On July 4th, 2025 President Trump signed the One Big Beautiful Bill Act into law. Included in this legislation, there were a lot of tax provisions. Below please find a summary of some of the most relevant changes for individuals and businesses.
Individual – Tax Cuts and Jobs Acts (TCJA)
1. TCJA tax rates were made permanent.
2. The standard deduction was made permanent and increased to $15,750 for single filers, $23,625 for heads of household, and $31,500 for married individuals filing jointly for 2025. The standard deduction will then be adjusted for inflation.
3. Personal exemptions have been set to 0. From 2025-2028, an additional $6,000 deduction will be allowed for taxpayers over 65 years old. This amount will phase out if Modified Adjusted Gross Income exceeds $75,000 ($150,000 MFJ).
4. State and Local Tax deduction temporarily increased to $40,000. It will be adjusted for inflation going forward until it reverts to $10,000 in 2030. This deduction will be phased out by 30% if Modified Adjusted Gross Income exceeds $500,000 until the deduction returns to $10,000.
5. Child Tax Credit increased non-refundable portion to $2,200 and makes $1,400 refundable credit permanent.
6. Qualified Business Income (QBI) deduction has been made permanent.
7. Estate Tax exemption permanently increased to $15 million ($30 million MFJ). These will be adjusted for inflation.
8. Mortgage Interest permanently limited to the first $750,000 of acquisition debt.
9. 2% miscellaneous itemized deductions are permanently eliminated.
10. Permanently eliminates the overall cap on itemized deductions and replaces it with a provision requiring taxpayers to reduce the value of itemized deductions claimed against the top individual income tax rate (37%) by 2/37.
Individual – New Provisions
11. A temporary above the line deduction of up to $25,000 for qualified tips received by an individual in an occupation that normally receives tips. This will be available from 2025 to 2028. More guidance forthcoming.
12. A temporary above-the-line deduction of up to $12,500 ($25,000 in the case of a joint return) for qualified overtime compensation received by an individual during a given tax year. The deduction begins to phase out when the taxpayer’s MAGI exceed $150,000 ($300,000 MFJ). This will be available from 2025 to 2028. More guidance forthcoming.
13. Auto Loan interest up to $10,000 will be an itemized deduction through 2028 for cars purchased after 2024. Final assembly of the vehicle will need to be in the United States.
14. Trump Accounts will be a form of IRA accounts (not Roth) for minors. Contributions of up to $5,000 will be allowed 12 months after the passage of this legislation and up until the beneficiary turns 18. Distributions will be allowed after the beneficiary turns 18.
15. A new credit of the greater of $5,000 or 10% of the taxpayer’s AGI for charitable contributions to scholarship-granting organizations. The credit comes with a $4 billion annual cap (starting in 2027), and the credit will be allocated on a first-come, first-served basis, up to that cap.
16. 529 account uses expanded to include elementary, secondary, and qualified postsecondary expenses.
17. The Charitable contribution deduction above the line has been reinstated. Non-itemizing taxpayers will be allowed to claim a deduction for up to $1,000 ($2,000 MFJ) of charitable contributions. Taxpayers that itemize will be subject to a 0.5% floor to claim this deduction. The base will be the current year’s contributions.
Business Provisions
1. 100% bonus depreciation deduction return for purchases after 1/19/2025.
2. R&D expenses carried out in the United States will be deductible after 12/31/2024.
a. Small Business taxpayers (gross receipts under 31 million) will be allowed to retroactively change this treatment and amortize R&D costs over a one-to-two-year period instead of capitalizing. This will be allowed for tax years between 2022 and 2025.
3. Interest limitation calculation based on EBITDA has been reinstated. Adjusted taxable income will be computed without regard to the deduction for depreciation and amortization.
4. Employer credit for paid family and medical leave made permanent.
5. The amount of qualified childcare expenses considered for purposes of the employer-provided childcare credit increased from 25% to 40%. The maximum amount of the credit increased from $150,000 to $500,000 ($600,000 for eligible small businesses) and will be adjusted for inflation.
6. The bill makes opportunity zones permanent but with several changes, including narrowing the definition of “low-income community.” The changes would generally take effect 1/1/ 2027.
7. A larger number of green energy credits have been terminated (mostly the vehicle and residential home ones).