Key Tax Provisions in the One Big Beautiful Bill Act

On July 4^th, 2025, President Trump signed into law the “One Big Beautiful Bill Act”, a sweeping reconciliation package that includes a broad array of tax provisions affecting individuals, businesses, and international taxpayers.

We want to highlight some of the key provisions and offer preliminary insights into how they may affect your tax planning. Please contact us at your earliest convenience to discuss your situation so we can develop a customized plan. We will continue to closely monitor any potential tax legislation and update you accordingly.

Individual Income Tax Provisions

• Permanent extension of lower tax rates and brackets: The bill makes permanent the individual income tax rates and brackets established by the Tax Cuts and Jobs Act (TCJA) including lower individual tax brackets. The top marginal rate remains at 37%, and inflation adjustments are retained for all but the top bracket.
• Standard Deduction: The nearly doubled standard deduction was made permanent, with additional inflation adjustments.
• Itemized deductions/Pease Limitation repeal: The law permanently removes the Sec. 68 overall limitation on itemized deductions (known as the Pease limitation) and implements a limitation that allows an overall maximum benefit of 35% for the value of a taxpayer’s itemized deductions.
• Child Tax Credit: The law would permanently increase the child tax credit to $2,200 per child with $1,700 being refundable, with inflation adjustments.
• Estate and Gift Tax Exemption: The increased exemption is made permanent and raised to $15 million per individual ($30 million for married couples) in 2026, indexed for inflation.
• SALT Deduction Cap: The state and local tax (SALT) deduction cap is increased from $10,000 to $40,000 per household and would be phased out for taxpayers with modified adjusted gross income (MAG) over $500,000.
• Charitable Deduction for Non-Itemizers: A permanent above-the-line deduction for certain charitable contributions ($1,000 for single filers, $2,000 for joint filers) beginning in 2026.
• No Tax on Tips and Overtime: For 2025-2028, above-the-line deductions are created for qualified tips (In certain occupations) and for overtime premium pay, subject to income and occupation limitations. The deduction for qualified tips is limited to $25,000 per taxpayer, while the deduction for overtime is limited to $12,500 per taxpayer.
• Enhanced Deduction for Seniors: For 2025-2028 a deduction is available for seniors ( age 65+) with income below $75,000 ($150,000 for joint filers).
• Car Loan Interest Deduction: For 2025- 2028 up to $10,000 of interest on loans for U.S. assembled passenger vehicles may be deducted, subject to income phaseouts.
• Moving Expense Deduction: The bill permanently terminates the deduction except for Armed Forces.
• Home Mortgage Interest and Insurance Premiums: The bill would permanent the $750,000 Sec. 163(h)(3) limit on the treatment of mortgage insurance premiums as qualified residence interest. The exclusion of home-equity indebtedness from the definition of qualified residence interest would also become permanent.
• Casualty Loss Deduction for personal Casualties: The Sec. 165(h)(5) limitation on personal casualty loss deductions, under which a casualty loss is deductible only to the extent it Is attributable to a federal declared disaster, would be made permanent.
• Deduction for wagering losses: The law limits the amount of deductible losses to 90% of the taxpayer’s wagering losses only to the extent of winnings.
• Establishment of Trump Accounts: The law creates a new tax-deferred savings account for the benefit of children up until the age of 18, which includes a pilot program where children born between 2025 and 2028 may receive a $1,000 government contribution.
• Other Deductions and Credits: The bill makes permanent or enhances several other deductions and credits, including the adoption credit, employer-provided childcare credit, paid family and medical leave credit, and education-related benefits.

Business Tax Provisions

• QBI Deduction: Sec. 199A qualified business income (QBI) deduction is made permanent, and the deductible amount for each qualified business remains 20%. The phase-in ranges are expanded, making more taxpayers eligible to claim the deduction.
• PTET SALT Deduction: The law does not limit the availability of the pass-through entity ax (PTET) deduction for pass-through entities as it currently exists.
• Bonus Depreciation: 100% expensing (bonus depreciation) for qualified property is permanently restored for property place in service beginning Jan. 19, 2025.
• 179 Expensing: The maximum amount a business may expense is increased to $2.5, million, with the phaseout threshold raised to $4 million, both indexed for inflation after 2025.
• Qualified Production Property” Manufacturing Property”: The law introduces an elective 100% depreciation allowance for qualified production property that is acquired and placed in service between Jan. 19, 2025, and Dec. 31, 2030, restoring full expensing for a broader range of assets.
• R&D Expenditures: The TCJA introduced a requirement that specified research and experimental (R&D) expenditures be capitalized and amortized ratably over a five-year period for tax years after 2021. The law permanently suspends that requirement for domestic research or experimental expenditures paid or incurred in tax years beginning Dec 31,2021. Taxpayers are provided with options to claim deductions for previously capitalized domestic research or experimental expenditure paid before 2025. Foreign R&D would continue to be capitalized and amortized for over 15 years.
• EBL Permanency: The law makes Sec. 461(I) excess business loss (EBL) limitation permanent, which is currently set to expire at the end of 2028.
• Deferred payment of tax on capital gains of certain farmland: The law allows qualified sellers of qualified farmland property to elect to pay tax on these capital gains in four equal annual installments.
• Third-Party Network Transaction Reporting Threshold: The law reverts to the prior rule for Form 1099-K, Payment Card and Third Party Network Transactions, reporting, under which a third-party settlement organization (TPSO) would not be required to report unless the aggregate value of third-party network transactions with respect to a participating payee for the year exceeds $20,000 and the aggregate number of such transactions with respect to a participating payee exceeds 200.
• Form 1099 Reporting Threshold: The law increases the information reporting threshold for certain payments to persons engaged in a trade or business and payments of remuneration for services to $2,000 in a calendar year (from $600), with the threshold amount to be indexed annually for inflation in calendar years after 2026.
• Renewed OZs: The new law establishes a permanent opportunity zone (OZs) policy, with revised eligibility and incentives, including special rules for rural areas.
• Clean Energy and IRS Credits: The law terminates or phases out several clean energy credits from the inflation Reduction Act (IRA) and the 179D deduction.
• Employee Retention Credit (ERC) – The law prohibits payment of 2021 Q3, and Q4 ERC claims as of January 31, 2024, and extends the statute of limitations on ERC claims to six years.

How you can prepare:

This brief summary of key law changes only takes into account a few of the changes in this new law. We recommend reviewing your current tax strategy considering these proposed changes. Our team is available to discuss how these provisions may impact your personal or business tax situation and to help you plan accordingly.

As always, if you have any questions, please contact your trusted Scheffel Boyle CPA to schedule a consultation.