Important Disclaimer: This legislation HAS PASSED CONGRESS and is headed to the President's desk. President Trump is expected to sign the bill on July 4, 2025, making it law.

Last updated 7.3.25 - Bill passed House 218-214, goes to President Trump for signature on July 4th

As an insurance agency owner, you've been watching the tax legislation with keen interest. The final bill has now passed both chambers of Congress and will be signed into law by President Trump on July 4, 2025. This comprehensive tax package will significantly impact how you run your business and manage your personal finances. Let's break down what this bill contains and what it means for your agency.

If you're ready to plan your tax strategy for 2025, contact your current Client Advisor or schedule a free demo with our team to discover how we can partner together to manage your financials.

FINAL UPDATE - July 3, 2025

IT'S DONE. The tax bill has passed both chambers of Congress and is headed to President Trump's desk:

• Senate Vote: Passed Tuesday, July 1st (51-50 with VP Vance casting tie-breaking vote)
• House Vote: Passed Thursday, July 3rd (218-214)
• Presidential Signature: Expected Friday, July 4th, 2025
• Effective Date: Many provisions take effect retroactively to January 1, 2025

This represents the largest tax reform package for insurance agencies and professional services in over a decade.

PREVIOUS UPDATES

June 29-30 Updates: The Senate Budget Committee made a significant reversal on the SALT cap, now matching the House at $40,000 (up from $10,000) but with important differences:

• SALT Cap: Senate increases to $40,000 through 2029, then reverts to $10,000 (includes phase-down for high earners)
• PTET Workarounds: Senate completely removes restrictions on pass-through entity tax workarounds
• Standard Deduction: Made retroactive to 2025 (slight reduction from earlier Senate version)

Original Senate Finance Committee changes (June 16):

• QBI Deduction: Senate keeps at 20% (vs. House increase to 23%)
• Bonus Depreciation: Senate makes permanent (vs. House temporary 2025-2029)
• Tips/Overtime: Senate adds caps and income phase-outs
• Senior Deduction: Senate increases to $6,000 (vs. House $4,000)

Detailed analysis of all changes appears throughout this updated post in highlighted sections.

TLDR (Too Long Didn't Read)

This legislation extends most Tax Cuts and Jobs Act (TCJA) provisions permanently and introduces several new tax breaks. For insurance agency owners, the most significant impacts are the permanent 20% QBI deduction, $40,000 SALT deduction caps through 2029, complete preservation of PTET workarounds, permanent bonus depreciation, and potential benefits from tip/overtime exemptions for qualifying employees.

FINAL OUTCOME 7.3.25: A very large positive financial impact for insurance agency owners and small business owners alike. The final bill provides SALT cap relief matching the House ($40,000 through 2029), complete preservation of PTET workarounds (allowing unlimited state-level strategies to bypass SALT caps), permanent business provisions (bonus depreciation, R&D expensing, 20% QBI deduction), and enhanced benefits for small business stock and manufacturing. The main trade-off: QBI deduction stays at 20% instead of increasing to 23%, but becomes permanent with full planning certainty.

Key Provisions That Could Impact Insurance Agencies

Section 199A (QBI) Deduction Enhancement

House Version:

• Current Law: 20% deduction on qualified business income
• Proposed Change: Increase to 23% permanently

FINAL SENATE UPDATE 6.30.25: The Senate Budget Committee version keeps the QBI deduction rate at 20% permanently, not increasing it to 23% as proposed in the House version. However, the Senate bill introduces an inflation-adjusted minimum deduction of $400 for taxpayers who have at least $1,000 of QBI from one or more active trades or businesses in which they materially participate.

What This Means for You: If your agency operates as a pass-through entity (LLC, S-Corp, partnership), the House's 3-percentage-point increase could provide meaningful tax savings. For an agency with $500,000 in qualified business income, this could mean an additional $15,000 in deductions annually. Under the final Senate version, you would not get this additional benefit, but you would get the permanent extension, new minimum deduction, and significant SALT cap relief that may more than offset the lower QBI rate.

