Key Provisions of the New Tax Act

On July 4, 2025, Donald Trump signed the One Big Beautiful Bill Act (OBBBA) into law. At the center of the bill is the extension of many provisions of the 2017 Tax Cuts and Jobs Act (TCJA) slated to end at the end of 2025. The OBBBA makes many expiring provisions of TCJA permanent, adds new tax benefits, and eliminates some tax credits. While the legislation is a tax and spending package, this article will only highlight the key tax provisions of the act. Please note that Treasury has not had time to create regulations for the new parts of the law, so how the law will be implemented is not yet fully defined.

OBBBA brought good news for large estates. Now, the estate tax deduction allows people to pass $15M tax-free to their heirs. The exemption was set to revert to $7 million at the end of 2025.

OBBBA made the following tax provisions for businesses:

• TCJA provided a 20 percent deduction for qualified pass-through income for sole proprietorships, partnerships, and S-corporations. OBBBA extended the TCJA section 199A qualified business income deduction (QBI), making it permanent. The limitation phase-in window was increased to $75,000 for single filers and $150,000for joint filers, indexed for inflation. A new minimum QBI deduction was introduced, providing that if a taxpayer’s aggregate QBI from all active qualified trades or businesses is at least $1,000, they will receive a minimum deduction of $400, or the regularly calculated deduction – whichever is greater.
• Permanently maintains the 21 percent corporate tax rates established under TCJA.
• Permanently reinstated the 100 percent bonus depreciation for property placed in service after January 19, 2025.
• Increased section 179 expensing limit from $1M to $2.5M with a new $4M phase-out threshold, effective for property placed in service after 12/31/2024.
• For costs of building new qualified manufacturing facilities, 100% expensing for construction costs incurred between January 19, 2025, and January 1, 2029, is allowed.
• R&D costs can now be fully expensed. Prior tax law required business owners to amortize and expense these costs over 5 years. Foreign R&D expenses must still be amortized over 15 years.
• Increased 1099-NEC and 1099-MISC reporting thresholds from $600 to $2,000, effective for payments made in 2025 and thereafter. The new $2,000 threshold will be adjusted for inflation in calendar years after 2026.
• Limits or eliminates many clean-energy tax credits and incentives including the deduction for energy-efficient commercial buildings that begin construction after June 30, 2026.

OBBBA made the following tax provisions for individuals:

Tax rates and tax brackets:

• Permanently extends the reduced tax rates and tax brackets of TCJA. TCJA cut the top marginal tax rate from 39.6 percent to 37 percent and set the other new individual tax rates at10 percent, 12 percent, 22 percent, 24 percent, 32 percent, and 35 percent. OBBBA maintains these brackets.
• Permanently raises the standard deduction to $15,750 for individuals, $31,500 for joint filers and $23,625 for heads of households and indexes it for inflation.
• Permanently eliminates personal deduction for most taxpayers.
• The new tax act adds a new temporary standard deduction for seniors. Through 2028, each person over 65 can deduct an additional $6,000. Deduction begins phasing out at $75,000 for single and $150,000 for joint filers. This will effectively reduce the amount of Social Security benefits tax subject to federal taxation.

For taxpayers who itemize:

• TCJA temporarily eliminated the “Pease limitation,” a rule that reduced the value of itemized deductions for high-income taxpayers. OBBBA permanently repealed the Pease limitation.
• TCJA imposed a $10,000 cap on the deductibility of state and local taxes. For individuals who itemize deductions, OBBBA raised the cap on state and local tax deduction from $10,000 to $40,000 beginning in 2025. The cap falls back to $10,000 in 2029.
• Interest on car loan payments can be deducted up to $10,000 for vehicles purchased in the US between 2025 and 2028. This deduction phases out between $100,000 and $150,000 for individuals and between $200,000 and $250,000 for joint filers.
• Interest on home loans remains deductible, keeping the TCJA principal limit of $750,000.
• Permanently terminates miscellaneous itemized deductions.
• Permanently terminates moving expense deductions, but moving expense exclusion continues to apply to active-duty military.
• Permanently terminates bicycle commuting reimbursements. OBBBA continues to allow pre-tax treatment for transit and parking.

Other Provisions

• Raises child tax credit from $2,000 to $2,200 adjusted for inflation after 2025 and makes these changes permanent.
• Alternative minimum tax exemption amounts were increased under TCJA along with the income levels at which the exemptions phased out. This resulted in fewer taxpayers being liable for the AMT tax. The Act increases the AMT exemption amounts permanently. The exemption phaseout threshold is now set at $500,000 for individual filers and $1M for joint filers.
• Provides that non-itemizers may claim an above-the-line charitable deduction not in excess of $1,000 for single filers and $2,000 for joint filers. To qualify, contributions must be in cash, made to a public charity meet requirements of section 170(p). applies for tax years beginning after December 31, 2025.
• New Internal Revenue Code section 224 temporarily allows employees to deduct up to $25,000 annually in qualified tip income from their taxable wages. Guidance from Treasury is expected in 2026.
• New IRC section 225 temporarily allows employees to deduct up to $12,500 in qualified paid overtime pay from taxable income. Employers must now report overtime pay separately on W-2.
• EV tax credit eliminated.
• Under the previous law, gamblers could deduct 100% of their losses up to the amount of their winnings. Effective January 1, 2026, gamblers can only deduct 90% of their losses up to the amount of their winnings. The remaining 10% of losses are not deductible. This change means that even if a gambler breaks even or has a net loss, they may still owe taxes on a portion of their winnings.

As with any tax law, the new law has many qualifications and exceptions. If you have questions about how OBBBA will affect you or would like more detail about any of its provisions, give one of our tax professionals a call.