On July 4th, 2025 President Donald Trump signed the One Big Beautiful Bill Act (OBBBA). This bill has several important changes to various aspects of the tax regime. This article is a summary of the bill’s extension of expiring tax codes and updates for individuals, businesses and international changes.
Individual
Permanent Extensions from TCJA
Tax Brackets Stay Put: The individual income tax rates of 10%, 12%, 22%, 24%, 32%, 35%, and 37% are now permanent.
Standard Deduction Locked In: Higher standard deduction amounts are now permanent and will adjust annually for inflation. For 2025:
- Single Filers: $15,750
- Heads of Household: $23,625
- Married Filing Jointly: $31,500
AMT Relief Continues: The increased Alternative Minimum Tax (AMT) exemption amounts are now permanent:
- Single filers phaseout begins at $626,350
- Joint filers phaseout begins at $1,252,700
For 2025, the exemption amounts are $88,100 (single filers), $137,000 (joint filers), and $68,500 (married filing separately). Phaseout thresholds will be indexed for inflation starting in 2026 where the exemption phase-out rate will increase from 25% to 50%.
New (But Temporary) Deductions and Credits
Tip Income Deduction: Up to $25,000 of tip income is now deductible, phasing out for higher earners. The deduction starts phasing out at $150,000 of income if single filer, and $300,000 if filing jointly. This deduction is not available to married taxpayers filing separately. This amount is deductible in addition to the standard deduction, so there is no need to itemize.
Overtime Deduction: Working extra hours? For everyone whose W-2 reflects overtime pay income, you can deduct up to $12,500 and $25,000 for joint filers with similar phaseout limits to the tip income deduction. This deduction is not available to married taxpayers filing separately.
Senior Deduction: Taxpayers 65 and older may claim an additional $6,000 deduction through 2028. Although Social Security is still taxable if the deduction is not enough to offset it, and the deduction phases out for seniors making more than $75,000 for a single filer or $150,000 for a joint filer.
Auto Loan Interest Deduction: Taxpayers (modified adjusted gross income below $100k individual / $200k joint) can deduct up to $10,000 in interest paid on qualifying auto loans on U.S. assembled vehicles.
Enhanced Child Tax Credit (CTC): The CTC increases to $2,200 per qualifying child, and the credit will be adjusted for inflation starting in 2026. A valid Social Security Number is required for the child and at least one parent. Phaseout threshold $200,000 for single and $400,000 for joint filers. For 2025, maximum refundable amount is $1,700 per qualifying child.
Wagering Losses: After 2025, losses from wagering transactions limited to 90% of the amount of such losses only the extent of winnings.
Other Notable Changes
SALT Deduction Expanded (Temporarily): For 2025, the $10,000 cap on State and Local Tax (SALT) deductions increases to $40,000 for those earning $500,000 or less. For 2026, the cap increases to $40,400. Following that, there will be 1% annual increases through 2029. However, a 30% “haircut” applies for taxpayers in the highest income bracket (modified higher than $500,000 joint filers and $250,000 for married filing separately, but the deduction would not be reduced below $10,000.)
Stricter SSN Rules: Claiming the new deductions and the enhanced CTC? You’ll need valid Social Security Numbers for all relevant individuals.
Premium Tax Credit Changes Ahead: The recapture limit on Advanced Premium Tax Credit has been removed, meaning individuals who receive more financial assistance than they are eligible for may have to repay the full amount when they file their tax returns. The enhanced health insurance premium tax credits (extended during the pandemic) are set to expire, potentially raising out-of-pocket costs for marketplace enrollees starting in 2026.
Estate and Gift Tax Exemption: Increases to $15 million in 2026 which then will be adjusted for inflation after 2026.
Business
Qualified Business Income (QBI) deduction: The Act makes the QBI deduction permanent. The QBI deduction for passthrough income remains at 20%. A minimum deduction of $400 is added for taxpayers with aggregate QBI for all active qualified trades or businesses of at least $1,000. The phase-in amounts are increased from $50,000 to $75,000 for single filers and from $100,000 to $150,000 for joint filers.
