Will the Big Beautiful Bill Really Lower Your Taxes—or Just Shift the Burden?

Congress has passed what some are calling the most significant tax overhaul in years: the Big Beautiful Bill. On the surface, it promises to lower taxes, simplify the code, and boost small businesses- but beneath the branding, the reality is possibly more complicated.

The Big Beautiful Bill reshapes income, small business, and payroll taxes in ways that may help some Americans in the short term, while potentially increasing burdens for others- especially working and middle-income families.

Let’s break down what’s really in the bill, who it’s likely to help (and who it won’t) and what you can do now to protect yourself as the changes roll in.

What Is the Big Beautiful Bill and Why Was It Introduced?

The “Big Beautiful Bill”—yes, that’s the actual nickname legislators are using—is a sprawling tax reform package backed by several high-profile members of Congress, including allies of President Trump. Supporters claim it will modernize the tax system, boost the economy, and reduce burdens on small businesses.

It passed narrowly, with minimal bipartisan support, and was rushed through ahead of a looming budget deadline. Like many major tax changes before it, it was branded as a win for “ordinary Americans.” Despite that, many warn that Americans should be cautious.

So what’s actually in it? There are sweeping changes to how personal income, small business profits, and payroll taxes are handled, along with a few shifts in corporate taxation that deserve a closer look. The truth is though that some of the biggest impacts aren’t in what’s included, they’re in what’s missing entirely.

Personal Income Tax Changes: Simplification or Shell Game?

On paper, the bill adjusts federal tax brackets, changes some deductions, and modifies credits. Supporters call it a simplification. But some experts argue that simplification doesn’t always mean fairness- and it definitely doesn’t always mean savings.

Bracket Adjustments

The bill restructures the federal income tax brackets, consolidating the current seven-tier system into five brackets. According to the legislative text, the new bracket structure is as follows:

• 0% on income up to $15,000 (single) / $30,000 (married filing jointly) 
• 12% on income from $15,001 to $75,000 
• 20% on income from $75,001 to $250,000 
• 28% on income from $250,001 to $749,999 
• 34% on income over $750,000 

While this appears to simplify the tax code and lowers marginal rates for some middle-income earners (the previous 32%, 35%, and 37% brackets are eliminated), it also reduces overall progressivity. Under prior law (per 26 U.S. Code § 1 and IRS Revenue Procedure 2023-23), the top bracket of 37% began at $578,125 for single filers in 2023. Under the new structure, not only is the threshold for the top bracket raised to $750,000, but the rate is cut from 37% to 34%—a 3 percentage point drop.

Critically, the bill also phases out or eliminates several deductions used by lower- and middle-income taxpayers to offset their liability. While not labeled as increases, these changes effectively reduce tax benefits for those earning under $100,000. For example, the bill repeals the above-the-line deduction for student loan interest (26 U.S. Code § 221) and introduces a cap on the Earned Income Tax Credit (EITC) for families with more than two children, which previously had no such limit.

In short, while some filers may see short-term relief in marginal rates, the bill’s structural changes favor high-income households, both by increasing the income threshold for the top bracket and by reducing the marginal rate they pay.

 

Deductions & Credits

• The standard deduction is increasing again, which may sound helpful at first—especially for middle-income households who don’t itemize. But that shift is paired with reductions and caps on itemized deductions that many taxpayers depend on, particularly in high-tax states. So while the top-line numbers look good, the net effect could still result in a higher bill for families who previously saw more benefit from itemizing.
• The Child Tax Credit—which had been expanded in past legislation and was widely expected to grow again—has instead remained flat. In some versions of the bill that nearly made it to the floor, the refundable portion (the part that supports the lowest-income families) was reduced. That didn’t end up in the final version, but it’s a strong signal that the safety net could weaken in future negotiations.
• The student loan interest deduction is gone altogether. For millions of borrowers still adjusting to resumed payments, that means one fewer option to ease the pressure, especially for recent grads or parents helping with college costs.
• And while the bill technically adjusts the State and Local Tax (SALT) deduction cap, it’s not a full repeal. The new cap increases to $40,000—but only for some households, based on income phase-outs, and only temporarily. The cap is currently scheduled to revert back to $10,000 in 2029 unless extended. That’s a meaningful difference if you live in states like California, New York, or New Jersey, where property taxes and state income taxes are steep. But for many families, especially those just above the phase-out threshold, it’s a short-term offer that may not feel like much relief at all. 

Winners vs. Losers

High-income earners in low-tax states like Florida or Texas stand to benefit the most under the new structure. With the top bracket kicking in at a higher threshold and a reduced marginal rate (down from 37% to 34%), wealthy individuals in states with no state income tax will see significant federal tax savings—especially since the State and Local Tax (SALT) deduction remains capped and is only temporarily increased. The bill raises the cap to $40,000 for certain households, but that increase is subject to an income-based phase-out and will revert back to $10,000 in 2029 unless renewed.

