Tax Planning
Understanding the Working Families Tax Cuts: Tax Planning Under the OBBB Bill
The ‘One, Big, Beautiful Bill’ introduced sweeping tax changes under the Working Families Tax Cuts. From enhanced depreciation to changes in backup withholding thresholds, here’s how to adapt your plan.
By NomadicTax Research Team • 5-8 min read • July 29, 2026
## What’s Changed Under OBBB (One, Big, Beautiful Bill)
The Working Families Tax Cuts, also known as the **OBBB Act** (One, Big, Beautiful Bill), introduced several tax changes for individuals and businesses starting in **tax years beginning in 2025**. ([irs.gov](https://www.irs.gov/newsroom/working-families-tax-cuts?utm_source=openai))
Key changes include:
- **Premium Tax Credit (PTC)** rules: Removal of limits on repayment of excess advance payments and elimination of outdated PTC rules for the 2020–2021 years. ([irs.gov](https://www.irs.gov/newsroom/working-families-tax-cuts?utm_source=openai))
- **Enhanced depreciation for certain productions**: Qualified sound recording production costs up to $150,000 per year can now be expensed under Section 181 for productions before January 1, 2026. ([irs.gov](https://www.irs.gov/newsroom/working-families-tax-cuts?utm_source=openai))
- **Broader first-year depreciation** under Section 168(k): Expanded definitions, particularly for qualified property for film, TV, and theatrical producers. ([irs.gov](https://www.irs.gov/newsroom/working-families-tax-cuts?utm_source=openai))
- **Backup withholding threshold changes**: The classic $600 threshold is replaced by a higher combined threshold: payments over $20,000 *and* over 200 transactions in a year are required to trigger backup withholding. ([irs.gov](https://www.irs.gov/newsroom/working-families-tax-cuts?utm_source=openai))
## Tax-Planning Tips for Individuals & Businesses
### Individuals:
- Homes and health: If you qualify for a Premium Tax Credit, check your eligibility again under the new rules—those limits and repayment requirements may be different.
- Gig workers / sellers: If you receive many small payments through platforms, track both the **number of transactions** and **total amounts**—you may avoid backup withholding under the new dual threshold.
### Businesses / Producers:
- **Film, TV, Theater, and Sound Recording Producers**: Plan your production expenditures to hit the $150K expensing cap before year end if you expect profits or taxable income. Understand whether your project qualifies under Section 181.
- **Depreciable Property**: Assets placed in service after January 19, 2025 may qualify for 100% first-year depreciation if they fall under certain categories. Strategically time asset purchases if you want to maximize write-offs.
## Related Compliance & Risk Considerations
- Keep strong documentation and contracts, especially for Section 181 or enhanced first-year depreciation claims—poor paperwork draws scrutiny.
- With backup withholding, beware unexpected liability: if you exceed both thresholds (transactions and total payments), you may owe withholding. Platforms and payees should collaborate to monitor compliance.
- Monitor IRS guidance updates—proposed regulations and interim guidance may evolve, especially during transition periods.
## Example Tax Strategies
- **Small recording studio owner**: Sara produces multiple small releases, each under $150,000. If total costs are expected to cross that threshold, Sara might delay or combine releases to qualify under new expensing rules.
- **Gig economy seller**: If you receive $25 of tips over 300 transactions through a platform, you’ll fall under the new threshold for backup withholding only if both thresholds are breached; otherwise safe.
- **Individual with premium credits**: Jake previously repaid excess advance payments under old PTC rules. Under new rules, his risk of repayment is reduced; he should re-estimate his credits ahead of 2025 filing.
## How Digital Nomads & Cross-Border Workers can Benefit
- If you're receiving payments through third-party platforms while abroad, you may still avoid withholding if both thresholds aren’t met.
- When depreciating assets used partly for business abroad (like equipment or software), check whether **enhanced depreciation** rules apply, even if your operations span countries.
## Final Thoughts
The OBBB Act brings substantial tax-planning opportunities. To make the most of them:
- Act **proactively**: time your purchases, productions, and payments; document thoroughly.
- Stay aware of threshold changes—one miscalculation for backup withholding or credit repayment can cost.
- Consult with a tax professional to apply rules like PTC or Section 181/168(k) especially if cross-border or entrepreneurial work is involved.