Archives for July 2025

Breaking Down The One Big Beautiful Bill for Businesses

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Recently enacted tax legislation known as The One Big Beautiful Bill was passed by Congress and signed into law on July 4, 2025.

This new legislation brings immediate relief in several key areas while creating strategic decisions that require prompt attention. Here’s a summary of the most critical provisions that may impact your business:

Research and Development (R&D) expensing. Businesses can once again fully deduct domestic R&D expenses in the year they’re incurred. Small businesses can amend 2022-2024 tax returns to claim immediate R&D deductions previously capitalized which may generate refunds and improve cash flow.

Large corporations cannot amend prior years but can take the full remaining deduction in 2025 or split it between 2025 and 2026.

Research credit coordination. New rules require choosing between claiming the full R&D tax credit or taking the full expense deduction, as you can no longer maximize both.

If you claim the Section 41 research credit, you must reduce your R&D deductions by the same amount. Alternatively, you can elect a smaller credit to preserve your full deduction.

Business interest limitation. The bill’s business interest deduction now limits returns to the more favorable 30% of EBITDA calculation, reversing the restrictive EBIT-based rules that had been in effect since 2022. This change is permanent, eliminating previous uncertainty about future policy shifts.

The key improvement is that depreciation and amortization are back in the calculation base, increasing the threshold for allowable interest deductions. This benefits manufacturers and other capital-intensive businesses that were hit hard by the previous rules.

But there’s one important clarification: Capitalized interest (interest added to asset costs rather than immediately deducted) must now be included in the limitation calculation, with the 30% cap applied to capitalized interest first before current deductible interest.

Foreign-derived income changes. The foreign-derived income deduction is being scaled back in two phases. The deduction rate drops permanently from 37.5% to 33.34% for tax years beginning after 2025. And starting mid-2025, income from selling intangible property and depreciable assets won’t qualify for the deduction, and only expenses directly tied to qualifying foreign income can reduce the benefit.

The 100% bonus depreciation is back for all qualifying equipment and property purchased after that date. This reverses the phase-down schedule that reduced the benefit to 60% in 2024 and 40% in early 2025. The reinstatement applies to plant, equipment and tangible personal property, including both new and used assets. There’s also a special elective provision for manufacturing and refinery property placed in service through 2031, giving these businesses additional flexibility in timing their depreciation benefits.

International tax changes. Starting in 2026, Global Intangible Low-Taxed Income (GILTI) rules are being renamed Net CFC Tested Income (NCTI), affecting businesses with foreign operations.

The deduction rate drops from 50% to 40%, which increases the effective tax rate from approximately 13.1% to 12.6% (around 14% when factoring in foreign tax credits). The previous exclusion for tangible asset investments is eliminated, meaning all foreign income is now subject to tax under these rules.

In addition, the foreign tax credit rate increases from 80% to 90%, and rules for allocating deductions against this income are being tightened to exclude interest and R&D expenses from the calculation base.

Next steps for your business

The One Big Beautiful Bill offers substantial tax relief, but maximizing these benefits requires proactive planning and strategic decision-making now. The professionals at Magone & Co can help. Reach out to our knowledgeable team or give us a call today at (973) 301-2300.

This document is for informational purposes only and should not be considered tax or financial advice. Be sure to consult with a knowledgeable financial or legal advisor for guidance that is specific to your business situation.

One Big Beautiful Bill: What Every Family Should Know About the New Tax Law

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The tax landscape just shifted — dramatically.

President Trump recently signed the “One Big Beautiful Bill” into law, bringing the most significant tax changes in years. From employees and families to entrepreneurs and charitable donors, this new legislation may impact your 2025 tax return and beyond.

Let’s break down the key changes: 

Your tax rates just got locked in. Remember those lower tax rates from 2017 that were set to expire? They’re now permanent. The top tax rate stays at 37%, and all the existing brackets will continue to adjust for inflation each year. So what you’re paying now is what you’ll keep paying.

More of your income is protected from taxes. Starting with your 2025 tax return, the standard deduction increases to:

  • $15,750 for single filers
  • $31,500 for married couples filing jointly

This means more of your income is shielded from federal taxes, and fewer people will need to itemize deductions to get the highest tax benefits.

There are new ways to save on charitable giving. Even if you don’t itemize deductions, you can now deduct charitable contributions. In fact, you can deduct up to $1,000 ($2,000 for married couples) for cash donations to qualified public charities, right off the top.

Plus, the Educational Choice for Children Act creates a tax credit (not just a deduction) of up to $1,700 for donations to scholarship organizations that help families pay for private K-12 education.

There’s an increase in state tax relief (temporarily). If you live in a high-tax state and itemize deductions, you’ll want to pay attention to this one. The cap on state and local tax (SALT) deductions has been temporarily raised to $40,000 through 2029 — a huge jump from the previous $10,000 limit. Note that this benefit phases out for higher earners with income starting at $500,000, so not everyone will qualify for the full amount.

Other changes to be aware of:

Service workers may deduct up to $25,000 in tip income while overtime workers may deduct up to $12,500 in overtime pay

  • Car buyers can deduct up to $10,000 in interest on loans for U.S.-made vehicles
  • Effective for 2025 through 2028, individuals who are age 65 and older may claim an additional deduction of $6,000
  • Parents of children born between 2025 and 2028 can open special savings accounts that come with a $1,000 government-funded starting deposit
  • Child tax credit increases to $2,200 per child
  • The estate and gift tax exemption jumps to $15 million per person

Guiding you through change

If you have questions about how these changes affect your family or your long-term financial plans, we’re here to help. Contact the experts at Magone & Co to ensure you’re taking advantage of every benefit available to you under the new law. Reach out  or give us a call today at (973) 301-2300.

