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The Big Beautiful Bill – How does it affect tax treatment for professional services firms?

7/9/25

By: James G. Bozza

The One Big Beautiful Bill Act was signed into law on July 4, 2025 following weeks of contentious debate. If your professional services firm operates as an LLC, an S corporation or a sole proprietorship, the BBB contains important tax implications for your business.   

After strong pushback from industry leaders including the American Bar Association, the final bill removed the proposal to deny pass-through entity tax deductions to specified services trades or businesses such as law and accounting firms. Specifically, the original form of the bill sought to deny the state and local tax deduction at the entity level for pass-through entities which would have significantly raised tax burdens on professionals to the tune of approximately $75 billion over the next decade.   

The final bill, however, increases the state and local tax deduction cap to $40,000 in 2025, preserves the full pass-through entity tax deduction for state and local taxes, and creates a phaseout of the state and local tax cap benefit for modified adjusted gross income above $500,000. This is particularly important for professionals such as accountants and lawyers because it maintains equal tax treatment for their learned professions compared to larger C-corporations that do not operate as pass-through entities.  

Now that professional services firms can more accurately predict their tax liabilities moving forward, important business decisions lie ahead. Should a need for legal advice or services arise, the FMG professional liability team is prepared to assist. Contact FMG attorneys Scott Anderson and James Bozza for more information at scott.anderson@fmglaw.com and james.bozza@fmglaw.com.  

Information conveyed herein should not be construed as legal advice or represent any specific or binding policy or procedure of any organization. Information provided is for educational purposes only. These materials are written in a general format and not intended to be advice applicable to any specific circumstance. Legal opinions may vary when based on subtle factual distinctions. All rights reserved. No part of this presentation may be reproduced, published or posted without the written permission of Freeman Mathis & Gary, LLP.