Tax Changes in the One Big Beautiful Bill Act
July 9th, 2025
On July 4, 2025, President Trump signed the One Big Beautiful Bill Act (H.R. 1), commonly referred to as the ‘Big, Beautiful Bill’. The legislation extends key provisions of the Tax Cuts and Jobs Act (TCJA) and introduces additional changes for individuals and businesses.
The One Big Beautiful Bill Act represents the one of the most significant federal tax reforms in years, with a range of provisions that provide opportunities for planning as well as new compliance considerations.
Our team is here to help you make sense of these changes and create a tax strategy tailored to your goals.
Highlights for Individuals
** subject to additional income phaseout limitations
Standard Deduction
Under New Legislation: $15,750 – single/mfs; $23,625 – head of household; $31,500 – married filing joint for 2025 (higher standard deduction was made permanent under legislation and will index for inflation yearly)
Prior: $15,000 – single/mfs; $22,500 – head of household; $30,000 – married filing joint for 2025
State and Local Tax (SALT) part of Itemized Deductions
Under New Legislation: $40,000 limit for 2025**
Prior: $10,000 limit
Senior Tax Benefit
Under New Legislation: Seniors (65+) receive a $6,000 deduction through 2028.**
Prior: N/A
Child Tax Credit
Under New Legislation: $2,200 per child; refundable $1,700 child tax credit**
Prior: $2,000 per child; refundable $1,700 child tax credit**
Estate and Gift Tax Exemption
Under New Legislation: $15 million per individual in 2026
Prior: $13.99 million per individual for 2025, exemption was to revert back to pre-TCJA amounts in 2026, basic exclusion of $5 million indexed for inflation
No Tax on Qualified Tips
Under New Legislation: Temporary deduction in 2025-2028 of up to $25,000 per taxpayer in an occupation that customarily receives tips.** Additional requirements for married taxpayers and for the self-employed.
Prior: N/A
No Tax on Qualified Overtime Compensation
Under New Legislation: Temporary deduction in 2025-2028 of up to $12,500 per taxpayer.** Additional requirements for married taxpayers.
Prior: N/A
No Tax on Car Loan Interest
Under New Legislation: Deduct up to $10,000 of annual loan interest for new US-assembled passenger vehicles purchased from 2025 through 2028**
Prior: N/A
Trump Accounts for Child Savings
Under New Legislation: One-time $1,000 credit for opening a “Trump account” for a child born in 2025-2028. Contributions are limited to $5k/year, gov't will contribute $1k/child into eligible account which the IRS will establish on the child's behalf if no account (parents can opt out of the account).
Prior: N/A
Highlights for Businesses
Bonus Depreciation
Under New Legislation: 100% for property acquired and placed in service after Jan. 19, 2025, permanently set at 100% for future years
Prior: 40% in 2025
Section 179 Expensing
Under New Legislation: Increased to $2.5 million, for 2025
Prior: $1.25 million, for 2025
Research and Development Expenses
Under New Legislation: Immediately deduct domestic research expenses, provide small businesses with the option to apply change retroactively back to 2022 with amended returns, also allow taxpayers to accelerate any remaining Sec. 174 deductions.
Prior: Required to amortize and can deduct $20 for every $100 spent; the remaining $80 would be spread out over the next four years
Limitation on Business Interest
Under New Legislation: Reinstates Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) limitation
Prior: Earnings Before Interest and Taxes (EBIT) limitation
Paid Family and Medical Leave Credit
Under New Legislation: Sec. 45S amended to make credit permanent
Prior: Family and Medical Leave Credit (Sec. 45S) not available for tax years after 2025
Special Depreciation Allowance for Qualified Production Property (Manufacturing Property)
Under New Legislation: Additional first-year depreciation deduction equal to 100% of the adjusted basis, qualified property construction begins after Jan. 19, 2025 and is place in service before 2031.
Prior: N/A
Advanced Manufacturing Investment Credit (Semiconductor Manufactures)
Under New Legislation: Increases to 35% for property placed in service after Dec. 31, 2025
Prior: 25%
Qualified Small Business Stock
Under New Legislation: Tiered exclusion, 50% after 3 years, 75% after 4 years; 100% after 5 years, for qualified small business stock acquired after July 4, 2025.
Prior: 50% exclusion after 4 years
Excess Business Losses
Under New Legislation: Sec. 461(I)(1) becomes permanent
Prior: Excess business loss rules under Sec. 461(I)(1) were slated to expire for tax years beginning after 2028
Highlights for changes to Energy Credits
Section 179D, Energy Efficient Commercial Buildings Deduction
Under New Legislation: Terminates deduction for property that begins construction after June 30, 2026.
