Signed into law on July 4, 2025, the One Big Beautiful Bill Act (OBBB) builds on the foundation of the 2017 Tax Cuts and Jobs Act (TCJA), making many of its provisions permanent while introducing new tax benefits, such as providing deductions to remove income tax on certain tips and overtime pay. The bill also removes several clean energy incentives. The following summary includes highlights of key domestic provisions that impact both individuals and businesses. Note that when changes below are described as permanent, this only means that the provisions have no set expiration date.
What are Key Tax Provisions for Individuals?
1. Tax Rates and Standard Deduction
The OBBB solidifies and makes permanent the individual tax rates established under the TCJA, avoiding the scheduled sunset in 2026. The top individual tax rate of 37 percent is now permanent. The bill also extends inflation adjustments for rate brackets in efforts to prevent taxpayers from moving into higher brackets due to inflation alone.
The standard deduction is also made permanent and increased as follows (these amounts will be adjusted annually for inflation):
- $15,750 for single filers
- $23,625 for heads of household
- $31,500 for married couples filing jointly
There is also a $6,000 additional standard deduction for seniors who are aged 65 or older. This deduction begins to phase out when a senior’s modified adjusted gross income (MAGI) exceeds $75,000 if single or $150,000 if filing a joint return.
2. SALT Cap Expansion
The State and Local Tax (SALT) deduction cap is temporarily increased from $10,000 to $40,000 as of the beginning of 2025. This SALT deduction cap will be adjusted for inflation through 2029, after which it reverts to $10,000. Taxpayers with MAGI over $500,000 are subject to a phase-down between $500,000 and $600,000 of income (in 2025). The phase out will not reduce the deduction below $10,000.
3. Qualified Business Income (QBI) Deduction For small business owners and self-employed individuals, the QBI deduction under Section 199A becomes permanent and keeps the deduction rate of 20 percent. For a taxpayer who earns a full QBI deduction, the top income tax rate on income from pass-through entities remains at 29.6 percent.
4. Estate and Gift Tax Exemption
The estate and gift tax exemption is increased to $15 million per person and indexed for inflation. This provision is extended indefinitely and does not sunset.
5. No Tax on Tips
Workers who earn tips will now be able to deduct the first $25,000 of tip income from income tax. The deduction takes effect for 2025, including tips already received. The deduction will end after 2028. The deduction begins to phase out once an individual’s income exceeds $150,000 or $300,000 for married couples who file a joint return. Tip workers will still face the 7.65 percent Social Security and Medicare payroll taxes.
6. Child Tax Credit
The OBBB increases the nonrefundable child tax credit to $2,200 per child, effective the beginning of 2025, with the credit amount indexed for inflation. The refundable $1,400 child tax credit is also made permanent, with the credit amount indexed for inflation. Also made permanent are increased income phaseout threshold amounts of $200,000 ($400,000 for joint returns), and the $500 nonrefundable credit for each dependent of the taxpayer that is not a qualifying child.
6. Car Loan Interest Deduction
For the years 2025 to 2028, the bill introduces a new deduction for interest paid on car loans, up to an annually capped amount of $10,000. The deduction will phase out for taxpayers with MAGI in excess of $100,000 ($200,000 if filing jointly).
7. Trump Accounts
The OBBB introduces Trump Accounts as a new savings vehicle, designed to help families build long-term funds for events such as education, homeownership and entrepreneurship. Contributions are capped at $5,000 per year but cannot begin until one year after the enactment of the new law. The federal government will seed each account with $1,000 for children born from 2025 – 2028. Contributions are after-tax, but earnings grow tax-free, and qualified withdrawals are not taxed.
8. Expanded Use of Section 529 Plans
Section 529 education savings plans can now be used for a broader range of expenses, including homeschooling costs, apprenticeships and certain adult education programs.
9. Charitable Contribution Deduction
For those who itemize deductions for charitable contributions, the 60% AGI limit for cash contributions to public charities is now permanent. There is a new floor in determining charitable contribution deduction. Only contributions of more than 0.5% of MAGI will be deductible.
For non-itemizers, the bill provides an above-the-line charitable deduction of up to $600 for individuals and $1,200 for joint filers.
What are Key Provisions for Businesses?
1. Bonus Depreciation
In an effort to be a major incentive for capital investment, the bill extends 100 percent bonus depreciation through 2027, allowing businesses to immediately deduct the full cost of qualifying property.
2. Section 179 Expensing
The Section 179 expensing limit is increased to $2.5 million, with the phase-out threshold raised to $4 million, both indexed for inflation.
3. Research and Development (R&D) Expenses
The OBBB reverses the TCJA requirement to amortize R&D expenses over five years. Businesses can now immediately deduct R&D costs, meant to promote innovation and domestic investment for businesses. Small business taxpayers with average annual gross receipts of $31 million or less will generally be permitted to apply this change retroactively to tax years beginning after 2021.
4. Qualified Small Business Stock (QSBS)
The exclusion for gains on QSBS is expanded. A three-tiered capital gain exclusion now applies – 50 percent for stock held at least three years, 75 percent for stock held at least four years and 100 percent for stock held at least five years. The maximum gain exclusion is increased from $10 million to $15 million, with the possibility of higher gain exclusion if the gain exceeds ten times stock basis. For corporate issuers of QSBS stock, the gross asset test for eligibility is increased from $50 million to $75 million.
5. Clean Energy Incentives Rolled Back
The bill terminates many clean energy tax credits, including those for electric vehicles, solar installations, energy-efficient home improvements as well as wind and solar facilities. The Section 45Z clean fuel production credit is extended until the end of 2029, with restrictions placed on the use of foreign feedstocks.
Have the Right Tax Advisor at Your Side
For taxpayers attempting to navigate new provisions for themselves and their businesses, the right tax advisor at your side can help you understand and navigate how new tax law impacts your tax situation. Windham Brannon’s Tax Professionals are ready to show you new opportunities and develop updated strategies for your wealth and your business. For questions or more information, contact your Windham Brannon tax advisor today, or reach out to Nicole Suk and Geana Gault.
