The “One Big Beautiful Bill Act” Tax Changes

1. Individual and Family Tax Provisions:

• Permanent Lower Individual Tax Rates and Brackets: The bill permanently extends the lower individual income tax rates and brackets established by the TCJA, which were scheduled to expire after 2025. It also provides an extra inflation adjustment to the bottom six brackets, resulting in lower tax bills for many taxpayers.
• Increased Standard Deduction: The doubled standard deduction from the TCJA is permanently extended. Additionally, an extra inflation adjustment is provided.
• State and Local Tax (SALT) Deduction Cap: The $10,000 cap on individual itemized deductions for state and local taxes is temporarily increased to $40,000 for tax years 2025 through 2029, with a phase-down for incomes over $500,000.
• New Deductions for Tipped and Overtime Workers: The bill introduces new provisions allowing workers to deduct income earned from tips and overtime pay, effective through 2028.  The benefit for tipped workers is limited to $25,000.  The benefit for overtime workers is limited to $12,500 ($25,000 MFJ).  Both benefits would phase out when the taxpayer’s modified adjusted gross income exceeds $150,000 ($300,000 for MFJ) and expires in 2028.
• Additional Deduction for Seniors: Taxpayers over the age of 65 can claim an additional $6,000 deduction per individual (2025-2028); phased out at higher incomes.
• Mortgage Interest Deduction Cap: The $750,000 cap on the mortgage interest deduction for acquisition debt is made permanent.
• Mortgage Insurance Deduction: Borrowers can now permanently deduct mortgage insurance premiums (PMI, FHA MIP, VA funding fees, and USDA guarantee fees), subject to income limits.
• Child Tax Credit (CTC): The bill permanently increases the child tax credit to $2,200 per child, with $1,700 refundable with inflation adjustments.
• Health Savings Account (HSA) Expansions: The bill expands access to HSAs for patients with high-deductible health plans (HDHPs) and those with bronze and catastrophic-level plans through ACA marketplaces. It also allows HSAs to be used for direct primary care.
• “Trump Accounts” Establishment: The bill would create a new Sec. 530A, to establish a new type of tax-preferred account. These accounts would be set up for the exclusive benefit of an individual and designated at the time of establishment as such (under rules Treasury will promulgate). The accounts would be exempt from tax.  Complete details are still being established.  Employer contributions to Trump accounts excluded from income up to $2,500 per employee.
• Scholarship Tax Credit: A new scholarship tax credit is introduced.
• Non-Itemizer Charitable Deduction: A deduction for charitable contributions is available even for non-itemizers. The charitable deduction has been added for taxpayers who utilize the standard deduction equal to a $1,000 deduction for single taxpayers and $2,000 for married couples from 2025-2028.
• Estate and Gift Tax: The bill extends and expands cuts to the estate tax. Increases exemption to $15 million (indexed from 2026); makes higher exemption permanent.
• No Tax on car loan interest: Allows deduction for up to $10,000 of interest on new car loans (2025–2028); must be US-assembled passenger vehicles with the vehicle serving as security for the loan. Other exceptions apply.
• 1099 reporting: The threshold for required reporting has increased from $600 to $2,000.

2. Business and International Tax Provisions:

• Permanent Business Tax Provisions: Key business tax provisions enacted in the 2017 TCJA that were set to expire are permanently extended. These include:
  • Bonus Depreciation: The bill revives 100% bonus depreciation for property acquired and placed in service on or after January 19, 2025.
  • Domestic Research & Experimental (R&E) Expenditures: The required capitalization of domestic research and experimental expenditures is suspended for amounts paid or incurred in taxable years beginning after December 31, 2024, and before January 1, 2030, allowing for immediate expensing. Foreign R&E expenditures must still be capitalized and amortized over 15 years. The bill provides small businesses with the option to apply this change retroactively back to 2022 through amended returns. It also allows taxpayers to accelerate any remaining Sec. 174 deductions.
  • Business Interest Deduction Limitation (Section 163(j)): For taxable years beginning after December 31, 2024, the adjusted taxable income for purposes of the Section 163(j) limitation will be computed by reference to earnings before interest, taxes, depreciation, and amortization (EBITDA), rather than EBIT, potentially allowing for larger interest deductions for many taxpayers.
  • Section 199A Qualified Business Income (QBI) Deduction: The 20% QBI deduction for pass-through businesses is made permanent.
• Lower International Rates: The bill extends lower international tax rates with modifications.
• Opportunity Zones: The bill establishes a permanent Opportunity Zone policy.
• Expensing of Manufacturing Property: Allows for the bonus depreciation of Qualified Production Property “Manufacturing Property” through 2031.
• Clean Energy Tax Credits: The bill rolls back or phases out significant green energy tax credits from the Inflation Reduction Act (IRA), including those for electric vehicles, home energy upgrades, wind, and solar. It also repeals the methane tax.
• College Endowment Tax: The excise tax on investment income of certain private colleges and universities is modified, limiting its application to institutions with at least 3,000 full-time students.
• Remittance Excise Tax: An excise tax is imposed on money sent out of the country through a remittance transfer provider.

We will be focusing on specifics analysis in the coming days to help provide guidance and insight for both individuals and businesses.

Disclaimer: This article provides general information and should not be considered professional financial or tax advice. Please consult with a qualified CPA or financial advisor for guidance specific to your individual business needs.