegas, Nevada. Registration required.
Trivia
Which midwestern state clings to a 1942 ban on fireworks, while neighboring states have boasted millions of dollars in sales tax revenue from selling the Fourth of July staple?
(A) Illinois
(B) Indiana
(C) Iowa
(D) Ohio
Find the answer at the bottom of this newsletter.
Positions And Guidance
The IRS has published Internal Revenue Bulletin 2025-27.
The American Institute of CPAs (AICPA) submitted comments to the U.S. Treasury related to the implementation of Executive Order 14247, which requires the Treasury to stop issuing and receiving paper checks. The AICPA has supported the transition to electronic payments for federal disbursements and receipts; however, there are challenges associated with implementing a system that requires taxpayers to have a U.S. bank account to participate. Mandating a U.S. bank account for electronic tax payments could exclude vulnerable taxpayers, such as seniors and the âunbankedâ population, while international banking rules currently limit automated clearing house (ACH) transfers with non-U.S. financial institutions.
Noteworthy
The IRS and its Security Summit partners announced the launch of the special summer “Protect Your Clients; Protect Yourself” campaign to help tax professionals protect themselves against new and ongoing threats involving tax-related identity theft. Now in its tenth year, the Security Summit partners continue to work together to raise awareness about data theft in the tax professional community.
âThe IRS, the states and the nationâs tax industry through the Security Summit partnership continue their decade-long effort to protect taxpayers,â said IRS Commissioner Billy Long. âThis effort is a testament to what can be accomplished when business and government work together to educate the taxpayer and raise awareness of this wide-ranging problem.â
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If you have tax and accounting career or industry news, submit it for consideration here or email me directly.
In Case You Missed It
Here’s what readers clicked through most often in the newsletter last week:
- Senate Tax Bill Preserves SALT Workaround For Traders And SSTBs
- What Comes Next For The One Big Beautiful Bill Act
You can find the entire newsletter here.
Trivia Answer
The answer is (A) Illinois.
Since 1942, Illinois residents have crossed state lines into border states to stock up on fireworks. Its neighboring state, Indiana, has averaged approximately $5.4 million annually from 2019 through 2023 in sales tax revenue.
Fireworks are a $3 billion industry in the U.S. Most of those sales are consumer fireworks, totaling more than $2.4 billion in 2024.
Feedback
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