State and Local Tax (SALT) Deduction Changes

House Version:

• Current Law: $10,000 cap per household
• Proposed Change: Increase to $40,000 per household ($20,000 for married filing separately)

SENATE UPDATE 6.20.25: The Senate Finance Committee version of the bill would retain the current $10,000 cap, but this provision is still being negotiated. The $10,000 cap is largely considered placeholder language while the Senate negotiates with House holdouts on this issue.

UPDATE 6.30.25: The Senate Budget Committee version makes a major reversal and now increases the SALT cap to $40,000 through 2029, then reverts to $10,000 in 2030. However, the Senate version includes important differences from the House version:

Senate SALT Provision Details:

• 2025: $40,000 cap
• 2026: $40,400 cap (adjusted for inflation)
• 2027-2029: Increases by 1% annually
• 2030+: Reverts to $10,000
• Phase-down: For taxpayers with MAGI over $500,000, the deduction is reduced by 30% of the excess, but never below $10,000

Critical Difference - PTET Workarounds: The Senate Budget Committee version completely removes restrictions on passthrough entity tax (PTET) workarounds, unlike both the House version and the earlier Senate Finance Committee version. This means state-level workarounds to the SALT cap remain fully available.

Impact: Both House and Senate versions now provide significant relief for agency owners in high-tax states. The Senate's phase-down provision means high-income agency owners ($500,000+ MAGI) will see reduced benefits, but the deduction never goes below $10,000. The sunset provision creates planning opportunities but also uncertainty for 2030+.

SENATE WORKAROUND CHANGES 6.20.25: The Senate bill makes major modifications to provisions designed to shut down state law pass-through entity tax (PTET) regimes. Instead of the House's exception for income taxes paid by partnerships or S corporations with 75% qualified business income, the Senate allows taxpayers to deduct up to 50% of taxes passed through under PTET regimes (or $40,000 if greater).

SENATE WORKAROUND CHANGES 6.30.25: The Senate Budget Committee version completely removes all restrictions on passthrough entity tax (PTET) workarounds, preserving the current state-level strategies to circumvent the SALT cap. This represents a large positive impact for professional service firms and represents a complete reversal from both the House version and the earlier Senate Finance Committee version that would have limited these strategies.

Estate Tax Exemption

Both House and Senate:

• Proposed Change: Permanently increase basic exemption to $15 million (indexed for inflation)

Why It Matters: For successful agency owners planning succession or thinking about passing the business to family members, this higher exemption could significantly reduce estate tax exposure.

Employee-Related Provisions

Tips and Overtime Tax Exemptions

House Version: The bill proposes eliminating income taxes on:

• Tips for employees in traditionally tipped occupations (2025-2028)
• Overtime pay for eligible workers (2025-2028)

SENATE UPDATES 6.20.25:

Tips: The Senate bill would provide a deduction of up to $25,000 for qualified tips received by an individual in an occupation that customarily and regularly receives tips. The deduction would begin to phase out when the taxpayer's MAGI exceeds $150,000 ($300,000 in the case of a joint return).

Overtime: The Senate bill would provide an above-the-line deduction of up to $12,500 ($25,000 in the case of a joint return) for qualified overtime compensation received by an individual during a given tax year. The deduction would begin to phase out when the taxpayer's MAGI exceeds $150,000 ($300,000 in the case of a joint return).

For Insurance Agencies: While most insurance roles aren't traditionally tipped, some agencies have service roles that might qualify. The overtime exemption could benefit non-exempt employees who work extra hours during busy periods. The Senate caps and income limits make these benefits more targeted and manageable.

Enhanced Employer Credits

Both Versions:

• Child Care Credit: Increased from 25% to 40% of qualified expenditures (50% for small businesses)
• Paid Family Leave Credit: Made permanent

SENATE ENHANCEMENT 6.20.25: The Senate bill would increase the employer-provided child care credit from $150,000 to $500,000 and the percentage of qualified child care expenses from 25% to 40%. The rate would be 50% for qualifying small businesses.

