Latest Federal Tax Overhaul: What CA Business Owners Need to Know

The One Big Beautiful Bill was recently signed into law by President Trump last week on Independence Day and many are curious as to what this entails for Americans. According to White House.gov, this newly enacted law is set to benefit middle and working class Americans who make less than $50,000 per year, making it one of the largest tax cuts in history. For context, this bill proposes approximately $4-4.5 trillion in tax reductions over the next decade, extending the 2017 Tax Cuts and Jobs Act (TCJA). Generous provisions to include elimination of taxes on tips, overtime, and social security. Moreover, increased child tax credits and standard deductions, aimed at positively impacting an estimated 40-million families, while providing relief to seniors, throughout the U.S.

There are also significant provisions, within this bill, that are designed to stimulate small business growth and will attempt to curve operational burdens for pass-throughs, tipped workers, and family-owed companies. Business owners may continue to deduct up to 20% of net income (Quality Business Income Deduction) under IRC § 199A as it relates to income thresholds and SSTB limitations. Under this new bill, businesses might also be eligible to fully deduct qualified capital expenses (equipment, vehicles, software) in the year where these items were first used by the business. In addition, businesses may find more flexibility to invest without complex depreciation schedules as the limit for expensing smaller equipment and software will increase significantly. For service industries, such as salons, restaurants and hospitality, employee tips will be tax free which will help to reduce employer payroll tax liability and simplify reporting requirements on the federal level. However, California may still treat employee tips as taxable income.

Keep in mind, tax law is constantly changing and evolving and this latest legislation is no exception. While the “One Big, Beautiful Bill” presents major opportunities for business owners, it also brings complexity, especially in California. We encourage you to dig deeper and ask the right questions, and consult with your trusted and licensed financial advisor, CPA, and tax attorney before making any strategic moves.

Our firm is closely monitoring developments at both the federal and state levels, and will continue to share insights as the details unfold.

If you have any questions regarding your individual or businesses’ state and/or federal tax return(s)/tax liabilities or received a notice from the IRS, FTB, EDD, CDTFA or any other regulatory agency, please call or email Wilson Tax Law Group, APLC, to setup a consultation with our firm.

Wilson Tax Law Group, APLC is a boutique Orange County tax controversy law firm that specializes in representation of individuals and businesses before federal and state tax authorities with audits, appeals, FBAR, offshore compliance, litigation and criminal defense.  Firm founder, Joseph P. Wilson, is a former Federal tax prosecutor and trial attorney for the IRS and California Franchise Tax Board.  Wilson Tax Law Group, APLC, is comprised of former IRS litigators & Special Agents, and Assistant US Attorneys from the US Attorney’s Office, Central District of California, Tax Division, which at the time handled both civil tax lawsuits and criminal tax prosecutions on behalf of the United States of America.

For further information, or to arrange a consultation please contact: Wilson Tax Law Group, APLC

Tel: (949) 397-2292 (Newport Beach Office) 

Tel: (714) 463-4430 (Yorba Linda Office)

Disclaimer: This blog post is for informational purposes only and does not constitute legal, tax or financial advice. Please consult with a qualified attorney, accountant or financial advisor for specific guidance related to your circumstances.