Upper-middle-income families in high-tax states like California and New York are more likely to feel a pinch. Many fall into the new 28% or 34% brackets but don’t qualify for the full SALT deduction due to phase-outs—and they’re not seeing new relief in other areas either. Commonly relied-upon deductions, like those for mortgage interest or child-related credits, are either capped or less generous than in prior years. That means these families could end up shouldering a larger share of the federal tax burden without meaningful offsets.

Meanwhile, low-income households—especially those with children—may lose access to key refundable credits that have long served as lifelines. The Earned Income Tax Credit (EITC) now includes new limitations based on dependents, and the Child Tax Credit (CTC) is no longer fully refundable. This change hits part-time and hourly workers the hardest, reducing the cash refunds they’ve often relied on to help cover rent, childcare, and groceries.

 

So: is this really a tax cut?

✅ For some, absolutely.
🚫 For many, it’s a shift.

Less a broad tax cut and more of a redistribution of who carries the load—with the burden sliding off the highest earners and onto working- and middle-class families, especially those in high-cost, high-tax regions.

 

Small Business Provisions—Relief or Rebranding?

The bill’s supporters tout its benefits for Main Street, but the actual text of the bill paints a more nuanced picture.

Pass-Through Changes

The bill makes notable changes to the Qualified Business Income (QBI) deduction under IRC § 199A, which allows eligible owners of pass-through entities (such as S-Corps, LLCs, and sole proprietorships) to deduct a portion of their business income from taxable income.

While the existing QBI deduction permits up to 20% of qualified business income to be deducted, the new bill expands eligibility modestly, but only under specific conditions:

• The deduction remains capped for single filers earning over $170,050 or joint filers over $340,100 (based on current inflation-indexed thresholds), and phase-outs are tightened slightly, especially for service-based businesses. 
• However, the bill extends full deduction eligibility to certain “priority sectors,” a term left intentionally broad in the legislative language but largely interpreted to favor real estate holding companies, financial services, and professional consulting groups. 
• The definition of “qualified business income” is also expanded to include certain types of passive income from real estate, such as REIT dividends and rental activity, even when those entities do not materially participate in the business, raising concerns about the deduction being used more as a wealth shelter than a small-business incentive. 

Quoting from the bill’s explanatory text:

“To encourage continued investment in sectors critical to American growth and infrastructure, the deduction under 199A shall be retained and extended to pass-through businesses operating in federally designated opportunity zones, financial services, and professional sectors contributing significantly to GDP.”

This language mirrors similar carve-outs introduced during the Tax Cuts and Job Acts era (2017), which saw a sharp increase in tax advantages for real estate developers and large professional service firms structured as partnerships or S-Corps. A 2022 study by the Joint Committee on Taxation found that 61% of QBI deduction benefits went to households earning more than $500,000 annually, with real estate and finance dominating the top claimants.

So while the bill brands itself as “pro-small business,” the practical effect is that smaller service providers and lower-earning entrepreneurs may see little to no additional benefit, especially if their industries fall outside the government’s list of favored sectors or if they earn above the threshold.

 

Redefining ‘Small Business’

On paper, the bill doesn’t directly rewrite the definition of “small business.” But through its targeted expansions and exclusions, it effectively reshapes who benefits from policies meant to support small business owners.

Rather than focusing on business size, employee count, or community impact, the bill continues a trend where legal structure determines access. If a business is organized as a pass-through and falls into a favored sector, it’s eligible, regardless of whether it’s a neighborhood startup or a multi-million dollar real estate group.

This creates a quiet but meaningful shift. Tax relief aimed at “small businesses” increasingly flows toward industries with scale, strategic structuring, and access to high-end tax planning. Firms with dedicated legal and accounting teams, particularly in real estate and finance, are best positioned to take full advantage of the law.

As the U.S. Treasury noted in a 2021 analysis:
“Over half of the QBI deduction’s value goes to the top 1% of households by income.”

And according to the Joint Committee on Taxation, 61% of QBI benefits go to households earning over $500,000 annually.

The result is a growing disconnect between the popular image of small business- the local restaurant, the solo consultant, the plumber,  the side hustle- and the entities that actually receive the largest tax breaks under that label. Some argue that the Big Beautiful Bill doesn’t just leave that gap in place, it widens it, favoring firms that may be “small” in tax terms, but look very different in practice.

Depreciation & Write-Offs

The bill temporarily boosts the Section 179 deduction limit, increasing the maximum amount a business can immediately expense from $1.16 million to $1.5 million, with the phase-out threshold raised from $2.89 million to $3.5 million (adjusted for inflation). This provision allows businesses to deduct the full cost of qualifying equipment and software purchases upfront, rather than depreciating them over several years.

