On July 4, President Trump signed into law the 800-page “One, Big, Beautiful Bill Act (OBBBA).” It makes permanent certain expiring provisions of prior tax law, eliminates certain existing tax breaks and creates new ones. Following is a list of a few of the changes. As my mother used to say, “The devil is in the details!”
INDIVIDUALS
- Makes permanent the TCJA’s individual tax rates of 10%, 12%, 22%, 24%, 32%, 35% and 37%
- Nearly doubles the standard deduction
- For 2025-2028, creates an additional deduction of up to $6,000 for taxpayers age 65 or older, with income-based phaseouts
- For 2025-2028, creates a new deduction of up to $25,000 for tip income in certain industries, with income-based phaseouts
- For 2025-2028, creates a new deduction of up to $12,500 for single filers or $25,000 for joint filers for qualified overtime pay, with income-based phaseouts
- For 2025-2028, creates a new deduction of up to $10,000 for qualified passenger vehicle loan interest on the purchase of certain American-made vehicles, with income-based phaseouts
- Increases the limit on the deduction for state and local taxes (the SALT cap) to $40,000 beginning in 2025, with an income-based reduction and a 1% increase each year through 2029, after which the $10,000 limit will return
- Creates a permanent charitable contribution deduction for nonitemizers of up to $1,000 for single filers and $2,000 for joint filers, beginning in 2026
- Permanently increases the child tax credit to $2,200, beginning in 2025, with annual inflation adjustments going forward
- Expands the allowable expenses that can be paid with a tax-free Section 529 plan
- distributions, beginning with distributions made after July 4, 2025
- Expands the qualified small business stock gain exclusion for stock acquired after July 4, 2025
- Permanently increases the federal gift and estate tax exemption amount to $15 million for individuals and $30 million for married couples beginning in 2026, plus an annual adjustment for inflation for married couples beginning in 2026, with annual inflation adjustments going forward. Eliminates several clean energy tax credits, generally after 2025, including the energy-efficient home improvement and residential clean energy credits – but the clean vehicle credit ends Sept. 30, 2025
BUSINESSES
- Makes permanent and expands the 20% Sec. 199A qualified business income (QBI) deduction for owners of pass-through entities and sole proprietorships
- Makes permanent 100% bonus depreciation for the cost of qualified assets, for property acquired after January 19, 2025
- Creates a 100% deduction for the cost of “qualified production property” for qualified property placed in service after July 4, 2025, and before 2031
- 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. Increases the cap on the business interest deduction beginning in 2025 by excluding depreciation, amortization and depletion from the calculation of adjusted taxable income. Makes permanent the excess business loss limit
- Permanently allows the immediate deduction of domestic research and experimentation expenses (retroactive to 2022 for eligible small businesses) not used to claim the research credit
- Eliminates clean energy tax incentives, generally after 2025, including the alternative fuel vehicle refueling property credit and the Sec. 179D deduction for energy-efficient commercial buildings (both after June 30, 2026) – but the qualified commercial clean vehicle credit ends Sept. 30, 2025
