Just before President Trump’s requested July 4th deadline, Congress put the finishing touches on the “One Big Beautiful Bill Act.” The final bill included several provisions of interest to banks and their borrowers, including:
- The inclusion of a deduction from taxable income of 25 percent of the interest earned by a bank on qualified real estate loans secured by rural or agricultural real estate, including those used to produce agricultural products or any real property substantially used in the trade or business of fishing or seafood processing. This does not apply to refinancings.
- Makes permanent the Section 199A Qualified Business Income deduction for pass-through entities and keeps the deduction rate at 20 percent.
- Makes permanent the reduced individual tax rates and higher estate tax exemptions of the 2017 Tax Cuts and Jobs Act.
- Allows the income tax resulting from the sale of farmland to a qualified farmer to be paid in four annual installments.
- The federal deduction for state and local taxes was raised to $40,000 (from the current $10,000). It will be annually adjusted for inflation by 1 percent until 2030, when the deduction will revert back to $10,000. Taxpayers earning more than $500,000 will have their SALT deduction modified by up to 30 percent, but the deduction will never be less than $10,000.
- Raises the 1099 reporting threshold to $2,000 from $600 and indexes for inflation in future years.
- Imposes a 1 percent tax on international remittance transfers. This excludes business transfers and to those funded with a bank account, debit card or credit card. It will apply to those transfers in which the sender provides cash, a money order, a cashier’s check or any other similar physical instrument.
IBAT will continue to review the bill for helpful provisions. With many of the provisions set to take effect in the 2025 tax year, we encourage you to consult your tax counsel to fully understand how this bill may impact your bank.
