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One Big Beautiful Bill Act: Part 1 – What the New Tax Law Means for You

4 min read

Part 1

The One Big Beautiful Bill Act (OBBBA) passed the House on July 3 and was signed into law by President Trump. This comprehensive legislation makes several expiring tax cuts from the 2017 Tax Cuts and Jobs Act permanent while at the same time introducing several temporary provisions through 2028. In this two-part series, we will look at what the OBBBA means for taxpayers. In Part 1, we examine the impact on individual taxpayers; Part 2 will cover the Act’s impact on businesses, trusts, and estates.

Making TCJA Provisions Permanent

The bill primarily focuses on extending individual tax benefits sunsetting after 2025 since business tax benefits from the 2017 TCJA were already made permanent.

Income Tax Rates and Brackets: The current seven-bracket system is becoming permanent, with the highest rate staying at 37 percent.

Standard Deduction: The doubled standard deduction amounts are now permanent. For tax year 2025, this means individuals get $15,000, married couples filing jointly receive $30,000, and heads of household get $22,500.

Child Tax Credit: The credit increases from $2,000 to $2,200 per child, with future inflation adjustments. The credit remains subject to phase-outs beginning at $400,000 for joint filers and $200,000 for other taxpayers.

Alternative Minimum Tax (AMT): The TCJA increases to AMT exemptions are made permanent with inflation adjustments. For 2025, single filers get an $88,100 exemption that phases out at $626,350, while married couples filing jointly receive $137,000 that phases out at $1,252,700.

Changes to Deductions

State and Local Tax (SALT) Deductions: The current $10,000 cap on state and local tax deductions is raised temporarily to $40,000 with 1 percent annual increases through 2029. After that, it reverts to $10,000 in 2030. High earners with modified adjusted gross income in excess of $500,000 face a phase-down of this benefit.

Charitable Deductions: Starting in 2026, taxpayers who don’t itemize can claim an above-the-line deduction for charitable contributions up to $1,000 ($2,000 for married filing jointly). Those who itemize face new limits on deductions with modified carryover rules. The 60 percent contribution limit for cash gifts to qualified charities becomes permanent.

Mortgage Interest: The lower mortgage interest deduction cap of $750,000 (down from the previous $1 million) is made permanent. Interest on home equity debt unrelated to home improvements remains non-deductible.

What’s Eliminated: Several deductions are permanently eliminated, including personal exemptions (which remain at zero), miscellaneous itemized deductions subject to the 2 percent floor (unreimbursed employee expenses, tax preparation fees), and casualty and theft loss deductions except for federal disasters.

New Temporary Provisions (2025-2028)

Senior Deduction: Taxpayers over 65 can claim an additional $6,000 deduction, available whether they itemize or take the standard deduction. This phases out for joint filers earning $150,000 to $350,000 and other taxpayers earning $75,000 to $175,000. According to the White House, this provision will increase the percentage of seniors not paying tax on Social Security benefits from 64 percent to 88 percent.

No Tax on Tips: Workers in traditionally tipped industries who don’t itemize can deduct up to $25,000 of reported tips. This federal income tax deduction doesn’t affect state taxes or payroll taxes for Social Security and Medicare. High earners making over $160,000 are excluded, and the deduction applies to both cash and credit card tips.

No Tax on Overtime: A deduction for qualified overtime pay up to $12,500 ($25,000 for married filing jointly) is available for non-itemizers. This phases out for taxpayers with income over $150,000 ($300,000 for married filing jointly) and disappears entirely at $275,000 for single filers.

Auto Loan Interest: Interest on loans for U.S.-assembled cars becomes deductible up to $10,000, but only for vehicles assembled domestically. The deduction phases out for individuals earning over $100,000 (single) or $200,000 (married filing jointly). Campers and RVs are excluded.

Trump Accounts: New tax-advantaged accounts benefit children under 8. Parents can contribute up to $5,000 annually (adjusted for inflation), with funds locked until the child turns 18. Withdrawals for college, first-time home purchases, or starting a business are taxed at favorable capital gains rates. The government will deposit $1,000 for qualifying U.S. citizen children born between Dec. 31, 2024, and Jan. 1, 2029, with no income limits.

Additional Provisions

529 Education Plans: Tax-free distributions can now cover K-12 expenses at private and religious schools, plus additional qualified higher education expenses, including “postsecondary credentialing expenses.”

Pease Limitations: The previous caps on itemized deductions for high earners are permanently eliminated, replaced by a 35-cent-per-dollar limit on itemized deductions.

Gambling Losses: The ability to deduct gambling losses and related expenses is made permanent, but losses are limited to 90 percent of gains from the taxable year.

