05/30/2025
Key tax provisions in the House's One Big Beautiful Bill Act
We are writing to inform you of significant developments in federal tax legislation. On May 22, 2025, the House of Representatives passed H.R. 1, One Big Beautiful Bill Act, a sweeping $3.8 trillion reconciliation package that includes a broad array of tax provisions affecting individuals, businesses, and international taxpayers.
While the bill is expected to undergo revisions in the Senate, we want to highlight the key provisions as currently drafted and offer preliminary insights into how they may affect your tax planning. Please contact us at your earliest convenience to discuss your situation so we can develop a customized plan. We continue to closely monitor any potential tax legislation and update you accordingly.
Individual income tax provisions
• Permanent extension of lower tax rates and brackets: The bill would make permanent the individual income tax rates and brackets established by the Tax Cuts and Jobs Act (TCJA), including lower individual tax brackets and the increased standard deduction.
• Standard deduction: The nearly doubled standard deduction would be made permanent, with an additional inflation adjustment and a temporary increase for 2025–2028 ($1,000 for single filers, $2,000 for joint filers).
• Child Tax Credit: The credit would increase from $2,000 to $2,500 per child and include a temporary enhancement for 2025–2028.
• Qualified business income deduction (Sec. 199A): The 20% deduction for qualified business income from pass-through entities is made permanent and increased to 23% for tax years after 2025.
• Estate and gift tax exemption: The increased exemption is made permanent and raised to $15 million per individual ($30 million for married couples) in 2026, indexed for inflation.
• SALT deduction cap: The state and local tax (SALT) deduction cap is increased to $40,000 per household with a $500,000 income cap.
• Charitable deduction for non-itemizers: A temporary above-the-line deduction for charitable contributions is reinstated for 2025–2028 ($150 for single filers, $300 for joint filers).
• No tax on tips and overtime: For 2025–2028, above-the-line deductions are created for qualified tips (in certain occupations) and for overtime premium pay, subject to income and occupation limitations.
• Enhanced deduction for seniors: For 2025–2028, a $4,000 deduction is available for seniors (age 65+) with income below $75,000 ($150,000 for joint filers).
• Car loan interest deduction: For 2025–2028, up to $10,000 of interest on loans for U.S.-assembled passenger vehicles may be deducted, subject to income phaseouts.
• Moving expense deduction: The bill permanently terminates the deduction except for Armed Forces.
• Other deductions and credits: The bill makes permanent or enhances several other deductions and credits, including the adoption credit, employer-provided childcare credit, paid family and medical leave credit, and education-related benefits.
Business tax provisions
• Bonus depreciation: 100% expensing (bonus depreciation) for qualified property is restored for property placed in service from Jan. 19, 2025, through Dec. 31, 2029.
• Sec. 179 expensing: The maximum amount a business may expense is increased to $2.5 million, with the phaseout threshold raised to $4 million, both indexed for inflation after 2025.
• Research and experimental expenditures: Allows full expensing of domestic R&D from Jan 1, 2025 through 2029; amortization resumes in 2030.
• Business interest deduction: For 2025–2029, the limitation is calculated using earnings before interest, taxes, depreciation and amortization (EBITDA), rather than EBIT.
• Low-Income Housing Tax Credit: The 9% credit allocation is increased for 2026–2029, the bond-financing threshold for the 4% credit is lowered, and Indian and rural areas are designated as “difficult development areas.”
• Opportunity zones: A new round of opportunity zones is created for 2027–2033, with revised eligibility and incentives, including special rules for rural areas.
• Clean energy and IRS credits: The bill would terminate or phase out several clean energy credits from the Inflation Reduction Act (IRA).
What’s next?
The bill now moves to the Senate, where significant revisions are expected. As noted by Senate Finance Committee members, the upper chamber will not rubber-stamp the House version. We will monitor developments closely and provide updates as the legislative process unfolds.
How you can prepare
We recommend reviewing your current tax strategy in light of these proposed changes. Our team is available to discuss how these provisions may impact your personal or business tax situation and to help you plan accordingly.
Please don’t hesitate to contact us with any questions or to schedule a consultation.
Sincerely,
The Team at Sechrest & Bloom, LLC
