ACT 633 Week 8 discussion

Overview

This is a 2 part post. One is the initial discussion and the second is a response to the same topic. Ensure initial post and response is in APA format.6th edition.

The topic is as follows "As future tax professionals, understanding recent legislative changes is essential for your expertise. The One Big Beautiful Bill (OBBB), signed into law on July 4, 2025, introduces significant updates to the US tax code, building on the 2017 Tax Cuts and Jobs Act (TCJA) and adding new provisions that affect individuals, businesses, and international taxation. In this discussion post, please list 12 of the key tax provisions within the law. For each key provision, please write a short paragraph evaluating the benefits or potential challenges."

Respond to the following post from Javion."

• Qualified Tips Deduction
• Senior Deduction (65 or older)
• Qualified overtime deduction
• Permanent QBI deduction
• Child Tax Credit
• Deduction Increase (SALT)
• Modified Business Expenses expanded
• Gift and Estate Tax exemption (expansion)
• Excise Tax (1% remittance)
• Vehicle Loan Interest Relief (Business)
• Employee Retention Credit (ERC)
• Individual TCJA Tax Rates

• The benefits of the of the qualified tips deduction Is that workers who have a tip only job are allowed to deduct up to $25,000 from their taxable income on reported tips earnings. This provision allows for people who depend on tips to essentially increase their take-home earnings without huge tax cuts and making things harder for them, this tax relief would be a major benefit for those types of workers. Another benefit of the qualified tip deduction is that it may promote accurate reporting of tips earned to the IRS which will increase the compliance ratings on the business from the IRS. Since this provision is in place, this will give taxpayers a better advantage of being eligible for other credits if they have a limit on their income, this is because the taxable income is lowered through the deductions. Finally, this provision gives workers (tips only) a better advantage in their income and finances from a tax/revenue perspective.
• The challenge associated with this provision is that the deduction for high income taxpayers is phased out which makes it ineffective for the senior citizens who are more financially stable. Also, another issue is that this specific provision is that it expires in 2028, this means everything must be done on time and accurately for the benefits to be maximized from withdrawals and income. If the taxpayers don’t understand the rules/regulations to this provision it can cause reporting issues for the IRS leading to adjustments or imposing penalties towards the taxpayer (seniors). Finally, because this provision is temporary (expires in 2028) this can create issues for seniors who are trying to create a long-term plan regarding retirement.
• Qualified overtime deduction benefit gives employees the option to deduct a portion of their overtime pay from their taxable income, up to $25,000 for joint filing and $12,500 for single filing. This benefit also increases employee net pay who work overtime often and decreases any tax issues that may occur overall. Overtime deduction gives employees an opportunity to work extra hours and make extra money without facing the issue of higher tax rates for their extra income. Finally, the qualified overtime deduction benefits those who take advantage of increasing their finances which in this case promotes efficient work and make overtime worth the money with lower taxes coming out.
• The challenge presented with the QBI deduction being permanent is that the restrictions can make it harder for tat payers to figure out what limitations do or don’t apply to them as filers which will cause an increase in compliance issues with the IRS. Also, the QBI deduction in this case will most likely encourage business owners to file their business taxes based upon the advantages of the situation (tax structure) rather than how the company operated and correctly filing accurate information. Another challenge is that the QBI deduction can be problematic due to different components such as the phase outs, phase ins, income limit, and tax regulations based on the type of business that’s being operated. Overall, the QBI deduction will influence business owners to make decisions that help them strategize things to meet the tax standards rather than what their business needs.
• The benefit of the child tax credit regarding the OBBB is that it provides taxpayers with a rise in the child tax credit of $2,200 per child that is eligible in this case, reducing their tax burden and giving taxpayers better financial relief. Another benefit to this child tax credit is that it allows taxpayers to keep majority of their income and be able to take care of their children in terms of healthcare, expenses, and school. The increase in this tax adjustment also provides families with long term stability for the cost of living and ensures that the children involved have some type of relief as well.
• The SALT deduction increase provision can create some minor issues and challenges, the problem Is that the SALT being increased create problems in the future because the $10,000 credit isn’t until 2029, leaving on room for long term strategies. Also, because of the increased deduction, taxpayers must be more attentive to details each year when filing due to the phase outs, this is from the taxpayers being in a lower tax bracket (high earning taxpayer). When it comes to paying taxes, tax advisors will have to adjust to the new SALT guidelines increasing the workload they have to do when helping their clients calculate deductions (maximum) and filing taxes. Lastly, these guidelines being in place temporarily will promote taxpayers to change things they do when filing or paying their SALT in advance, thus making things more difficult.