Looking Ahead and Conclusion

Tax professionals will be busy helping clients navigate these changes and identify new planning opportunities. The legislation creates a complex mix of permanent and temporary provisions that will require careful tax planning, particularly as the temporary provisions expire after 2028. Taxpayers should consult with tax professionals to understand how these changes affect their specific situations and develop appropriate strategies.

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Examining Differences Between Liquidity And Solvency

3 min read

Differences Between Liquidity and SolvencyLiquidity looks at how well a company can handle paying wages, inventory, and lending repayments via measuring its cash or quasi-cash levels. Put another way, it looks at the health of a company’s cash flow to satisfy short-term financial obligations.

It’s important to be mindful of different sectors and what’s normal or healthy based on the time of year. For example, retail and manufacturing feature functionally focused companies, which means seasonality impacts their dynamic working capital requirements.

1. Current Ratio

The current ratio looks at the ratio of current assets divided by current liabilities. It measures how well a company is projected to pay its present obligations. If the result is 1.0 to 3.0, it’s considered financially well. However, if it’s higher than 3.0, suboptimal asset utilization may be incurred by the company, with a lower than industry average suggesting financial concern. It’s calculated as follows:

Current Ratio = Current Assets/Current Liabilities

The resulting current ratio can signal many things. For a growing current ratio, debt could be growing or cash levels falling. When the current ratio is falling, but not too low, and it’s a smooth downward trend, it can indicate the company is getting more efficient at moving inventory, collecting invoices, and reducing debt levels.

2. Quick Ratio or Acid Test

This is determined by taking the current assets and deducting inventory from them. Once that’s calculated, that number is divided by current liabilities. By looking at the business’ on-demand liquid assets without factoring in inventory, it’s calculated as follows:

Quick Ratio or Acid Test = (Current Assets – Inventory)/Current Liabilities

Resulting calculations above or equal to 1.0 show a company’s stable short-term fiscal health. It’s important to be mindful that a very high result can indicate there’s idle cash that’s not being reinvested, distributed to shareholders, or otherwise put to better use.

Defining Solvency

Solvency refers to the ability of a business’ complete assets to satisfy its complete long-term financial obligations and loan repayments. It’s especially helpful when the business is analyzed internally or externally to determine if the business can survive and thrive during challenging economic times (industry-specific or macro challenges). It helps determine the company’s creditworthiness, whether it’s a good bet for an investment, and/or the risk for companies to take on additional debt. It looks at not only the debt on the company’s financial statements, but also how it relates to equity, tangible assets, and EBITDA.

Debt to Equity

This measures how a company relies on debt versus its equity. It’s used when comparing one company against its industry competitors and how the company’s own ratio has trended over time. Looking at companies within the same industry, companies with a higher ratio indicate a riskier financial situation. Similarly, a ratio that’s too low can indicate a business not using debt to expand its operations effectively.

While liquidity and solvency are different, they are complementary for both owners and managers, along with external parties such as investors analyzing for the next potential investment.

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Navigating Worker Classification: The Critical Difference Between Employees and Independent Contractors

4 min read

Difference Between Employees and Independent ContractorsRunning a small business often means working with a mix of people: some full-time staff, part-time helpers, seasonal workers or project-based contractors. While this flexibility helps manage costs and workload, it creates a crucial decision point that many business owners underestimate: properly classifying each worker.

The stakes couldn’t be higher. Companies like FedEx have paid nearly half a billion dollars for getting this wrong, and even tech giants like Microsoft and Lyft have faced costly legal battles over worker misclassification.

Why Classification Matters More Than You Think

The difference between an employee and an independent contractor goes far beyond semantics; it fundamentally changes your legal and financial obligations.

When someone is your employee, you must:

  • Withhold income taxes, Social Security, and Medicare taxes
  • Pay the employer portion of Social Security and Medicare taxes
  • Potentially provide benefits like health insurance and retirement plans
  • Consider offering stock options or other incentive programs
  • Pay severance or unemployment compensation when appropriate
  • Comply with wage and overtime requirements

When someone is an independent contractor, you:

  • Simply pay them for their work
  • Issue a 1099-NEC form at year-end
  • Have no tax withholding obligations
  • Owe no employment benefits
  • Face no severance obligations

The Control Test: Your North Star for Classification

The Internal Revenue Service uses one primary principle: control. The more control you exercise over how, when, and where work gets done, the more likely that person is your employee.

Think of it this way: if you’re micromanaging the work process, you’re probably dealing with an employee. If you’re only concerned with the end result, you’re likely working with a contractor. The 20 factors identified by the IRS in Revenue Ruling 87-41 can be found in full here.

The IRS Three-Factor Framework

Rather than getting lost in complicated checklists, focus on these three core areas:

1. Behavioral Control – Do you dictate not just what work gets done, but how it’s performed? Employees typically receive training, follow company procedures, and work within established systems. Contractors bring their own methods and expertise.

