Plus: The One Big Beautiful Bill Act, fireworks and tariffs, changes in store for stablecoins, hot dogs, Congressional polls, filing deadlines, tax trivia, and more. |
I don’t know about you, but I had hoped that my Fourth of July weekend would involve some lounging around–it was, after all, a day off.
However, in a show of solidarity that took most by surprise, the House passed the Senate’s version of the One Big Beautiful Bill Act (OBBBA) on July 3 in a narrow 218 to 214 vote. It now moves to the President’s desk–he’s expected to sign it around 5 p.m. ET on July 4, meaning that by the time this lands in your inbox, 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 don’t 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 2025—the 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 “no tax on Social Security”—there 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 deductible—only for tax years 2025 through 2028—for individuals in traditionally and customarily tipped industries. The deduction is limited to $25,000 of reported tips and you don’t have to itemize to claim it. And don’t let those social media threads on “cash only tips” throw you—the 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 credit—that’s 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 wasn’t 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 didn’t make it into the bill? A few things, including a higher tax rate on carried interest and the so-called “millionaire’s tax” 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 Trump’s 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 (that’s 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. It’s 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 China—that’s 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, “tariffs will only drive-up costs for American businesses, local governments, and consumers.” Their biggest worry? The impact on next year when many cities, including Philadelphia, have big plans to celebrate the nation's 250th birthday. That’s 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 won’t say I’m biased, but (whispers), Go Bayern!
Enjoy your weekend,
Kelly |
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This week, a reader asked:
Is a hot dog a sandwich?
I realize this is not a traditional tax question, but since it’s the Fourth of July, I’ll bite (see what I did there?).
It probably won’t surprise you to learn that I’ve written about hot dogs before—for National Hot Dog Day (it’s July 23, in case you’re wondering). But that article focused on a hot dog tax—this 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 “two slices of bread, or the top and bottom sections of a sliced bun, that enclose meat or poultry.” But that’s 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 you’re going to eat them later) are typically exempt.
That tends to be the case in most states—if 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 it’s ready to eat. Ditto in South Carolina. However, in California, hot food is generally taxable while cold food is not—the 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, “Limiting the hot dog’s significance by saying it’s ‘just a sandwich’ is like calling the Dalai Lama ‘just a guy’.
There 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.
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What does a tax professional look like? This week, meet Nicole Davis, CPA. Nicole explains that her job is more than crunching numbers. “I help businesses, medium and small, redesign their business processes by reducing or automating non-value added tasks and focusing on improving productivity and quality,” she explains. Put another way, she advises business owners on operations and accounting.
When asked about the biggest change that she’s seen in the tax profession in the last five years, she calls out “how compliance is pretty much a tech product now.”
“We are no longer chained to keyboard cranking out returns,” she explains. “Our 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? They’re sprinting past the pack.”
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 series—a chance to get to know all kinds of tax professionals and understand that the field of tax is bigger than April 15. If you’d like to nominate a tax professional to be featured, send your suggestion to kerb@forbes.com with the subject: Getting To Know You Tuesday. |
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Statistics, Charts, and Maps |
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| 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. That’s 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 weren’t 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 clear—the 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). What’s at stake? There are 468 seats in Congress up for election in 2026–that’s all 435 House seats and 33 Senate seats. You can bet that both parties will bring up OBBBA—and hope that the numbers are on their side. |
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The One Big Beautiful Bill Act isn’t 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 House’s 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). It’s clear that even if the GENIUS Act passes, the Treasury will need to issue guidance for taxpayers. |
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Tax Filing Dates And Deadlines |
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