FINAL SENATE VERSION 6.30.25: The Senate Budget Committee version increases the maximum credit to $500,000 ($600,000 for eligible small businesses) and adjusts it for inflation going forward.

Bottom Line: These could reduce your costs for providing employee benefits.

Additional Business-Friendly Provisions

Bonus Depreciation and R&D Expensing

House Version (2025-2029):

• 100% Bonus Depreciation: Restored for equipment purchases
• R&D Expensing: Immediate deduction for domestic research costs

MAJOR SENATE CHANGES 6.20.25:

Bonus Depreciation: The Senate version would restore 100% bonus depreciation for property acquired and placed in service after Jan. 19, 2025, and unlike the House bill, the Senate version would make the provision permanent.

R&D Expensing: The Senate bill would allow taxpayers to immediately deduct domestic research or experimental expenditures paid or incurred in tax years beginning after Dec. 31, 2024, and would make these changes permanent. Additionally, taxpayers would be allowed to elect to claim any unamortized amounts incurred from 2022 to 2024 in either the first tax year beginning after 2024 or ratably over a two-taxable year period.

FINAL VERSION CONFIRMED 6.30.25: The Senate Budget Committee version maintains these permanent provisions exactly as proposed by the Senate Finance Committee, providing maximum planning certainty for equipment and technology investments.

Impact: The permanent nature of these provisions in the Senate version provides much greater planning certainty for equipment purchases and technology investments.

Business Interest Deduction

Both Versions: Less restrictive limitations

SENATE DETAILS 6.20.25: The Senate bill would reinstate the more favorable calculation of the limit on the interest deduction under Section 163(j) for tax years beginning after Dec. 31, 2024, but would make the change permanent and include important modifications. However, for tax years beginning after 2025, interest capitalized to other assets would be subject to the Section 163(j) limit, shutting down an important planning strategy for many taxpayers.

Personal Tax Benefits for Agency Owners

Enhanced Standard Deductions

House Version (2025-2028):

• Married filing jointly: Additional $2,000
• Head of household: Additional $1,500
• Single filers: Additional $1,000

SENATE VERSION 6.20.25: The Senate bill would make the TCJA's increased standard deduction amounts permanent. For tax years beginning after 2025, the standard deduction would increase to $16,000 for single filers, $24,000 for heads of household, and $32,000 for married individuals filing jointly.

FINAL SENATE VERSION 6.30.25: The Senate Budget Committee version makes the TCJA's increased standard deduction amounts permanent and retroactive to 2025. For tax years beginning after 2024, the standard deduction would be $15,750 for single filers, $23,625 for heads of household, and $31,500 for married individuals filing jointly. These amounts are slightly lower than in the earlier Senate Finance Committee version but are made retroactive to include 2025.

Senior Bonus Deduction

House Version (2025-2028): $4,000 additional deduction for taxpayers 65 and older

House Version (2025-2028): $4,000 additional deduction for taxpayers 65 and older

SENATE ENHANCEMENT 6.20.25: The Senate bill would provide a temporary $6,000 deduction for individual taxpayers who are age 65 or older. The Senate's senior deduction would begin to phase out when a taxpayer's modified adjusted gross income (MAGI) exceeds $75,000 ($150,000 in the case of a joint return).

FINAL SENATE VERSION 6.30.25: The Senate Budget Committee version maintains the $6,000 deduction for taxpayers 65 and older with the same phase-out thresholds, confirming this enhancement over the House's $4,000 proposal.

Car Loan Interest Deduction (2025-2028)

Both Versions: Up to $10,000 deduction for qualified passenger vehicle loan interest (with income limits and requirement for U.S.-assembled vehicles)

FINAL SENATE DETAILS 6.30.25: The deduction phases out for taxpayers with MAGI exceeding $100,000 ($200,000 for joint filers) and applies only to vehicles with final assembly in the United States.

