The Big Beautiful Bill (BBB) isn’t just a tax headline — it’s a turning point for how high-income entrepreneurs plan, deduct, and defend their returns.
At Washington & Co. Inc — Strategic Tax & Advisory, we’ve broken down what actually matters in this new legislation so you don’t have to dig through 300+ pages of tax code.
If you’re a seven-figure earner, here’s what’s changed, what’s urgent, and where the opportunities are hiding.
What’s in the Big Beautiful Bill?
This legislation introduced sweeping tax changes designed to increase enforcement, reduce loopholes, and realign deductions with long-term business investment.
Here are the highlights most likely to impact you:
- A tighter definition of “ordinary and necessary” deductions
- Increased IRS enforcement funding, especially for incomes over $400K
- New caps on certain entertainment, vehicle, and fringe benefit deductions
- Adjustments to credit eligibility for R&D, clean energy, and hiring incentives
- Sharper scrutiny on S Corp salary ratios and reasonable compensation
In short, the IRS now has more tools and more funding to review high-income returns — and the rules are narrowing.
What High Earners Must Do Differently (Starting Now)
If your taxable income is in the high six or seven figures, the margin for error — and the cost of sloppy planning — just got bigger.
Start with these steps:
- Review entity structure and compensation – The BBB includes language reinforcing “reasonable salary” expectations for S Corp owners. Too low? You’re exposed.
- Audit your deduction categories – Home office, auto use, and client entertainment must now meet stricter substantiation standards. Gray areas are red flags.
- Stack eligible credits before year-end – Credits like R&D and WOTC are still powerful, but the BBB adds documentation requirements and timing limitations.
- Upgrade your documentation systems – The IRS now has more budget and technology to match your transactions against AI-driven flagging systems. You need your own tech stack to match.
Areas Most at Risk for Audit
According to the BBB’s enforcement roadmap, here’s where high earners will see the most scrutiny:
- S Corps with no or low owner W-2 wages
- Schedule C businesses reporting consistent losses
- Excessive meal or travel deductions
- Entertainment expenses without written business purpose
- “Consulting” or service-based income without clear cost basis
This doesn’t mean you stop deducting — it means you plan and document proactively.
Strategy Spotlight: R&D Credit Under the BBB
A major change under the BBB affects how the R&D credit can be claimed:
- Startups can now only offset payroll tax up to $250,000
- Established businesses must file Form 6765 with additional substantiation
- You must now identify qualified research activities, expenses, and employee roles in more detail than ever before
If you develop software, design products, or improve systems internally — you still qualify. But your CPA needs to do more legwork to defend the credit.
Real Example: $21,600 Credit Secured with Pre-BBB Documentation
A marketing analytics firm we work with wanted to claim the R&D credit for internal tool development.
Because they had:
- Employee time-tracking logs
- Project plans tied to business goals
- Software specs and prototypes
…we were able to document $72,000 in qualifying expenses and claim a $21,600 credit — before BBB enforcement ramped up.
Post-BBB, this same client is now creating a quarterly substantiation file so they’re always audit-ready.
What to Do Before Year-End
- Re-benchmark your W-2 comp if you’re an S Corp
- Review current credit opportunities and gather supporting docs
- Run a deduction risk score across meals, travel, vehicle use, and home office
- Upgrade to cloud-based receipt, payroll, and time-tracking tools
- Meet with your tax strategist to lock in compliant year-end moves
Book a BBB Compliance + Strategy Review
The rules changed. The enforcement budget increased. And the window for proactive planning is closing fast.
Don’t wait for an IRS letter — let’s audit-proof your strategy and maximize what’s still available.
Schedule your Big Beautiful Bill Strategy Review with Washington & Co. Inc — Strategic Tax & Advisory today.