In addition, the bill reinstates 100% bonus depreciation for certain capital investments placed in service during the first three years after enactment. Under current law (as amended by the Tax Cuts and Jobs Act of 2017), bonus depreciation has been phasing down—dropping to 60% in 2024 and scheduled to phase out entirely by 2027. The new bill reverses that trajectory, at least temporarily.

This is a strong incentive if you’re investing in new machinery, tech infrastructure, or other hard assets. But for labor-intensive or service-based businesses, like therapy practices, tutoring companies, hair salons, or legal firms, these provisions are of limited use. If your primary investment is people, not property, there’s little to deduct.

As the Congressional Research Service noted in its 2023 review of bonus depreciation:
“Accelerated depreciation disproportionately benefits capital-intensive industries, with limited impact on employment-heavy sectors or smaller service businesses.”
— CRS Report R45753

In short, these changes can offer meaningful tax relief, but only if your business model matches the type of investment the bill rewards.

Complication, Not Simplification

One of the bill’s headline promises is tax simplification, particularly for small business owners. But in practice, it introduces a web of new income thresholds, phase-out ranges, and compliance requirements that may actually make filing more complicated—not less.

For example, several key deductions come with layered eligibility requirements and income-based phase-outs that require careful tracking of business activity, income type, and even geographic location (such as whether the business operates in a designated “opportunity zone”).

Perhaps more notably, the bill introduces lowered reporting thresholds and new substantiation rules for taxpayers claiming certain business deductions. That includes stricter documentation for independent contractor payments, real estate depreciation schedules, and capital purchases expensed under Section 179.

These changes don’t just increase the paperwork, they also expand audit risk, especially for small businesses that operate as sole proprietorships or single-member LLCs. The IRS already flags Schedule C filers (sole proprietors) for audit at a rate more than twice the national average, and according to a 2022 GAO report, businesses with high deductions relative to reported income are particularly likely to be scrutinized.

As the IRS noted in its 2023 Small Business Audit Strategy:
“Claims of substantial business deductions, particularly in pass-through structures with limited documentation, remain a top area of enforcement focus.”

By adding more deductions, more limits, and more documentation rules, the bill may increase the likelihood of audits for exactly the businesses it claims to support, especially those that lack access to professional tax help.

For many actual small business owners, that means higher accounting costs, not lower ones—and a growing need to hire outside help just to stay compliant.

Case Study: Diane the Café Owner

Diane runs a small café in a mid-size city. Her business is structured as an LLC. Her revenue is modest, and most of her expenses are labor and supplies—not capital equipment. Under the new law:

• Her QBI deduction remains limited. 
• She doesn’t benefit from bonus depreciation. 
• Her payroll tax costs (more on that below) go up. 
• Her bookkeeping needs just got more complex. 

Payroll Tax Shifts—The Silent Burden

If you’ve ever paid attention to your paycheck, you know that income tax isn’t the only thing that gets taken out. Payroll taxes—for Social Security and Medicare—are another major slice.

The Big Beautiful Bill quietly shifts that burden in a few major ways.

Expanded Wage Base

For years, there’s been a cap on how much of your income gets taxed for Social Security. That cap is now significantly raised, meaning high-income earners will pay more into the system.

Employer Contributions Up

Employers are now responsible for an additional 0.5% payroll tax on wages over $150,000. That may sound small, but if you run a business with a few high earners (or just operate in a high-wage industry), that adds up fast.

Impact on Gig Workers & Contractors

The bill offers no new carve-outs or protections for gig workers, freelancers, or independent contractors, a group that now makes up over 36% of the U.S. workforce, according to a 2023 report from Upwork and the Freelancers Union.

In fact, some may end up owing more in self-employment tax, due to changes in how net earnings are calculated and how certain income streams are reclassified for reporting purposes. The bill tightens definitions of “active income,” meaning certain payments that were previously excluded from self-employment tax, like non-participatory consulting revenue or irregular platform payments, may now be subject to FICA-equivalent taxes under IRC § 1402(b).

In addition, the bill aligns with recent IRS guidance on Form 1099-K thresholds, reinforcing the lower $600 reporting threshold for third-party platforms (like Uber, DoorDash, Etsy, and PayPal), which had previously been delayed. This means more freelancers will receive 1099-Ks even for small side-gig earnings—requiring them to track and report income more meticulously, even when the tax owed is minimal.

As the U.S. Treasury Inspector General for Tax Administration (TIGTA) noted in 2022:
“Lowering reporting thresholds may increase compliance, but it also imposes a disproportionate burden on low- and middle-income gig workers who are often unaware of filing requirements.”