This document is for informational purposes only and should not be considered tax or financial advice. Be sure to consult with a knowledgeable financial or legal advisor for guidance that is specific to your business situation.

Maximizing Financial Aid: Strategies Every Family Should Know

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Navigating the complex world of college financial aid can be overwhelming for parents and students alike. But with a holistic, proactive approach, you can significantly improve your aid potential and reduce college costs.

Here are some tips and strategies to help transform the college dream of an affordable education into your family’s reality.

Plan early. Financial aid preparation is a multi-year process. Ideally, begin strategic planning as early as freshman or sophomore year of high school. This includes:

  • Carefully managing family assets and income
  • Understanding how different financial moves can impact aid eligibility
  • Exploring available scholarship opportunities and eligibility

Understand the Free Application for Federal Student Aid (FAFSA) calculation. The FAFSA is the form you complete, but the Expected Family Contribution (EFC) is the output that results from the information you provide on that form. The EFC is critical in determining aid eligibility. The formula heavily weights income, but there are several factors that influence this calculation:

  • Parent’s income and assets
  • Student’s income and assets
  • Number of children in college
  • Family size and household income

Remember, not all assets are treated equally. Retirement accounts, primary home equity and life insurance are typically excluded from aid calculations, while investment accounts and cash savings tend to carry more weight.

Manage assets and income strategically. Smart financial positioning in the years before college can dramatically improve aid outcomes. To maximize aid potential, consider these financial strategies:

  • Avoid large cash transfers to student accounts before filing FAFSA
  • File FAFSA using prior-prior year tax returns, allowing time to plan
  • Prioritize parent-owned 529 plans, which have minimal impact on aid calculations
  • Consider timing of bonuses, capital gains or other significant income when possible
  • If possible, defer income or accelerate deductions in the years preceding your FAFSA submission

Explore multiple aid sources. Federal aid is just one piece of the college funding puzzle. It’s important to diversify your approach.

  • Research institutional scholarships and merit-based scholarships
  • Investigate state-specific grant programs
  • Consider private scholarship opportunities
  • Explore work-study programs

Compare colleges. The right school choice can make a substantial difference in your overall financial commitment. Not all colleges distribute aid equally.

  • Review financial aid packages from multiple schools
  • Look beyond top-tier schools to institutions offering more generous aid packages
  • Consider schools where your student might be a top candidate for merit aid

Repeat the process every year. Financial aid isn’t a one-time event. To continue receiving aid and optimizing your aid amount, it’s recommended that you:

  • Appeal financial aid decisions if family circumstances change
  • Reapply for FAFSA each year
  • Explore additional funding sources annually

An action plan for college affordability

Remember, every dollar saved in financial aid is another dollar in your pocket. With careful planning, you can make college more affordable and accessible for your child.

 

W-2 or 1099? Navigating Worker Classification with Confidence

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Are you classifying your workers correctly as W-2 employees or 1099 independent contractors? This distinction carries costly legal implications and tax consequences that impact both your business and your workers.

Here’s a breakdown of the differences and why they matter to your bottom line.

The basics: W-2 vs. 1099

A W-2 employee works directly for your company under your control and direction. You determine when, where and how they perform their duties. On the other hand, a 1099 contractor operates as their own business entity, providing services to your company while maintaining autonomy over how they complete their work.

But how does the IRS determine worker status? When evaluating whether someone is an employee or independent contractor, the IRS analyzes three critical categories:

  • Behavioral control. Who directs how work is performed, including instructions, training methods and supervision requirements?
  • Financial control. Who controls the economic elements of the work relationship, examining factors like the worker’s investment, opportunity for profit or loss and payment structure?
  • Type of relationship. How do both parties view their connection, considering factors like relationship permanency and provision of traditional employee benefits such as insurance and paid time off?

The business-wide impact of worker classification

Each classification carries its own distinct set of requirements and implications that directly impact your bottom line, compliance status, management approach and more.

Taxes. As an employer of W-2 employees, you withhold income taxes, Social Security and Medicare from their paychecks and contribute the employer’s portion of these taxes. You pay federal and state unemployment taxes and must issue a W-2 form by January 31 showing annual wages and tax withholdings.

In comparison, 1099 employees are responsible for their own tax obligations, including self-employment taxes. There are no FICA or unemployment tax requirements.

Cost. While hiring independent contractors might seem less expensive no benefits costs, reduced payroll taxes), the calculation isn’t always straightforward.

Contractors typically charge higher rates to cover their self-employment taxes and benefits. However, the flexibility of scaling contractor relationships up or down based on business needs can be a valuable perk.

Control and legal protection. With W-2 employees, you maintain greater control over work processes, schedules and training. But this control comes with additional legal protections under employment laws.

Independent contractors, however, offer expertise without requiring the same level of day-to-day management.

Business planning. W-2 employee relationships typically create more stable, consistent teams but require longer-term financial commitments. Independent contractor relationships provide greater flexibility and specialized expertise that can be brought in precisely when needed.

When developing both short and long-term business plans, understanding the appropriate mix of employment relationships becomes a strategic advantage for resource allocation and organizational agility.

The right choice for your business

When it comes to worker classification, getting it right the first time is always less expensive than fixing it after an audit. Ask your CPA for clarity, or give us a call at (973) 301-2300 to see how our business advisory services can help you remain compliant with employment regulations.