The tax bill known officially as the One Big Beautiful Bill Act has been passed by both houses of Congress and signed into law by President Trump. There are many changes to existing law and almost everyone will be impacted by one or more provisions. We expect more details in the coming months, but below is a summary of the key provisions. Please call or email us if you have any questions.
Individual Provisions
- Tax Rates and Brackets: Permanently extends the individual tax rates and brackets from the Tax Cuts and Jobs Act (TCJA), with additional inflation adjustments. The top individual rate remains at 37%.
- Standard Deduction: Permanently increases the standard deduction (e.g., $15,750 for single filers and $31,500 for joint filers for 2025, indexed for inflation).
- SALT Cap: Raises the state and local tax (SALT) deduction cap to $40,000 (indexed for inflation through 2029), reverting to $10,000 in 2030. Deduction phases out for high-income taxpayers.
- Personal Exemptions and Senior Deduction: Permanently eliminates personal exemptions but adds a temporary $6,000 deduction for individuals aged 65+ (2025–2028), phased out at higher incomes (phase out begins at $75,000 for single filers and $150,000 for married filers).
- Child Tax Credit: Increases the nonrefundable child tax credit to $2,200 per child (indexed for inflation) and makes the $1,400 refundable portion permanent.
- Above-the-Line Deductions for Tips and Overtime: Temporary deductions for tips (up to $25,000 per individual) and overtime pay (up to $12,500 single / $25,000 joint) for 2025–2028. Deductions begin to phase out at income of $150,000 for single filers and $300,000 for joint filers.
- Auto Loan Interest Deduction: Temporary deduction for up to $10,000 of interest on qualified loans on U.S.-assembled vehicles (2025–2028). Deduction begins to phase out at income of $100,000 for single filers and $200,000 for joint filers.
- Estate and Gift Tax Exemption: Permanently increases the exemption to $15 million (indexed for inflation), effective 2026.
- Alternative Minimum Tax (AMT): Permanently increases AMT exemption amounts and adjusts phaseout thresholds.
- Charitable Deductions: Non-itemizers may deduct charitable contributions of up to $1,000 for single filers and $2,000 for joint filers. For itemizers, only contributions that exceed 0.5% of Adjusted Gross Income (AGI) are deductible.
- Trump Accounts: Creates new tax-preferred “Trump accounts” for children under the age of 18. Parents can contribute $5,000 per year and employers can make tax free contributions to these accounts annually. A $1,000 tax credit is provided for opening “Trump accounts” for children born between December 31, 2024 and January 1, 2029.
- Other Provisions:
- Repeals miscellaneous itemized deductions (with some exceptions), and limits the value of itemized deductions for high-income taxpayers.
- Allows a deduction of 90% of wagering losses to the extent of gambling winnings.
- Establishes a tax credit (max of $5,000) that is equal to the individual’s qualified contributions to a scholarship-granting organization.
Business Provisions
- Bonus Depreciation: Permanently restores 100% bonus depreciation for qualified property placed in service after January 19, 2025. Expands to certain manufacturing buildings placed in service before 2031.
- Section 179 Expensing: Increases the expensing limit to $2.5 million (phaseout at $4 million), indexed for inflation.
- Research and Development: Allows immediate expensing of domestic research costs. Provides transition rules for costs incurred in 2022–2024.
- Business Interest Deduction: Restores the EBITDA-based limitation, permanently excluding depreciation, amortization, and depletion from the calculation.
- Pass-Through Deduction: Makes the 20% deduction permanent and expands the phase-in threshold for limitations.
- Charitable Deductions for Corporations: Deduction allowed only for contributions exceeding 1% of taxable income (up to the 10% cap).
- Reporting Thresholds: Restores the 200 transactions / $20,000 threshold for Form 1099-K reporting. Raises 1099-MISC/NEC threshold to $2,000 (indexed for inflation).
- Qualified Small Business Stock: Expands Section 1202 gain exclusion: 50% after three years, 75% after four years, 100% after five years. Increases per-issuer cap to $15 million and gross assets ceiling to $75 million (indexed for inflation).
- Opportunity Zones: Makes the program permanent, narrows qualifying zones, creates special rules for rural areas, and adds new reporting requirements.
- Energy and Clean Technology: Accelerates phaseout or terminates many clean energy credits (e.g., for electric vehicles, solar, wind, energy-efficient property) after 2025–2027, with some exceptions and new restrictions on foreign entities.
- Employee Retention Credit: Bars new refunds for claims filed after January 31, 2024, increases penalties, and extends statute of limitations.
- Other Provisions:
- Increases the endowment tax for large universities (up to 8%).
- Expands definition of covered employee for excise tax on nonprofit compensation.
- Makes the new markets tax credit permanent.
International Provisions
There are many changes related to international activities, with most all aimed at increasing tax on foreign trade. Please contact us if you are interested in these specific and complex topics.