One Big Beautiful Bill Act - Summary of Tax Provisions
The huge tax package in the One Big Beautiful Bill Act became law on Friday, July 4th, making permanent most provisions of the 2017 Tax Cuts and Jobs Act (TCJA) and adding several new credits and tax deductions, with some changes effective in 2025 and some in 2026.
This summary highlights many of the key changes that may affect your tax planning for 2025 and beyond. We will follow up with a deeper dive into some of the most important provisions.
Individual Tax Provisions
The TCJA individual income tax rates are now permanent, maintaining the seven-bracket structure (10%, 12%, 22%, 24%, 32%, 35%, 37%) with continued inflation adjustments.
The standard deduction is increased to $16,000 for single filers and $32,000 for married filing jointly and will be indexed for inflation. The deduction for personal exemptions remains permanently eliminated.
The deduction cap for state and local taxes (SALT) is increased to $40,000 (with phaseouts for high-income taxpayers) for 2025 through 2029, reverting to $10,000 in 2030.
The Child Tax Credit is increased to $2,200 per child, with $1,700 refundable and annual inflation adjustments. Social Security Number requirements for qualifying children are expanded.
The $500 Other Dependent Credit is made permanent.
The estate and gift tax exemption is permanently increased to $15 million in 2026 and will be indexed for inflation after 2026.
The Alternative Minimum Tax (AMT) exemption and phase-out thresholds are made permanent, with a higher phase-out rate for upper-income filers.
The mortgage interest deduction is permanently limited to interest on up to $750,000 of acquisition debt, and the disallowance of home equity debt interest is also made permanent.
The limitation of casualty loss deductions to federally declared disasters is made permanent, with some expansion to state-declared disasters.
Miscellaneous itemized deductions are permanently eliminated, except for certain educator expenses.
The “Pease” limitation on itemized deductions is permanently repealed and replaced with a cap on the tax benefit of itemized deductions for top-bracket taxpayers.
New and Expanded Credits and Deductions
A new $6,000 deduction for taxpayers (and their spouses) aged 65 or older for tax years 2025-2028. This senior deduction is subject to phase-out for the adjusted gross income that exceeds $75,000 (or $150,000 for joint filers).
A charitable deduction for non-itemizers of up to $1,000 ($2,000 for a joint return) beginning in 2026.
A new, temporary deduction of up to $25,000 per year per taxpayer available 2025 – 2028 for individuals who receive qualified cash tips in occupations where tipping was customary before January 1, 2025, with a phase-out for higher income filers.
A new, temporary deduction of up to $12,500 ($25,000 for joint filers) per year per taxpayer available 2025 – 2028 for individuals who receive qualified overtime compensation, with a phase-out for higher income filers.
A temporary deduction of up to $10,000 for interest paid on new car loans for US-assembled passenger vehicles.
The exclusion for student loan discharge due to death or disability is made permanent, and employer payments of student loans under educational assistance programs are now permanent and inflation-adjusted.
The adoption credit is partially refundable and inflation-adjusted, and Section 529 plan qualified expenses are expanded to include more K-12, homeschool, and credentialing expenses.
A new type of tax-preferred account (“Trump Account”) is created, with a federal $1,000 contribution for qualifying children born in 2025 – 2028.
Business Tax Provisions
The 20% Section 199A Qualified Business Income deduction is made permanent, with increased phase-out amounts and a new minimum deduction.
100% bonus depreciation is reinstated and extended for property placed in service after January 19, 2025.
The Section 179 expensing limit is increased to $2,500,000, with a phaseout threshold of $4,000,000.
Full expensing for domestic research and experimental costs beginning in 2025, with retroactive application for small businesses. The legislation provides small businesses with the option to apply this change retroactively back to 2022 through amended returns. It also allows taxpayers to accelerate the deduction of the unamortized balance of any previously capitalized research expenditures.
Excess business loss limitation is made permanent, with modifications to carryforward rules.
The Childcare Credit is increased to 40% (50% for small businesses), with a higher maximum and inflation adjustment.
The Form 1099 reporting threshold is increased to $2,000 and indexed for inflation.
The Section 1202 Qualified Small Business Stock exclusion is modified to a tiered system, and the asset limit is increased to $75 million.
Energy and Other Provisions
Accelerated expiration dates for several energy credits and deductions including the Clean Vehicle Credits (terminates for vehicles acquired after September 30, 2025) and Residential Energy Credits (terminates for property placed in service after December 31, 2025).
The New Markets Tax Credit is permanently extended.
Implementation Notes and Effective Dates
· Most provisions are effective for tax years beginning after December 31, 2025, with some (such as the standard deduction and bonus depreciation) effective January 1, 2025, and others (such as energy credits) terminating for property placed in service after December 31, 2025, or June 30, 2026.
· Some provisions, such as full expensing for R&E costs, allow retroactive application for small businesses.
· The SALT deduction cap increases are retroactive to 2025, with phaseouts for high-income taxpayers, and revert to $10,000 in 2030.