Additional Senate Provisions Added in Final Version

ADDITIONAL SENATE PROVISIONS 6.30.25:

Advanced Manufacturing Credit Enhancement: The Senate version increases the advanced manufacturing investment credit rate from 25% to 35% (up from the 30% proposed in the earlier Senate Finance Committee version).

Child and Dependent Care Assistance: The maximum annual amount excludable from income under dependent care assistance programs would increase from $5,000 to $7,500.

Qualified Small Business Stock Enhancement: For stock acquired after enactment and held for at least four years, the exclusion percentage increases from 50% to 75%. If held for five years or more, the exclusion goes to 100%.

Trump Accounts: The Senate version creates tax-free IRAs for individuals under 18, with a $1,000 tax credit pilot program for children born between 2025-2028.

Clean Energy Credit Terminations: The Senate version terminates most clean energy credits earlier than the House bill, with many ending between September 2025 and December 2025, rather than the House's general cutoff at the end of 2025.

Debunking Common Misinformation

❌ Myth: "I can pay myself only in tips to avoid all taxes"

✅ Reality: The bill specifically limits tip exemptions to occupations that "traditionally and customarily" receive tips. Insurance sales and management don't qualify. Attempting to reclassify regular compensation as tips would be tax fraud.

❌ Myth: "I can bill everything as overtime to my employees to help them avoid taxes"

✅ Reality:

• Overtime exemptions only apply to legitimate overtime under Fair Labor Standards Act (FLSA)
• You can't artificially create "overtime" by manipulating schedules
• Employees must still pay Social Security and Medicare taxes on overtime
• Misclassifying regular wages as overtime could trigger labor law violations

❌ Myth: "These tax breaks are permanent"

✅ Reality: Many of the new provisions (tips, overtime, car loans, senior deductions) are temporary (2025-2028).  

UPDATE 6.20.25: The Senate version makes more business provisions permanent (bonus depreciation, R&D expensing, QBI deduction) while keeping individual benefits temporary.

❌ Myth: "This eliminates all taxes on tips and overtime"

✅ Reality: These exemptions only apply to federal income tax. Employees still owe:

• Social Security taxes (6.2%)
• Medicare taxes (1.45%)
• State income taxes (unless state also passes exemption)
• Unemployment taxes

Compliance Considerations

If This Becomes Law:

• Payroll Systems: You'll need to track and report tip and overtime income separately
• Employee Education: Workers will need to understand they'll get refunds when filing, not immediate relief
• Record Keeping: Enhanced documentation requirements for qualifying tip and overtime income
• State Variations: Some states are considering their own tip/overtime exemptions; others may not conform

SENATE COMPLIANCE ADDITIONS 6.20.25: Overtime deductions would only be allowed for qualified overtime compensation if the total amount is reported separately on Form W-2. A transition rule would allow employers required to furnish statements enumerating tips for tax year 2025 to use "any reasonable method" to estimate designated tip amounts.

FINAL COMPLIANCE REQUIREMENTS 6.30.25: The Senate Budget Committee version maintains these reporting requirements and adds that overtime deductions are also available for Form 1099 recipients (independent contractors), expanding the scope beyond traditional employees.

Strategic Planning Considerations

Business Structure Review

With the enhanced QBI deduction, now might be a good time to review your business structure with your tax advisor to ensure you're maximizing pass-through benefits.

UPDATE 6.20.25: The permanent 20% QBI deduction (vs. temporary 23%) changes the long-term planning calculus but still provides certainty for structure decisions.

FINAL PLANNING UPDATE 6.30.25: With both versions now offering $40,000 SALT caps and the Senate preserving PTET workarounds, the business structure analysis shifts toward optimizing the combination of QBI deduction, SALT benefits, and state-level tax strategies.

Compensation Planning

Consider how tip and overtime exemptions might affect your compensation strategies, but remember:

• Don't artificially create tip positions where none exist
• Overtime must be legitimate FLSA overtime
• Focus on fair compensation practices, not tax gimmicks

UPDATE 6.20.25: Income caps and phase-outs in the Senate version make these benefits more targeted to middle-income employees.

