H2R CPA Blog

The One, Big, Beautiful Bill Act is signed into law

On July 4, President Trump signed into law the far-reaching legislation known as the One, Big, Beautiful Bill Act (OBBBA). As promised, the tax portion of the 870-page bill extends many of the provisions of the Tax Cuts and Jobs Act (TCJA), the sweeping tax legislation enacted during the first Trump administration. It also incorporates several of President Trump’s campaign pledges, although many on a temporary basis, and pulls back many clean-energy-related tax breaks.

While the OBBBA makes permanent numerous tax breaks, it also eliminates several others, including some that had been scheduled to resume after 2025. Here’s a rundown of some of the key changes affecting individual and business taxpayers. Except where noted, these changes are effective for tax years beginning in 2025.

Key changes affecting individuals

  • Individual Tax Rates: Makes permanent the TCJA’s individual tax rates of 10%, 12%, 22%, 24%, 32%, 35% and 37%
  • Standard Deduction: Makes permanent the increased standard deduction amounts put in place by the Tax Cuts and Jobs Act.
  • Child Tax Credit: Permanently increases the child tax credit to $2,200, with annual inflation adjustments going forward
  • SALT Limitation: Temporarily increases the limit on the deduction for state and local taxes (the SALT cap) to $40,000, with a 1% increase each year through 2029, after which the $10,000 limit will return
  • Mortgage Interest: Permanently reduces the mortgage debt limit for the home mortgage interest deduction to $750,000 ($375,000 for separate filers) but includes mortgage insurance premiums as deductible interest
  • Miscellaneous Itemized Deductions: Permanently eliminates miscellaneous itemized deductions except for unreimbursed educator expenses
  • 529 Plans: Expands the allowable expenses that can be paid with tax-free Section 529 plan distributions
  • Alternative Minimum Tax: Makes permanent the TCJA’s increased individual alternative minimum tax (AMT) exemption amounts
  • Estate Exemptions: Permanently increases the federal gift and estate tax exemption amount to $15 million for individuals and $30 million for married couples beginning in 2026, with annual inflation adjustments going forward
  • Deduction for Tip Income: For 2025–2028, creates a deduction of up to $25,000 for tip income in certain industries, with income-based phaseouts (payroll taxes still apply)
  • Overtime Pay: For 2025–2028, creates a deduction of up to $12,500 for single filers or $25,000 for joint filers for qualified overtime pay, with income-based phaseouts (payroll taxes still apply)
  • Car Loan Interest: For 2025–2028, creates an above-the-line deduction of up to $10,000 for qualified passenger vehicle loan interest on the purchase of certain American-made vehicles, with income-based phaseouts
  • Senior Deduction: For 2025–2028, creates a bonus deduction of up to $6,000 for taxpayers age 65 or older, with income-based phaseouts
  • Itemized Deductions: Limits itemized deductions for taxpayers in the top 37% income bracket, beginning in 2026
  • Trump Accounts: Establishes tax-favored “Trump Accounts,” which will provide eligible newborns with $1,000 in seed money, beginning in 2026
  • Charitable Contributions: Creates a permanent charitable contribution deduction for non-itemizers of up to $1,000 for single filers and $2,000 for joint filers, beginning in 2026. The Act also imposes a 0.5% floor on charitable contributions for itemizers, beginning in 2026

Key changes affecting businesses

  • Qualified Business Income Deduction: Makes permanent and expands the 20% qualified business income (QBI) deduction
  • Bonus Depreciation: Makes permanent 100% bonus depreciation for the cost of qualified new and used assets, for property acquired after January 19, 2025
  • Manufacturing Incentive: Creates a 100% deduction for the cost of “qualified production property” for qualified property placed into service after July 4, 2025, and before 2031
  • Section 179 Expense: Increases the Sec. 179 expensing limit to $2.5 million and the expensing phaseout threshold to $4 million for 2025, with annual inflation adjustments going forward
  • Business Interest Limitation: Increases the cap on the business interest deduction by excluding depreciation, amortization and depletion from the calculation of “adjusted taxable income”
  • Research & Experimentation Fix: Permanently allows the immediate deduction of domestic research and experimentation expenses beginning in 2025. The Act also addresses costs capitalized in 2022 through 2024, allowing small business taxpayers the ability to amend prior returns to claim missed deductions, or, for non-small business taxpayers, the ability to deduct the unamortized costs over one or two years (beginning in 2025)
  • Excess Business Losses: Makes permanent the excess business loss limit
  • Qualified Opportunity Zones: Permanently renews and enhances the Qualified Opportunity Zone program
  • Qualified Small Business Stock: Expands the qualified small business stock gain exclusion for stock issued after the date of enactment

In addition to the items above, the Act took aim at energy tax credits, eliminating a large amount of clean and renewable energy incentives, both related to credits for individuals and businesses. These eliminations generally affect transactions occurring post-2025.

Brief overview of far-reaching implications

We’ve only briefly covered some of the most significant OBBBA provisions here. There are additional rules and limits that apply. Note, too, that the OBBBA will require a multitude of new implementing regulations. Turn to us for help navigating the new law and its far-reaching implications to minimize your tax liability. Feel free to contact your H2R CPA liaison and they will be happy to assist you with any questions.

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