Bonus depreciation: The act permanently extends the additional first-year bonus depreciation for certain qualified property. The allowance is increased to 100% for property acquired and placed in service on or after Jan. 19, 2025.
Qualified Production Property: The Act introduces a new 100% bonus depreciation provision for qualified production property. Qualified production property is certain non-residential real property used in manufacturing where construction begins after January 19, 2025 and before January 1, 2029. The property must be placed in service prior to 2031.
Sec. 179 Expensing limits: For property placed in service after 2024, the Code Sec. 179 expensing limits are increased to $2,500,000 and the phaseout threshold is increased to $4,000,000 (both subject to inflation adjustments).
Research and Experimental (R&E) Expenses: The Act allows taxpayers to fully deduct domestic R&E expenses paid or incurred in tax years beginning after December 31, 2024. Foreign R&E expenses will continue to be capitalized and amortized over 15 years. The Act provides small businesses with the option to elect this change retroactively back to 2022 through amended returns. All taxpayers that made domestic R&E expenditures after December 31, 2021 and before January 1, 2025, will be allowed to accelerate any remaining deductions for those expenditures over a one- or two-year period.
Business interest: For tax years beginning after December 31, 2024, the Act modifies the definition of adjusted taxable income for purposes of the Code Sec. 163(j) limitation on business interest. Adjusted taxable income for purposes of the Sec. 163(j) interest deduction limitation for these tax years would be computed without regard to the deduction for depreciation, amortization, or depletion.
Sec. 1202 Qualified Small Business Stock (QSBS): The Act increases the exclusion of gain on the sale of qualified small business stock. The percentage of gain excluded is 50% for stock held for 3 years, 75% for stock held for 4 years, and 100% for stock held for 5 years. Also, the Act increases eligibility for the exclusion by increasing the aggregate gross asset limit from $50 million to $75 million.
Corporate charitable contributions: The Act adds a new 1% floor on corporate charitable deductions for post-2025 tax years. Only contributions above 1% of taxable income are deductible and the deduction cannot exceed the current 10% of taxable income limit.
Excess business losses: The Act makes the Code Sec. 461(l) limit on excess pass-through business losses permanent and retains the existing treatment of excess business loss carryforwards as net operating losses.
Employer-Provided Child Care Credit: The credit is increased from 25% to 40% (50% for small businesses) of qualified child care expenses. The maximum amount of the credit increases from $150,000 to $500,000 ($600,000 for small businesses) and will be adjusted for inflation.
Paid Family and Medical Leave Credit: The Act makes the employer credit for paid family leave and medical leave permanent, allows for insurance premiums to qualify, and modifies aggregation and eligibility rules.
Employee Retention Credit (ERC): The Act prohibits the payments of Q3 2021 and Q4 2021 claims as of January 31, 2024. It also requires ERC promoters to comply with due diligence requirements with respect to a taxpayer’s eligibility for (or the amount of) an ERC.
Tip Credit: The Act expands the credit for the FICA paid by an employer on tips to include the beauty service industry starting in 2025.
Enhanced manufacturing investment credit: The advanced manufacturing investment credit on qualified investments in an advanced manufacturing facility is increased from 25% to 35% for property placed in service after December 31, 2025.
Information reporting, Form 1099-K: The Act retroactively reverts to the prior Form 1099-K reporting, under which a third-party settlement organization is not required to report, unless the aggregate value of third-party network transactions exceeds $20,000 and the aggregate number of transactions exceeds 200.
Information reporting, Forms 1099-NEC, 1099-MISC: For payments made after 2025, the reporting thresholds for Forms 1099-NEC and 1099-MISC are increased from $600 to $2,000, with the threshold amount to be adjusted annually for inflation after 2026.
Work Opportunity Tax Credit: This credit expires after December 31, 2025.
