Tax Highlights of the signed “Big Beautiful Bill”

On July 3, 2025, Congress completed and approved “The One Big Beautiful Bill,” which President Trump signed into law on July 4. This comprehensive legislation introduces major tax reforms for individuals and businesses, with most measures becoming effective in the 2025 or 2026 tax years, and some applying retroactively from January 1, 2025.

This extensive legislation modifies and prolongs several significant elements of the Tax Cuts and Jobs Act of 2017 (TCJA), many of which were scheduled to expire at the close of 2025. Below is a summary of the main tax provisions included in the final version of the bill: 

TCJA Individual Tax Provisions Extended or Made Permanent

• Extension of Modification of Rates -

  Permanently establishes the TCJA tax rates and alters the inflation adjustment method for the different brackets.

• SALT Limitation Increase to $40,000 -

  Temporarily raises the state and local tax (SALT) itemized deduction limit to $40,000 for most taxpayers starting in 2025 and increase the cap by 1% from that level through 2029, subject to phaseout for taxpayers with incomes over $500,000, and returns to $10,000 cap in 2030.

• Increased Standard Deduction -

  Make the standard deduction increase permanent with an enhancement, starting in 2025 at $31,500 for joint filers, $23,625 for head of household, and $15,750 for all other filers, inflation adjusted thereafter.

• Increased Child Tax Credit -

  Establishes the TCJA's expanded and improved child tax credit as permanent and temporarily raises the maximum credit from $2,000 to $2,200 per child. $500 credit remains for other dependents.

• Increased Estate and Gift Tax Exemption Amounts - Permanently increases the lifetime estate and gift tax exemption to $15 million per person ($30 million if married), subject to inflation adjustments after 2025.

• Termination of Overall Limitation on Itemized Deductions -

  Removes the overall limit on itemized deductions permanently and introduces a rule that mandates taxpayers to decrease the value of itemized deductions claimed against the highest individual income tax rate (37%) by 2/37.

• Limitation on Deduction for Qualified Residence Interest -

  Establishes a permanent cap for mortgage interest deductions at $750,000, incorporates the treatment of mortgage insurance premiums as qualified residence interest, and permanently omits home equity indebtedness from being classified as qualified residence interest.

• Termination of Miscellaneous Itemized Deductions - Permanently eliminates the Sec. 67(g) deduction for “2%” miscellaneous itemized deductions.

• Extension of current alternative minimum tax (AMT) rules – Makes the TCJA’s increased AMT exemption amount and phaseout thresholds permanent. 

  
  

 

TCJA Business Tax Provisions Extended or Made Permanent 

• Deduction for Qualified Business Income and Permanent Enhancement -

  Makes permanent the 20% Sec. 199A deduction for qualifed business income.

• 100% Bonus Depreciation -

  Permanently restores the 100% first-year (bonus) depreciation for property obtained and put into service after January 19, 2025.

• 163(j) Return to EBITDA Standard -

  Permanently reinstates the EBITDA-based calculation (adding back depreciation and amortization) for the interest expense limitation starting in 2025 and adds a new limitation for capitalized interest.

• Excess Business Loss Limitations -

  Makes permanent the limitation on excess business losses of a taxpayer other than a corporation. (In the final bill, excess business losses still become net operating losses (NOLs) for subsequent years.)

 

New Individual Tax Provisions 

• New Senior Deduction -

  Temporarily add a senior deduction of $6,000 (per senior over 65) for each qualifying individual for both itemizers and non-itemizers that phases out when modified adjusted gross income exceeds $75,000 ($150,000 for married couples filing jointly), available from 2025 through 2028.

• New Charitable Contribution Deduction -

  Creates a new permanent $1,000 max ($2,000 for Married Joint Filers) above-the-line deduction for charitable contributions. This deduction is only eligible for individuals who elect not to itemize.

• New Tip Income Deduction -

  Temporarily make up to $25,000 of tip income deductible for individuals in traditionally and customarily tipped industries for tax years 2025 through 2028; deduction phases out at a 10 percent rate when adjusted gross income exceeds $150,000 ($300,000 for joint filers).