At the same time, the bill does not address deductibility challenges gig workers frequently face, such as mileage, phone expenses, or home office deductions, all of which remain subject to narrow documentation rules that many gig workers lack the resources or support to fully navigate.

Without targeted reform, these workers are left navigating a more complex system, with higher audit risk, stricter reporting rules, and limited access to benefits available to traditionally employed taxpayers or incorporated small businesses.

 

Corporate Tax Cuts—Trickle-Down 2.0?

Despite promises that this bill focuses on “everyday Americans,” large corporations still get a seat at the table- and a few special gifts.

Corporate Rate Adjustments

While the flat corporate tax rate remains technically unchanged at 21%, the bill expands deductions for domestic manufacturing and research spending, something that mostly helps already-profitable companies.

Minimum Tax Provisions

The bill introduces a corporate minimum tax aimed at closing the gap between what large corporations report in profits and what they ultimately pay in federal income tax. Specifically, it creates a 15% minimum tax floor on the adjusted financial statement income (AFSI) of corporations with average annual earnings above $1 billion, aligning with a model used in the Inflation Reduction Act of 2022 (IRA).

In theory, this provision targets companies that use aggressive deductions, depreciation schedules, and tax credits to report minimal or zero taxable income—despite showing massive profits on their financial statements. Notably, dozens of Fortune 500 companies (including Amazon, Nike, and FedEx) have come under scrutiny in recent years for paying effective tax rates of under 5%, and sometimes nothing at all, in profitable years.

A 2023 study by the Institute on Taxation and Economic Policy (ITEP) found that 55 large corporations paid no federal corporate income tax in at least one year between 2018 and 2021—despite reporting combined profits of over $75 billion.

The bill’s minimum tax is designed to ensure that these companies can’t use the full weight of deductions, loss carryforwards, and special-interest credits to reduce their tax liability to near-zero.

However, enforcement provisions remain vague. The bill delegates significant discretion to the Secretary of the Treasury to define adjusted income and interpret which exclusions or credits may still apply. There are also carve-outs for certain “strategic investments” in infrastructure, research, and energy—which could allow well-advised corporations to continue reducing their effective rates well below 15%.

As tax policy analyst Chye-Ching Huang of the Tax Law Center at NYU put it:
“Minimum tax proposals are a good starting point, but without clear enforcement rules, they risk being more symbolic than substantive.”

In short, the provision sounds tough on paper—but whether it leads to meaningful change will depend on how aggressively it’s implemented, and whether corporations can once again outmaneuver the rules designed to rein them in.

 

Still Room to Hide Profits

The bill doesn’t close key offshore loopholes and there’s no expansion of IRS funding to enforce compliance. In other words, companies with good lawyers will still find ways to pay less than their fair share.

What’s Missing 

Sometimes, what’s not in a bill says just as much as what is.

Childcare, Housing, and Healthcare

None of the major financial pain points facing working families are addressed in this bill. No expanded childcare credits. No affordable housing credits. No tax offsets for health insurance premiums or medical debt.

IRS Funding

Although the bill changes how taxes are calculated and reported, it does not include new resources for the IRS to help implement or enforce those changes. So expect more confusion and delays for everyone.

Sunset Clauses

Some cuts and benefits sunset after five years- mostly those that benefit individuals and small businesses. Corporate provisions? Largely permanent. Sound familiar?

How to Protect Yourself Amid the Changes

Whether you’re a W-2 employee, a small business owner, or an independent contractor, you’re going to want to take a close look at your tax plan for 2025.

Work With a Professional

Don’t try to navigate this on your own. A tax attorney or experienced CPA can walk you through:

• What you’re still eligible to deduct 
• How to minimize self-employment and payroll taxes 
• Entity restructuring that might make sense now 

Update Your Withholdings

If your income bracket has changed—or deductions you rely on are gone—you might be under-withholding right now. Don’t get caught off guard come April.

Adjust Estimated Payments

Especially for freelancers, LLCs, and anyone with variable income, get your Q1 and Q2 payments adjusted now. It’s better to be safe than penalized.

Keep Meticulous Records

Several provisions of this bill are already facing legal and political challenges. If portions are repealed or delayed, you’ll want good documentation to respond quickly.

Conclusion

The Big Beautiful Bill might have a catchy name, but when it comes to real tax relief, the picture is more gray than golden. Some families and business owners will save. Others, especially those in the middle, might end up footing a larger portion of the bill.

No matter how the spin plays out, one thing is clear: this bill shifts priorities. Whether or not you benefit depends on how prepared you are.

Need help understanding how the Big Beautiful Bill affects you?

Whether you’re self-employed, behind on your taxes, or managing a growing business, Tax Crisis Institute is here to help you navigate your new tax reality. Schedule a free consultation today with a tax attorney who actually knows what’s going on—and can help you protect what you’ve built.