Opportunity Zones (OZ): Establishes a permanent opportunity zone policy, creating a 10-year OZ designation beginning in 2027. The Act also maintains the OZ designation process and strengthens eligibility requirements.
International
Global Low- Taxes Income (GILTI): Under the OBBBA, the Global Intangible Low-Taxed Income name changes to Net Controlled Foreign Corporation Tested Income. The rate changes to 12.6% for the years after December 31, 2025.
Net Controlled Foreign Corporations Tested income (NCTI), replaces GILTI: Domestic corporations may deduct 40% of NCTI for the tax years beginning after December 31, 2025, plus 40% of amounts treated as a dividend under IRC section 78 that is attributed to NCTI, subject to limitations.
Foreign Tax Credit limitation: Foreign Tax Credit limitation changes per CFC tested income formerly GILTI, purposes to 90% for years after December 31, 2025.
Foreign-Derived Intangible income (FDII): Foreign-Derived Intangible income name changes to Foreign-Derived Deduction Eligible Income. The rate changes to 33.34% for the year ended after December 31, 2025.
Business interest limitation: Limitation on Business interest, as cited above, has been made permanent and made retroactive for all years beginning after December 31, 2024. This may indirectly affect the calculation of NCTI.
Base Erosion and Anti-Abuse Tax (BEAT): Base Erosion and Anti-abuse tax income tax rate is set at 10.5% beginning after December 31, 2025, repealing the scheduled rise to 12.5%.
Section 863(b): Section 863(b) source of inventory rule enables US produced inventory sold abroad through a foreign branch to be treated as up to 50% foreign source income for foreign tax credit limitation purposes.
One month deferral: The Act repeals the election for one-month deferral in determining the tax year of Controlled Foreign Corporations, effective for taxpayers beginning after November 30, 2025.
Section 954 (c)(6): The Act makes permanent the Section 954 (c)(6) look-through rule for controlled foreign corporations.
Section 958(b)(4): The Act reinstates limiting constructive ownership of downward attribution of stock ownership, which would have resulted in the classification of numerous foreign corporations as CFCs.
Energy
Energy: The Act terminates many of the energy deductions and energy credits at various dates beginning after December 31, 2025 through 2032.
The One Big Beautiful Bill Act reshapes key elements of the tax code for individuals. While many will benefit from expanded deductions and stabilized tax rates, others may find new limitations.
Article Submitted by Joseph P. Marino, CPA, Jennifer Wallace, CPA, and Steve Benson.
Sources
Individual
- https://www.irs.gov/newsroom/one-big-beautiful-bill-act-tax-deductions-for-working-americans-and-seniors
- https://taxfoundation.org/research/all/state/big-beautiful-bill-state-tax-impact/
- https://tax.thomsonreuters.com/blog/impact-of-the-one-big-beautiful-bill-act/
- https://www.plunkettcooney.com/tax-law-estate-plans-probate-business-succession/big-beautiful-bill-tax-implications
- https://mailchi.mp/taxspeaker.com/self-rental-guide-6262949?e=19f0d2f36d
- https://www.journalofaccountancy.com/news/2025/jun/tax-changes-in-senate-budget-reconciliation-bill/
Business
- https://www.journalofaccountancy.com/news/2025/jun/tax-changes-in-senate-budget-reconciliation-bill/
- https://www.aicpa-cima.com/resources/download/key-tax-provisions-compared-current-law-vs-one-big-beautiful-bill-act
International
- https://www.hklaw.com/en/insights/publications/2025/07/a-look-at-the-international-tax-changes-in-the-obbb-act
- https://rsmus.com/insights/services/business-tax/international-tax-reform-under-the-one-big-beautiful-bill-act.html
- https://www.pwc.com/us/en/services/tax/library/international-insights-from-the-one-big-beautiful-bill-act.html
- https://www.cooley.com/news/insight/2025/2025-07-21-key-international-tax-provisions-under-the-one-big-beautiful-bill-act