FINAL UPDATE 6.30.25: The expanded availability to independent contractors (Form 1099 recipients) in the final Senate version may create more opportunities for agencies with contractor relationships.

Estate Planning

The higher estate tax exemption could open new succession planning opportunities for family-owned agencies.

EQUIPMENT PLANNING UPDATE 6.20.25: Permanent bonus depreciation in the Senate version fundamentally changes equipment purchase timing strategies, allowing for more predictable long-term capital planning.

FINAL ESTATE PLANNING UPDATE 6.30.25: The combination of enhanced qualified small business stock exclusions (75% at 4 years, 100% at 5 years) and permanent $15 million estate tax exemptions creates powerful succession planning opportunities for agencies considering sale or family transfer strategies.

Timeline and Reality Check

Current Status: House passed, Senate Finance Committee released their version Estimated Cost: $3.8 trillion over 10 years (House version) Likelihood: High for TCJA extensions, uncertain for new provisions

🔄 LEGISLATIVE UPDATE 6.20.25: Republicans are racing to enact their reconciliation bill before a self-imposed July 4 deadline, though there are signs that date could be slipping. Various factions have threatened to block the bill over the SALT cap and the softening of energy credit cutbacks.

🔄 FINAL LEGISLATIVE STATUS 6.30.25: The Senate could vote on its version as early as Monday (July 1, 2025). The Budget Committee's compromises on SALT cap relief may have resolved the major holdout issues, improving prospects for passage. If the Senate passes its version, the bill would return to the House where prospects remain uncertain due to differences in energy credit provisions and other details.

Key Dates to Watch:

• TCJA provisions expire December 31, 2025
• New provisions would start January 1, 2025 (retroactively if passed later)
• Self-imposed July 4, 2025 deadline for passage

Action Steps for Agency Owners

1. Implement Planning Now – The bill is law; begin implementing tax strategies immediately
2. Review Your Business Structure – Optimize for the permanent 20% QBI deduction and SALT/PTET strategies
3. Accelerate Equipment Purchases – Take advantage of permanent 100% bonus depreciation starting January 19, 2025
4. Update Payroll Systems – Prepare for tip and overtime deduction reporting requirements
5. State Tax Strategy Review – Maximize the $40,000 SALT cap and preserved PTET workarounds
6. Estate Planning Updates – Consider enhanced QSBS exclusions and $15 million estate exemptions
7. Employee Classification Review – Ensure FLSA compliance for overtime deduction eligibility
8. 2025 Tax Planning – Many provisions are retroactive to January 1, 2025

The Bottom Line

FINAL ANALYSIS 7.3.25: This law represents a transformative moment in personal and small business tax reform, especially for insurance agencies and professional service businesses.  The final bill delivers on virtually every major tax priority:

• SALT Relief: $40,000 cap through 2029 provides substantial relief for high-tax state agencies
• PTET Preservation: Complete protection of state-level workaround strategies
• Business Certainty: Permanent bonus depreciation, R&D expensing, and QBI deduction
• Estate Planning: Enhanced opportunities with higher exemptions and QSBS benefits

While agencies don't get the 23% QBI rate, the permanent 20% rate combined with SALT relief and PTET preservation creates a more valuable overall package. This is the most significant pro-business tax legislation for professional services in over a decade.

Implementation Focus: With the bill now law, shift from planning to implementation. The retroactive effective dates mean immediate action can provide 2025 tax benefits.

Remember: good tax planning starts with good business fundamentals. This legislation provides the tax framework to support profitable, compliant business growth that serves your clients well.

Always consult with qualified tax and legal professionals when implementing these new provisions.

Legislative Status Updates:

• 5/27/25: House passed "One Big Beautiful Bill" (215-214)
• 6/16/25: Senate Finance Committee released their version with significant modifications
• 6/29/25: Senate Budget Committee released updated version with major SALT cap changes
• 7/1/25: Senate passed final version (51-50 with VP Vance casting deciding vote)
• 7/3/25: House passed Senate version (218-214)
• 7/4/25: President Trump expected to sign bill into law