Major Federal Tax Changes in 2025 and Beyond: What Businesses and Investors Need to Know.

Sweeping tax reforms under the “One Big Beautiful Bill” (OBBB) and recent legislation are set to reshape the federal tax landscape in 2025, 2026, and beyond. For business owners, investors, and dealmakers, these changes carry significant implications for transaction structuring, compliance strategies, and potential litigation.

Key Federal Tax Law Changes

1. Corporate and Individual Tax Rates

• Corporate tax rates remain at 21%, with the top individual rate staying at 37%.

• Certain alternative minimum tax relief provisions become permanent.

2. Standard Deduction & Credits

• The standard deduction increases in 2025: $31,500 for joint filers, $15,750 for singles.

• The Child Tax Credit rises to $2,200 per child, with inflation adjustments.

• Expanded dependent care credits begin in 2026, and flexible spending caps increase for working parents.

3. SALT Deduction Cap Increase

• State and local tax (SALT) deduction cap increases to $40,000 for 2025–2029 before dropping to $10,000 in 2030.

• Higher income limits apply, but phaseouts affect high earners.

4. New Above-the-Line Deductions

• Starting in 2025, taxpayers may deduct up to $6,000 for senior status, $25,000 for qualified tips, $12,500 for overtime pay, and $10,000 in auto loan interest—subject to AGI limits.

5. Charitable Contribution Adjustments

• New deduction for nonitemizers (up to $1,000), but itemized charitable deductions face new percentage limitations.

• A federal tax credit of up to $1,700 applies for donations to certain K-12 scholarship programs.

6. 529 Education Accounts & New Savings Options

• Annual tax-free K-12 withdrawal limit increases to $20,000; more education expenses qualify.

• New “Trump Accounts” for children allow up to $5,000 annual contributions with government matches.

7. QSBS Enhancements for Investors

• Gains on Qualified Small Business Stock (QSBS) acquired after July 4, 2025, see expanded exclusions—an important consideration for M&A deal structuring.

8. Expiring Green Energy Credits

• Certain clean energy and efficiency credits from the 2022 Inflation Reduction Act will sunset after 2025–2026, impacting renewable energy investments and related acquisitions.

  
  

Implications for Mergers & Acquisitions

Capital Gains & QSBS Opportunities

• Enhanced QSBS exclusions can make equity in qualifying corporations more attractive in acquisitions. Deal timing could determine whether partial or full gain exclusion applies.

Valuation & Deal Structuring

• Changes to SALT caps, deductions, and energy credits can influence EBITDA adjustments, purchase price negotiations, and the tax efficiency of stock vs. asset deals.

Industry-Specific Impacts

• Education, renewable energy, and childcare sectors may see increased M&A activity due to new federal incentives and credits.

  
  

Litigation & Compliance Considerations

IRS Enforcement & Phaseout Rules

• Many deductions come with complex AGI-based phaseouts, creating higher audit risk for high earners and closely held businesses.

• Expect increased scrutiny on QSBS eligibility, charitable contribution compliance, and energy credit claims.

State vs. Federal Tensions

• The SALT deduction changes may lead to renewed legal disputes between high-tax states and the federal government, with potential trickle-down effects for businesses operating in multiple jurisdictions.

  
  

Bottom Line Takeaways: The 2025–2026 tax reforms introduce both opportunities and risks. For business owners, investors, and corporate strategists, proactive tax planning is critical—especially when considering M&A transactions or preparing for potential IRS challenges.

At Spizzirri Law LLC, we help clients navigate complex federal tax changes, structure deals to maximize after-tax value, and defend positions in tax controversies.

Thanks for reading.

MD

The Kiplinger Tax Letter: Vol. 100, No. 15, Pages 1-3