• New Overtime Deduction –

  Temporarily make up to $12,500 ($25,000 for joint filers) of the premium portion of overtime compensation deductible for itemizers and non-itemizers for tax years 2025 through 2028; the deduction phases out at a 10 percent rate when adjusted gross income exceeds $150,000 ($300,000 for joint filers).

• New Auto Loan Interest Deduction –

  Temporarily make auto loan interest deductible for itemizers and non-itemizers for new autos with final assembly in the United States for tax years 2025 through 2028; deduction limited to $10,000 and phases out at a 20 percent rate when income exceeds $100,000 for single filers and $200,000 for joint filers.

• 529 Plan Rule Changes -

  Expands the definition of ‘qualified higher education expenses’ under Sec. 529 plans to include certain costs associated with enrollment or attendance at K-12 public, private, or religious schools, as well as homeschooling and post-secondary credentialing programs.

• New Tax Credit for Charitable Contributions to Scholarship-Granting Organizations –

  New credit of $1,700 for charitable contributions to scholarship-granting organizations for elementary and secondary education. Contributions must be in cash, must be reduced by any state tax credit, and cannot be double-counted as charitable deductions. Each state is to provide a list of qualifying organizations each year.   

• Trump Accounts -

  Establishes Trump Accounts, which are tax-advantaged savings accounts for U.S. citizen children under the age of 8 at the time the account is opened. Contributions of up to $5,000 per account per year (indexed for inflation) are allowed, and distributions before age 18 are prohibited without penalties. Potential $1,000 tax credit for Trump Accounts created for children born between 2025 and 2028.

• Dependent care assistance programs –

  Increases the annual dependent care assistance program from $5,000 to $7,500.

• New Opportunity Zone Investments -

  Makes opportunity zones permanent. Starting 7/1/2026, Governors will designate new QOZs, which will then be in effect for 10 years. Capital gains invested after 1/1/2027 will be deferred until the earlier of the date of disposition or five years from the date of the investment in a QOZ. Holding the property for five years creates a 10% basis increase (30% for rural funds). Holding for 10-30 years eliminates all gain when the investment is disposed. 

  The final law raises several unanswered questions. Additional regulations will be necessary to provide further guidance.

• Removal of Residential Green Energy Tax Credits After 12/31/25 -

  Terminates the residential energy-efficient home improvement credit (Sec. 25C) and the residential clean energy credit (Sec. 25D) for property placed in service after 2025.

• New limit on Gambling losses –

  Starting in 2026, only 90% of gambling or wagering losses can be used to offset gambling or wagering income.

  
  

New Business Tax Provisions

• Deduction of Domestic Research and Experimental Expenditures - Permanently restores immediate deductibility of domestic research or experimental expenditures for tax years starting after 12/31/2024. Allows small businesses (under $31 million in gross receipts) to retroactively expense unamortized R&D costs dating back to January 1, 2022.

• New 179 Expense Limitations -

  Increases the maximum amount a taxpayer may expense under Sec. 179 to $2.5 million and increases the phaseout threshold amount to $4 million.

• Return to $20,000 1099-K Reporting Threshold -

  Reverts to the previous Form 1099-K reporting threshold, requiring third-party settlement organizations to report only if a participating payee’s aggregate transactions exceed $20,000 in value and 200 in number within a calendar year. 

• 1099 Reporting Threshold Increase from $600 to $2,000 -

  Raises the information reporting threshold for certain business-related payments and service remuneration to $2,000 per calendar year (up from $600), with the threshold indexed annually for inflation beginning in 2027.

• Qualified Small Business Stock –

  For qualified small business stock acquired after the date of enactment, there is a 50% benefit if held for 3 years, 75% for 4 years, and 100% for five years. Up to $15 million of gain can be excluded (but the 10 times basis rule does not change). The gross asset limit increases from $50 million to $75 million.

• Removal of Recent Green Energy Tax Credits After 12/31/25 -

  Repeals or phases out a large number of clean-energy provisions, including the clean vehicle credits and credits for certain clean energy property (i.e., solar, wind, geothermal, fuel cell, etc.).  

  
  

This new legislation indicates significant changes in the tax environment for both individuals and businesses. Some provisions are now permanent, while others are temporary and may change with future administrations. We are keeping a close watch on IRS guidance as implementation progresses and will offer further updates as they arise.

If you have any questions about these changes and how they affect your tax situation, don't hesitate to reach out!