• With an increase in the expense guidelines for small businesses being an advantage, there are still some challenges present that wouldn’t benefit the long-term goal tax wise. The problem that can arise from doing this is that a business would feel encouraged to deprecate their assets as fast as possible after purchasing it. This leads to them not being able to deduct from their taxable income because they have little to no depreciation to deduct from and in the future, they will have a higher taxable income. Another problem is that a business would have to monitor the guidelines on how and what assets qualify with the phaseout limits, doing this can create difficulties sand they would want to avoid any tax results they don’t like or penalties/fees.
• The benefit of increasing the GET is that less estates will have to owe estate taxes on a federal level, this allows taxpayers and businesses to come up with long term strategies for paying estate taxes in the future. Thether benefit under the gift and estate tax exemption is that it allows people to gift assets to someone else without the hassle of paying high transfer taxes, this is due to the limit being increased and help families maintain revenue and accomplish their goals. The gift and estate tax exemption is a provision that is permanently set in place which means in the long-term aspect things will be better financially and keep things within the family. Overall, the expansion on this exemption provides taxpayers with better flexibility when creating strategies for transferring and keeping wealth in the company or family.
• The challenges present with tacking on 1% on remittance is that people with low income would have a hard time sending family in another country anything due to a portion of the transfer being used by the 1% tax increase, this creates financial issues for immigrants. Another challenge with the excise tax increase, people may be encouraged to do unethical/informal things to the method of transfer which can make things much more difficult regarding compliance and a major decrease in overseeing this operation. The excise tax increase also may require any place that handles money transfer services to implement the new rules/regulations in place, this may cause the transfer services fees to be increased leading to a decrease in customers in the future. Finally, while the excise tax helps the federal government generate revenue, this new rule will create problems on an administration level that will lead to the population being disproportionate and make it extremely hard to enforce.
• The vehicle loan interest relief provision gives taxpayers tax benefits on their personal vehicle if they purchased one before the OBBB went in effect July 2025, the benefit covers interest deduction on vehicles. This provision is nice for taxpayers because it gives them an opportunity to make better financial decisions when buying a car as well as ensuring they receive the best possible interest rate at the time or after purchase due to older tax laws. Another benefit of this provision is that it offers short-term relief to middle-class consumers and encourages them to follow the new guidelines set in place as a taxpayer, thus making the transition easier to handle. Vehicle loan interest relief gives taxpayers a better tax filing by allowing them to reduce their taxable income up to $10,000 in deductions, this lowers the tax liability (federal income) they may face when filing taxes. Finally, this provision overall provides taxpayers with affordability of a vehicle and, they are getting better rewards when they purchase a domestic vehicle.
• The ERC provision under the OBBB gives businesses the opportunity to still pay their employees and be refunded through tax payroll credits during financial burdens the company could face. This helps businesses lower their payroll expenses, generate and manage Stroger cash flow, and provide employes with job stability, giving the company better financial performance on small business scale. Promoting the ERC gives businesses better operations on a day-to-day basis, allowing them to focus and plan effective strategies, and give employes job security without the company having to pay wages on full. Overall, The ERC give small businesses the support needed for both them and the employees during economic hardship while still encouraging long term growth and stability.
• The benefit of TCJA individual rates being permanent gives taxpayers the ability to make better decisions in the future based on monitoring it and predicting the outcome. With the tax rate increase consistently happening each year, this new approach with a stable tax rate allows for long term goals to be met with better financial planning without having to worry about any potential tax increases. Being that the tax rates are permanent this reduces any compliance issues a tax advisor may face because the provision has no expiration date and the rates never changed, creating better tax filing and returns. Lastly, lowering the TCJA rates and making them permanent provide taxpayers with relief and retention to their revenue, thus contributing to a better economic situation for taxpayers.

“Therefore, if anyone in Christ, he is a new creation. The old one passed away, behold, the new has come” (2 Corinthians 5:17)

“An intelligent heart acquires knowledge, and the ear of the wise seeks knowledge” (Proverbs 18:15)

References:

One, big, beautiful bill provisions. Internal Revenue Service. (n.d.-a). https://www.irs.gov/newsroom/one-big-beautiful-bill-provisions

PricewaterhouseCoopers. (n.d.). Overview of Senate-passed version of H.R. 1, the “One big beautiful bill act.” PwC. https://www.pwc.com/us/en/services/tax/library/overview-of-senate-passed-version-of-hr-1-one-big-beautiful-bill-act.html

2 corinthians 5:17 ESV - - Bible Gateway. (n.d.). https://www.biblegateway.com/passage/?search=2%2BCorinthians%2B5%3A17&version=ESV

Proverbs 18:15 ESV - - bible gateway. (n.d.). https://www.biblegateway.com/passage/?search=Proverbs%2B18%3A15&version=ESV"