2. Financial Control – Who controls the business aspects of the work? Independent contractors typically:

  • Invest in their own tools and equipment
  • Handle their own business expenses
  • Have multiple clients or income sources
  • Set their own rates and payment terms

3. Relationship Type – What does your working relationship look like? Employee relationships typically feature:

  • Written employment contracts
  • Ongoing work arrangements
  • Benefits packages
  • Work that’s central to your business operations

Beyond Taxes: The Broader Impact

Worker classification affects more than your tax bill. The Department of Labor’s 2024 updates to the Fair Labor Standards Act mean misclassification can trigger wage and overtime violations. State labor departments are also cracking down, with some states presuming workers are employees unless proven otherwise.

When Things Go Wrong: Your Options

If you realize you’ve made a mistake, don’t panic. You have several paths forward:

  • Get an Official Determination: File Form SS-8 with the IRS for an official ruling on a worker’s status. While it takes at least six months, you’ll have certainty going forward.
  • Claim Safe Harbor Protection: If you had a reasonable basis for your classification and treated similar workers consistently, you may qualify for tax relief under Section 530.
  • Use the Voluntary Settlement Program: The IRS Voluntary Classification Settlement Program lets you reclassify workers prospectively while receiving some tax relief.

The Bottom Line

Your worker classification isn’t just an administrative detail – it’s a fundamental business decision with major financial implications. When in doubt, err on the side of caution or consult with employment law and tax professionals.

The cost of getting expert advice upfront is minimal compared to the potential cost of getting it wrong.

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Addressing the Digital Divide within the Workforce

4 min read

What is Digital DivideThe rapid pace of technological change, particularly the integration of artificial intelligence (AI) in daily workflows, is reshaping the global economy and the nature of work. Today’s digital divide is no longer limited to internet access in underserved communities. The divide has now become a business risk impacting productivity, inclusion, and competitiveness.

What is the Workforce Digital Divide?

The digital divide refers to disparities mainly in access to technology and digital skills. The groups affected by this divide include older people, frontline employees, lower-income staff,f and people in rural or underserved urban areas.

In the workforce context, the digital divide includes a lack of proficiency with essential software, collaborative tools, data analysis, cybersecurity awareness, and other emerging technologies. This means it is no longer sufficient to just provide access to technology. Employees must be equipped with advanced knowledge, skills, and experience that will help leverage technology for more complex tasks.

In most cases, older employees are assumed to require training, but it is crucial to recognize that younger generations, although perceived to be digital natives, may lack specific professional digital skills.

According to the World Economic Forum, there are three skill sets that have become critical: carbon intelligence, virtual intelligence, and artificial intelligence. This also aligns with the high adoption of technologies such as big data, cloud computing, and AI, creating the demand for these new skills.

The digital skills gap is said to cost businesses $1.4 million per week in losses and 44 wasted working days per year as employees struggle with technology-related challenges.

Cost of Digital Skill Gap to Enterprises

While technology is often seen as an equalizer, it can deepen existing gaps if poorly implemented. Lack of digital skills leads to:

  • Reduced productivity – workers who don’t have the digital skills take longer to complete tasks or avoid using the available technology tools.
  • Increased support costs – there are more help desk requests, longer onboarding periods, and fragmented communication workflows that create hidden costs.
  • Barriers to innovation – employees who don’t know how to use digital tools are less likely to suggest improvements or test new solutions.
  • Retention and equity risks – employees who don’t have the necessary digital skills feel disengaged, leading to turnover or missed promotion opportunities.
  • Reputation and customer experience – inconsistent internal digital experiences will often mirror the customer experience.

Main Causes of the Digital Divide

The main causes of the digital divide include:

  • Legacy systems – Businesses that still operate outdated technologies and manual processes. This slows down operations and also limits employees’ ability to develop the latest digital skills.
  • Training gaps – Digital education often focuses on corporate or technical teams. This leaves out the frontline and support staff.
  • Rapid tech evolution – New tools are rolled out faster than employees can adapt, creating friction and frustration.
  • Socioeconomic and educational gaps – Not all employees start from the same digital baseline, and this may be a problem if it goes unaddressed.

Although businesses don’t intentionally create this divide, failing to address it puts performance at risk.

