Major tax changes are on the horizon, and mortgage lenders need to prepare. The One Big Beautiful Bill Act (OBBBA) — recently signed into law — makes several provisions from the Tax Cuts and Jobs Act (TCJA) permanent while introducing new rules that will directly affect mortgage companies in 2025 and beyond.
In Advisent’s recent webinar, Understanding OBBBA: Tax Implications for the Mortgage Industry, our tax experts John Czechowicz and Lucy Turek were joined by Alex Pak and David Finley from Source Advisors for an in-depth discussion of how these changes will influence tax strategy, planning, and compliance for independent mortgage banks and other financial institutions. The following is a summary of that discussion.
Making TCJA Provisions Permanent
The panel began by outlining the many TCJA provisions that OBBBA has now made permanent, including:
- The seven-tier individual tax brackets, with a top rate of 37% for joint income above $752,000
- The higher standard deduction, now a permanent feature
- The Qualified Business Income (QBI) deduction, which allows pass-through business owners to deduct up to 20% of their business income
- The pass-through entity (PTE) tax election, allowing entities to pay state income taxes at the entity level
- The estate and gift tax exemption, now fixed at roughly $15–16 million per spouse (indexed for inflation)
- The mortgage interest deduction, permanently capped at $750,000 for acquisition debt on a primary and secondary home
While these updates offer predictability, the speakers emphasized that tax planning remains essential, particularly for business owners who can manage income timing and deductions across multiple years to optimize tax liability.
Adjustments to SALT Deductions and PTE Elections
The State and Local Tax (SALT) deduction cap was one of the most discussed elements. Under OBBBA, the SALT cap increases from $10,000 to $40,000 for tax years 2025–2029, after which it reverts back to $10,000. However, high-income taxpayers may still see limitations due to a phase-out for adjusted gross income above $500,000 (for joint filers).
This change complicates the decision of whether to elect into the pass-through entity (PTE) tax regime. For most high-tax-state residents, electing into PTE continues to make sense, but the higher SALT cap introduces more nuance. As Czechowicz noted, mid-year tax planning is critical — business owners should review projected income and cash flow before deciding whether to make a PTE election and prepay state taxes.
Excess Business Losses, NOLs, and Income Planning
Another permanent TCJA provision now cemented by OBBBA is the limitation on excess business losses (EBLs) for individuals. For 2025, business losses are capped at $626,000 for joint filers, with additional losses carried forward as net operating losses (NOLs).
The discussion highlighted how these limits can unexpectedly affect S corporation shareholders and LLC members. For example, paying high wages to oneself through a pass-through entity can inadvertently reduce business income while leaving taxable W-2 income intact — an area where careful coordination between compensation strategy and tax planning is vital.
Bonus Depreciation, Section 179 Expensing, and Capital Planning
One of the most impactful updates under OBBBA is the return of 100% bonus depreciation for assets acquired and placed in service after January 19, 2025. This restores the full expensing benefit that had previously been phasing out (from 100% to 40%). Eligible assets include most property with a useful life of 20 years or less, such as office equipment, software, and qualified leasehold improvements.
At the same time, Section 179 expensing limits have been raised from $2.5 million to $4 million, giving businesses greater flexibility to expense assets on an individual basis. The panel discussed when to elect out of bonus depreciation, particularly if taking the full deduction would push a company into a loss position that triggers EBL or NOL limitations. Thoughtful use of Section 179 and bonus depreciation can help smooth taxable income across years and avoid wasteful carryforwards.
The Return of R&D Deductibility — and Major Credit Opportunities
The second half of the webinar focused on R&D tax credits, one of the most significant areas of opportunity created by OBBBA.
Under prior law, companies had to capitalize and amortize R&D expenditures over five years (15 for foreign research). OBBBA reverses this rule, allowing immediate expensing of domestic R&D costs beginning in 2025. For small businesses — defined as those with average gross receipts below $31 million — this treatment is retroactive to 2022, opening the door to refund claims for prior years.
Pak and Finley explained that many mortgage companies are eligible for R&D credits but haven’t claimed them due to confusion over what qualifies. Common qualifying activities include:
- Developing or improving loan origination systems and internal software
- Creating custom integrations and APIs with third-party platforms
- Enhancing UI/UX and borrower-facing portals
- Testing, validating, and improving systems or workflows
Qualifying expenses can include employee wages, U.S.-based contractor costs, and cloud computing tools used in development environments. Combined federal and state R&D credits can often return 5–9% of qualifying expenses, with some states (like California, Utah, and Minnesota) offering additional benefits.
Pak and Finley also explained that, for every $1 million in qualified research expenses, businesses may generate $60,000–$100,000 in federal credits, plus similar state-level savings — a substantial and permanent tax reduction.
Strategic Considerations for Year-End
As 2025 draws to a close, the panel emphasized that early and accurate year-end planning will be critical. Mortgage companies should:
- Review year-to-date income and expense trends by late October or early November
- Evaluate whether to elect into PTE or leverage the higher SALT cap
- Plan capital purchases strategically to optimize bonus depreciation or Section 179 deductions
- Identify potential R&D credit opportunities and evaluate retroactive claims
- Consider how excess business loss and NOL limits might affect cash flow and tax positions
For C corporations, there is still time before the October 15 filing deadline to complete an R&D credit study and make elections that could yield immediate or future-year benefits.
Looking Ahead
The One Big Beautiful Bill Act ushers in a new era of stability and opportunity for mortgage companies, but also complexity. Predictability around tax brackets and deductions provides welcome clarity, while the restoration of full R&D expensing creates immediate incentives for innovation and technology investment.
As Advisent’s experts stressed, now is the time for proactive analysis and strategic decision-making. With the right planning, mortgage companies can turn legislative changes into tangible tax savings and stronger financial performance in 2025 and beyond.
You can watch a recording of the webinar here. And for questions regarding this and other tax topics, reach out to our tax team at tax@advisent.com.