Prior: Deduction based on the cost of energy efficient commercial building property, up to a maximum amount per square foot.
Section 25C, Energy Efficient Home Improvement Credit
Under New Legislation: Terminates for property placed in service after December 31, 2025.
Prior: 30% of qualified costs, $1,200 annual limit, expires 2032, includes insulation, windows and doors.
Section 25D, Residential Clean Energy Credit
Under New Legislation: Terminates for property placed in service after December 31, 2025.
Prior: 30% of qualified costs, phases down after 2032, expires 2034, includes solar and other energy-efficient installations.
Section 25E, Previously Owned Clean Vehicle Credit
Under New Legislation: Terminates for vehicles acquired after December 31, 2025.
Prior: Up to $4,000, expires 2032.
Section 30D, Clean Vehicle Credit
Under New Legislation: Terminates for vehicles acquired after December 31, 2025, special rule for 2026 for manufactures under 200,000 vehicles.
Prior: Up to $7,500 per new clean vehicle, expires 2023.
Section 45W, Commercial Clean Vehicle Credit
Under New Legislation: Terminates for vehicles acquired after September 30, 2025.
Prior: Up to $40,000, expires 2032.
Highlights for Employers/Employees
Employee Retention Tax Credit (ERTC)
Under New Legislation: Prohibits IRS from issuing any ERTC refunds after July 4, 2025 (unless the taxpayer had filed the refund or credit claim before January 31, 2024.
Prior: Potentially could claim a COVID-related ERTC until April 15, 2025
No Tax on Qualified Tips
Under New Legislation: Temporary deduction in 2025-2028 of up to $25,000 per taxpayer subject to phaseout in an occupation that customarily receives tips.** Additional requirements for married taxpayers and for the self-employed.
Prior: N/A
No Tax on Qualified Overtime Compensation
Under New Legislation: Temporary deduction in 2025-2028 of up to $12,500 per taxpayer subject to phaseout for “qualified overtime compensation.” ** Additional requirements for married taxpayers.
Prior: N/A
Paid Family and Medical Leave Credit
Under New Legislation: This credit becomes permanent and employers have a choice for calculating the credit based on wages paid or premiums paid. An eligible employee can be employed for not less than six months. This applies to tax years after 2025.
Prior: The credit was not available for wages paid in tax years beginning after 2025.
Employer-Provided Child Care Credit
Under New Legislation: Effective in 2026, credit for “qualified child care expenditures” increases to 40% for regular businesses and 50% for eligible small businesses. The maximum credit is $500,000 ($600,000 for eligible small businesses), subject to annual inflation adjustments beginning in 2027.
Prior: 25% of qualified costs and a lower maximum credit limit
Employee Exclusion for Employer Payments of Student Loans
Under New Legislation: The employee exclusion for qualifying employer payments of student loans becomes permanent. In addition, provides an inflation adjustment to the maximum exclusion amount ($5,250) for tax years beginning after 2026.
Prior: Exclusion was set to expire after 2025.
Dependent Care Assistance Programs
Under New Legislation: Increases the annual tax-free limit for amounts paid or incurred by an employer pursuant to a dependent care assistance program to $7,500 ($3,750 for a married individual filing separately). This is effective for tax years beginning after 2025.
Prior: Limited to $5,000 ($2,500 for married individual filing separately)
Moving Expenses
Under New Legislation: The prior suspension of the moving expense deduction and exclusion becomes permanent for most taxpayers. There are exceptions for active-duty members of the Armed Forces moving due to a military order and for U.S. intelligence community employees and appointees who relocate due to a change in assignment. This is effective for tax years after 2025.
Prior: Suspended 2018-2025 (except for Armed Forces); reinstated in 2026.
Bicycle Commuting Expenses
Under New Legislation: Permanently eliminates the qualified bicycle commuting reimbursement exclusion.
Prior: Suspended 2018-2025; reinstated in 2026.
529 plans-Postsecondary Credentialing Expenses
Under New Legislation: Allows 529 savings plan distributions to apply to “qualified postsecondary credentialing expenses” including occupational or professional licenses issued or recognized at the state or federal government level. It also includes certificates of completion of an apprenticeship registered and certificated with the Secretary of Labor and credentials as defined in Section 3(52) of the Workforce Innovation and Opportunity Act. This applies to distributions after July 4, 2025.
Prior: N/A
Information reporting, Forms 1099-NEC and 1099-MISC
Under New Legislation: For payments made after 2025, reporting thresholds are increased to $2,000 (adjusted for inflation after 2026).
Prior: $600 and no adjustment for inflation
This post is for informational purposes only and does not constitute tax or legal advice. Please consult your accountant for guidance tailored to your individual situation.