There are significant federal tax changes following the passage of the “One Big Beautiful Bill Act” (OBBBA), signed into law in July 2025. This sweeping legislation brings major updates to both individual and business tax rules, with many provisions taking effect immediately or retroactively to the start of 2025.

For Individuals

Permanent Extension of 2017 Tax Cuts

• The OBBBA makes the individual tax rates and brackets from the 2017 Tax Cuts and Jobs Act permanent, including the increased standard deduction and lower rates.

SALT Deduction Cap

• The cap on deducting state and local taxes rises from $10,000 to $40,000 for most taxpayers (2025–2029), but phases out for households with AGI above $500,000 but never reduces below $10,000. The cap returns to $10,000 in 2030.

Child Tax Credit

• The Child Tax Credit increases to $2,200 per child, indexed for inflation, with phaseouts starting at $400,000 for joint filers and $200,000 for others.

Temporary Deductions for Working Families (2025–2028)

• Tip income is deductible up to $25,000, phasing out above $150,000 AGI (single) and $300,000 AGI (joint).
• Overtime pay is deductible up to $12,500 (single) and $25,000 (joint), the same phaseout as above.
• Car loan interest on new U.S.-assembled vehicles is deductible up to $10,000, subject to AGI phaseouts.

Senior Deduction

• Seniors receive a temporary $6,000 deduction (2025–2028), with phaseouts at higher incomes ($75,000 for singles, and $150,000 for married couples).

Estate and Gift Tax

• The federal estate and gift tax exemption is permanently raised to $15 million per person (indexed for inflation) starting in 2026.

Charitable Giving

• New above-the-line deduction for charitable contributions: $1,000 ($2,000 joint filers).

Other Provisions

• Trump Accounts: Tax-exempt savings accounts for newborns, seeded with $1,000, with an annual cap.
• Charitable Deduction Floor: There is a new 0.5% floor on itemized charitable contributions for individuals and 1% for corporations.
• Student Loan Forgiveness Rollback: Biden-era student loan forgiveness provisions are repealed.
• Medicaid/SNAP Changes: Deep cuts to Medicaid and new work requirements for SNAP.

For Businesses

100% Bonus Depreciation Restored

• Businesses can now immediately expense qualifying assets placed in service after January 19, 2025. The scheduled phase-down is eliminated.

Section 179 Expensing Cap Increased

• Small businesses can expense up to $2.5 million in qualifying property; the phase-out threshold rises to $4 million.

Immediate Expensing of U.S. R&D

• Domestic research costs are fully deductible; companies can elect a catch-up deduction for previously capitalized costs.

International Tax Reforms

• GILTI is renamed “Net CFC Tested Income” and FDII is now “Foreign-Derived Deduction Eligible Income,” both with revised rates and deduction rules.

Section 163(j) Business Interest Deduction

• EBITDA-based limitation revised to support capital-intensive businesses.

SALT Work-Arounds Preserved

• Full deductibility of state and local taxes paid through pass-through entity taxes remains in over 30 states.

Qualified Business Income Deduction

• Section 199A is made permanent, preserving the 20% deduction for pass-through income.

Excess Business Losses

• Flexibility preserved for business owners; plans to silo active pass-through losses are dropped.

Pro-Business Enhancements

• Expanded Section 1202 exclusions, Opportunity Zone extensions, and enhanced expensing caps for domestic investment.
• Section 899 “Retaliatory Tax” Eliminated: Removes barriers to foreign investment in U.S. real estate, preserving the U.S. as an attractive destination for global capital.
• Increased LIHTC Ceiling: The Low-Income Housing Tax Credit ceiling is raised, expanding opportunities for affordable housing development by increasing state allocations and lowering financing requirements.

Clean Energy and Green Incentives

IRA Clean Energy Incentives Terminated

• Many green tax credits from the Inflation Reduction Act (IRA), including 179D, 45L, and electric vehicle credits, are eliminated on an accelerated schedule.
• Most clean energy credits terminate for projects placed in service after 2027, with limited exceptions for nuclear, hydropower, and geothermal.

Curtailment of Clean Energy ITC and PTC

• Projects must begin construction within 12 months of enactment to qualify for the Investment Tax Credit (ITC) and Production Tax Credit (PTC). Tech-neutral credits for wind and solar are also terminated.

Additional Resources

For a comprehensive overview and the full legislative text, see:

Tax Foundation: Senate GOP Tax Plan – Details and Analysis

The bill represents the largest permanent tax overhaul since 2017, with broad implications for both immediate tax savings and long-term fiscal policy.

If you have any questions or would like to discuss how these changes may affect your situation, our team is here to help. We’ll continue to keep you updated and are available to assist with year-end planning and identifying new opportunities under the OBBBA.