Financial services companies should remain flexible, innovative, and proactive in addressing the new tax rules.
The new federal tax law — commonly known as the One Big Beautiful Bill Act (OBBBA) — introduces several key tax provisions impacting financial services companies.
Get highlights of some of the changes and explore their impacts on banks and credit unions, along with their employees and customers. For more details about the many new tax provisions in the OBBBA, check out this comprehensive overview.
Interest income exclusion on rural or agricultural real estate loans for financial institutions
A permanent new tax provision applying to financial institutions allows for a 25% gross income exclusion of interest income from qualified real estate loans secured by rural or agricultural real property made after July 4, 2025. The new rules include:
- The loan needs to be secured by rural or agricultural real estate or a leasehold mortgage (with a status as a lien) on rural or agricultural real estate made to a person other than a specified foreign entity.
- A loan is not treated as made after July 4, 2025 to the extent the proceeds of such loan are used to refinance a loan which was made on or before July 4, 2025.
- Rural or agricultural real estate is defined as any real property located in a U.S. state or a possession of the U.S. which is substantially used to produce one or more agricultural products, substantially used in the trade or business of fishing or seafood processing, and any aquaculture facility.
- Aquaculture facility means any land, structure, or other components used for aquaculture (including any hatchery, rearing pond, raceway, pen, or incubator).
- Loan interest will be treated as tax-exempt interest subject to the interest expense disallowance.
Charitable contribution deductions for corporations
Charitable contributions are deductible by a corporation for taxable years beginning after December 31, 2025 only if they exceed a new 1% of taxable income floor. Therefore, charitable contributions up to 1% of taxable income are permanently disallowed as a deduction.
C corporation financial services companies should evaluate whether certain donations can be fully deductible as part of marketing/advertising expense and thus not subject to the charitable contribution deduction limits.
Accelerated tax depreciation
100% bonus depreciation has been reinstated for qualified property acquired (purchase date or written binding contract entered into to acquire) and placed into service after January 19, 2025. Qualified property acquired and placed into service on or before this date continue to be subject to the TCJA phase-out rules (e.g., 40% for property placed in service in 2025).
The Section 179 expensing election maximum amount is increased to $2.5 million (adjusted for inflation) for qualified property placed in service in taxable years beginning after December 31, 2024. Additionally, the beginning of the phase-out of the deduction from qualified property additions is increased to $4 million (adjusted for inflation).
Business pass-through deduction
Owners of financial services companies structured as pass-through entities such as S corporations and partnerships permanently can deduct up to 20% on qualified business income under Section 199A with certain exceptions.
How CLA can help with the new tax rules for financial services companies
The new OBBBA tax provisions offer opportunities for increased tax savings and tax planning. Financial services companies should remain flexible, innovative, and proactive in addressing the new tax rules.
CLA’s financial services professionals can help you assess the implications of these provisions and develop strategies to adapt to the evolving tax landscape.