How to Bridge the Digital Divide Gap

Employers must take proactive steps to close this divide by:

  • Prioritizing digital skills as a core competence – empowering the workforce with digital skills boosts confidence and adaptability. All employees, from the frontline staff to mid-level managers, should go through ongoing digital upskilling.
  • Ensuring equal access to tools and connectivity – all employees, regardless of their role or location, should have access to the necessary tools and bandwidth to do their jobs effectively.
  • Redefine hiring and promotions – hiring tech-ready employees only can promote inequality. However, a business can include digital skills training in the onboarding process. Promotion criteria should also be reviewed to ensure tech-savvy employees are not being intentionally favored.
  • Build partnerships and collaborations – partnering with technology providers who offer training resources and user-friendly tools is a great way to support employee upskilling. Organizations may also seek partnerships with government or non-profit initiatives that offer public programs for digital literacy.
  • Build a culture where digital growth is normal – digital transformation is also about creating a culture that encourages continuous learning and embraces change.

Conclusion

The digital divide has become a core business challenge. As technology evolves, companies must move beyond access alone and invest in digital skills, inclusive training, and a culture of continuous learning. Bridging this gap is essential for boosting productivity, retaining talent, and staying competitive in a digitally driven economy.

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Preventing AI Deepfakes, Deterring Fentanyl and Foreign Aggression, and Strengthening Small Businesses

4 min read

Preventing AI Deepfakes, Deterring Fentanyl and Foreign Aggression, and Strengthening Small BusinessesHALT Fentanyl Act (S 331) – On Jan. 30, Sen. Bill Cassidy (R-LA) introduced this bipartisan act in order to close a loophole that allowed clandestine drug manufacturers to evade illegal drug laws by altering the chemical composition of fentanyl. The legislation permanently classifies all versions of fentanyl as a Schedule I substance, much like heroin and LSD. The bill passed in the Senate on March 14 and in the House on June 12. It currently awaits the president’s signature for enactment.

TAKE IT DOWN Act (S 146) – This legislation was signed into law on May 19. Introduced by Sen. Ted Cruz (R-TX) on Jan. 16, the bipartisan bill authorizes the internet removal of visual depictions, generated by AI, of intimate acts of identifiable people without their consent.

No Tax on Tips Act (S 129) – Introduced by Sen. Ted Cruz (R-TX) on Jan. 16, this is a stand-alone bill that features the popular provision to provide a $25,000 deduction to non-itemized tax filers who work in common industries where cash tips represent a portion of their income. Note that Social Security and Medicare taxes (FICA) would still be deducted from those tips. The bill passed in the Senate on May 20 and currently lies in the House, where it conflicts with the current House-passed budget reconciliation bill being debated in the Senate.

Rescissions Act of 2025 (HR 4) – This bill would give Congressional consent to rescind previously approved funding for various government agencies and programs, in alignment with the president’s agenda, including USAID and the Public Broadcasting System (PBS). The bill was introduced on June 6 by Rep. Steve Scalise (R-LA), passed in the House on June 12, and currently lies with the Senate.

Connecting Small Businesses with Career and Technical Education Graduates Act of 2025 (HR 1672) – This act is designed to amend the Small Business Act to require that information relating to graduates of career and technical education programs be relayed to small business and women’s business development centers. The goal is to enable hiring of more graduates of career and technical education programs by small businesses. Introduced on Feb. 26 by Rep. Roger Williams (R-TX), this bill passed in the House on June 3 and is under consideration in the Senate.

CEASE Act of 2025 (H 2987) – Introduced on April 24 by Rep. Robert Bresnahan (R-PA), this legislation would limit (to 16) the number of for-profit small business lending companies (SBLCs) that can offer small business loans without further Congressional approval. America’s Credit Unions support the act because they say the SBA has in the past expanded the SBLC license pool without “sufficient guardrails” to regulate fintech lenders, which have been disproportionately associated with fraudulent loans. The bill passed in the House on June 5 and is now in the Senate.

7(a) Loan Agent Oversight Act (HR 1804) – This bill requires the SBA’s Office of Credit Risk Management to provide Congress with an annual report on SBA 7(a) loans generated through loan agent activity. Specifically, the report would collect and analyze the necessary data to ensure oversight for fraudulent loans, default rates, and risk analysis of SBLC loan agents. The bill was introduced by Rep. Tim Moore (R-NC) on March 3 and passed in the House on June 3. It now lies with the Senate.

American Entrepreneurs First Act of 2025 (HR 2966) – On June 6, the House passed this bill, designed to require SBA loan applicants to provide citizenship status documentation. It was introduced by Rep. Beth Van Duyne (R-TX) on April 17 and is currently under consideration in the Senate.

DETERRENCE Act (S 1136) – Introduced by Sen. Margaret Hassan (D-NH) on March 26, this bipartisan bill would step up criminal penalties for federal crimes funded, conducted, or perpetrated in concert with foreign governments. The acronym stands for “Deterring External Threats and Ensuring Robust Responses to Egregious and Nefarious Criminal Endeavors,” and includes crimes such as murder, kidnapping, or threatening violence against certain present and former federal officials or their families. The act passed in the Senate on June 10 and is under consideration in the House.