07/11/2025
Key tax provisions in the One Big Beautiful Bill Act
We are writing to inform you of significant developments in federal tax legislation. On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act (OBBBA), a reconciliation package that includes a broad array of tax provisions affecting individuals, businesses and international taxpayers.
We want to highlight the key provisions 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 will continue to closely monitor any potential regulatory guidance as it’s developed from the IRS and update you accordingly.
Individual income tax provisions
• Permanent extension of lower tax rates and brackets: The OBBBA generally makes the tax rates enacted in 2017 in the Tax Cuts and Jobs Act (TCJA) permanent. An additional year of inflation adjustment is added for determining the dollar amounts at which the 12% rate bracket ends and the 22% rate bracket begins.
• Standard deduction: The nearly doubled standard deduction would be made permanent. Effective for 2025, the amounts are as follows:
Single & Married Filing Separately (MFS): $15,750 (indexed)
Head of Household (HoH): $23,625 (indexed)
Married Filing Jointly (MFJ): $31,500 (indexed)
• Child Tax Credit: The nonrefundable child tax credit increases to $2,200 per child beginning in 2025 and the credit amount is indexed for inflation.
• Other Dependent Credit: This nonrefundable credit of $500 per qualifying dependent who does not qualify for the child tax credit (e.g., older children and elderly parents) is made permanent with no inflation adjustment.
• Child and Dependent Care Credit: Starting in 2026, the Child and Dependent Care Credit will be more valuable for many families. The maximum credit rate increases from 35% to 50% of eligible expenses, up to $3,000 for one qualifying dependent or $6,000 for two or more. The full 50% rate applies to families with AGI up to $15,000 and gradually phases down to 35% for AGI up to $75,000 ($150,000 for joint filers). For taxpayers with AGI in excess of these limits, the credit rate remains unchanged at 20%.
• 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.
• Alternative Minimum Tax (AMT): While most provisions remain unchanged, new thresholds beginning in 2026 will expand the number of taxpayers subject to the AMT. The AMT exemption amounts are permanently increased for 2026 and beyond, but the phaseout rate for higher-income taxpayers doubles from 25% to 50%. Taxpayers should review their AMT exposure and consider strategies such as timing income or exercising options in lower-income years to avoid unexpected AMT liability.
• SALT deduction cap: In 2025, the state and local tax (SALT) deduction cap is increased to $40,000 per household and will be phased out for taxpayers with modified adjusted gross income (MAGI) over $500,000. The revised SALT deduction cap and the phaseout threshold will increase annually by 1% over the next 5 years. In 2030, the deduction will revert to $10,000.
• Charitable deduction for non-itemizers: An above-the-line deduction is added for charitable contributions that starts in 2026 ($1,000 for single filers, $2,000 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 $6,000 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 deduction is permanently terminated except for those in the Armed Forces.
• Home mortgage interest and insurance premiums: The $750,000 limit on the treatment of mortgage interest as qualified residence interest is made permanent. The exclusion of home-equity indebtedness from the definition of qualified residence interest is also now permanent.
• Casualty loss deduction for personal casualties: The limitation on personal casualty loss deductions is made permanent, however a provision is added to include state-declared disasters.
• Other deductions and credits: Several other deductions and credits, including the adoption credit, employer-provided childcare credit, paid family and medical leave credit, and education-related benefits are made permanent.
Energy credits
• Residential Clean Energy Credit (Solar): The 30% solar credit terminates for property placed in service after December 31, 2025.
• Energy Efficient Home Improvement Credit: This credit terminates for property placed in service after December 31, 2025. For 2025, the credit is equal to 30% of qualified costs subject to a $1,200 annual limit.
• Clean Vehicle Credit (EV): This credit terminates for new vehicles acquired after September 30, 2025. Prior to this date, there is a credit of up to $7,500 per new eligible EV purchase, subject to income phaseouts.
• Previously Owned Clean Vehicle Credit: This credit terminates for vehicles placed in service after September 30, 2025. Prior to this date, there is a credit of up to $4,000 per eligible used EV purchased, subject to income phaseouts.
• Alternative Fuel Refueling Property Credit (EV charging station): This credit terminates for property placed in service after June 30, 2026. Prior to this date, if you install a home EV charging station, a 30% credit on hardware and installation costs of up to $1,000 is available.
Business tax provisions
• QBI deduction: The Qualified Business Income (QBI) deduction is made permanent and the deduction remains at 20%. Beginning in 2025, the deduction limitation phase-in amounts are increased from $50,000 to $75,000 for single filers and $100,000 to $150,000 for joint filers. These thresholds will be indexed for inflation after 2026. This means more taxpayers will be able to the claim the QBI deduction and higher income taxpayers in service businesses may benefit before the QBI deduction phases out. In addition, a new minimum QBI deduction of $400 (indexed for inflation after 2026) is added for taxpayers with at least $1,000 of QBI from active qualified businesses.
• Bonus depreciation: 100% expensing (bonus depreciation) for qualified property is restored for property placed in service after Jan. 19, 2025.
• Sec. 179 expensing: The maximum amount a business may expense for qualifying expenses is increased to $2.5 million, with the phaseout threshold raised to $4 million, both indexed for inflation after 2025.
• R&E expenditures: Starting in 2025, the immediate expensing of domestic research and experimental (R&E) expenditures is permitted. In 2025, taxpayers have the option to expense unamortized domestic R&E expenditures over a one or two-year period. Alternatively, small businesses with average annual gross receipts < $31M have the option to retroactively expense domestic R&E that was capitalized in 2022 through 2024 by filing amended returns. R&E expenditures attributable to research conducted outside of the United States must continue to be capitalized and amortized over 15 years.
• Pass-through entity (PTE) tax/SALT deduction: While the individual SALT deduction limit is raised to $40,000 for most filers, there is no SALT limitation for pass-through entities. Thus, it will continue to make sense for many pass-through businesses to make a PTE tax election and pay the state income tax at the entity level.
• Excess business loss permanency: The excess business loss limitation is made permanent, and the existing treatment of loss carryforwards is maintained.
• Third-party network transaction reporting threshold: Form 1099-K, Payment Card and Third Party Network Transactions, reporting reverts back to previous rules where reporting is required if transactions exceed $20,000 and the aggregate number of transactions exceeds 200.
• Form 1099 reporting threshold: The information reporting threshold for payments for services increases to $2,000 in a calendar year (up from $600) in 2026, and the threshold amount will be indexed annually for inflation starting in 2027.
• Renewed Opportunity Zones: Opportunity zones provisions are made permanent, but with several changes, including narrowing the definition of “low-income community.” The changes will generally take effect in 2027.
How can you prepare?
A phased approach to planning will align with the timing and impact of this legislative development. This approach allows us to support you with timely strategies tailored to each stage of implementation:
• Short-term planning will focus on immediate actions and compliance considerations for tax provisions already in effect or taking effect soon.
• Mid-term planning will address transitional provisions and opportunities that emerge over the next 12–18 months.
• Long-term planning will help position you for sustained success by anticipating future changes and aligning your financial goals with the broader tax policy environment.
We’ll continue to monitor developments closely and provide updates and guidance as new details become available. Our goal is to ensure you’re informed, prepared, and supported — every step of the way.
We’re here to help
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
