One Big Beautiful Bill Act Becomes Law

U.S. Treasury To Begin OBBBA Interpretation

The One Big Beautiful Bill Act (OBBBA) was enacted into law, with President Donald Trump signing the legislation on Friday, July 4, 2025. The vote in the Senate was extremely narrow, but the House was less so, with various members’ objections ultimately subsumed within the drive to pass by the target deadline set forth by the President.  

Due to the narrow margin of the Senate vote, as well as the compressed amendment process, followed rapidly by the House vote and presidential signature, the final version of the legislation will require careful study and analysis over the coming days and weeks for taxpayers to fully understand what the various final provisions mean for them. Also, as in 2017, the U.S. Treasury will begin the process of writing regulations to interpret the legislation, a process that usually takes years. 

That said, the broad strokes of the legislation, from a tax standpoint, are fairly clear. This update will provide a list of generally applicable provisions. We will release more specific updates on provisions applicable to different taxpayers. However, keep reading to learn more about what you can expect as both an individual and as a business owner.

Individual Provisions 

A Move To Maintain TCJA Legacy

Much of the impetus for this legislation was maintaining the legacy of the Tax Cuts and Jobs Act (TCJA) of 2017. In the TCJA legislation, many corporate provisions were permanent (although some were not, as will be discussed below), but many individual provisions were subject to expiration at the end of 2025. As a result, much of the “headline” cost and importance of OBBBA was taken up by maintaining the status quo. 

• Individual tax rates, including the top rate of 37%, are maintained at current levels.
• The TCJA “increased” standard deduction is increased for 2025, and thereafter, indexed to inflation. 
• The TCJA “increased” child tax credit is increased for 2025, and thereafter, indexed to inflation. This is a significant change from past practice with this credit. 
• The TCJA estate and gift tax exemption is maintained at $15 million ($30 million for couples) and indexed thereafter to inflation. 
• Personal exemptions are essentially permanently repealed. 
• Limitations on the deductibility of mortgage and home equity interest are maintained at the status quo. 
• Miscellaneous itemized deductions and moving expense deductions (except for members of the military and intelligence services) are permanently repealed. 
• Higher alternative minimum tax (AMT) exemptions are permanent. However, higher earners are subject to a steeper (less favorable) claw-back of exemptions than under current law. 
• Permanent exclusion of income for student loan payments made by employers is maintained. 

New Provisions Will Impact Individuals 

In addition to the above, there are several new provisions relating to individuals, including: 

• State and local tax (SALT) deduction for itemizers is increased from $10,000 to $40,000, increasing by 1% per year until 2030, at which point the deduction is once again limited to $10,000. The $40,000 cap phases down once income exceeds $500,000. 
• Charitable deductions for non-itemizing taxpayers are permitted up to $1,000 ($2,000 for married filing jointly taxpayers). 
• For itemizing taxpayers, the deduction for charitable contributions is now subject to a floor of 0.5% of adjusted gross income. 
• Wagering losses are now only deductible up to 90% of losses, and only to the extent of winnings. 
• Itemized deductions for the top tax rate are capped at a benefit of $0.35 per dollar, except for the Section 199A deduction. 
• Additional deduction for seniors of $6,000 for tax years 2025-2028, phases out above $150,000 of adjusted gross income. 
• “No tax on tips” – New deduction of $25,000 per taxpayer of tip income as reported separately on a Form W-2; phases out as modified adjusted gross income exceeds $150,000 ($300,000 for married filing jointly) for years 2025-2028. 
• “No tax on overtime” – New deduction of $12,500 for overtime income as reported on a Form W-2 for years 2025-2028; phases out based on income. 
• “No tax on car loan interest” – New deduction of up to $10,000 of interest on new car loans on a U.S.-assembled passenger vehicle for years 2025-2028. 
• A 1% excise tax on remittance transfers by individuals to foreign recipients is introduced, effective Jan. 1, 2026, although banks and card issuers are exempt. 
• New accounts (Trump accounts) are created to provide a new type of tax-preferred savings account. These accounts would be set up for the exclusive benefit of an individual and designated at the time of establishment as such, and include a pilot program where the federal government pays a one-time $1,000 credit to an account of a child born after 2024 and before 2029. 

Read Also: OBBBA Provisions To Impact Real Estate, High-Net-Worth Property Owners

Business Provisions 

As mentioned above, certain provisions contained within the TCJA were made permanent, some after having reverted to a less taxpayer-favorable treatment beginning in 2022. 

• Section 199A is made permanent at a rate of 20%, with an expanded phase-out amount for specified service trades or businesses, and a new minimum deduction of $400 for taxpayers with qualified business income of at least $1,000.
• Pass-through entity tax (PTET) treatment for state and local taxes paid at the pass-through entity level is preserved. 
• Excess business loss limitation and treatment of carryforwards are made permanent. 
• Section 174 capitalization of domestic research and experimentation costs is no longer required, essentially reverting to pre-2017 law for domestic expenses. Foreign expenditures must still be capitalized and amortized over 15 years. Small businesses may apply the expensing retroactively to 2021. All taxpayers may deduct capitalized expenses in 2025 or split between 2025 and 2026.
• Permanent limitation of interest expense based on the more favorable tax-basis earnings before interest, taxes, depreciation, and amortization (EBITDA). 
• Permanently reinstates 100% bonus depreciation on non-real property acquired after Jan. 19, 2025. 
• Introduces new “qualified production property” concept. This allows 100% bonus depreciation on manufacturing or refining facilities that would otherwise be subject to a 39-year depreciable life. This must be split between the portions of the facility that produce or refine the product and administrative portions. 
• Section 179 expensing is increased to $2,500,000 (increased from $1,160,000), phasing out beginning at $4,000,000 (increased from $2,890,000). 
• Section 1202 qualified small business stock (QSBS) is modified for stock issued after the enactment of OBBBA, to provide for a tiered gain exclusion depending on how long the taxpayer holds the stock: 50% exclusion if held for 3 years; 75% exclusion if held for 4 years; 100% exclusion if held for 5 years. The limit of the amount of gain to be excluded per taxpayer is increased to be the lesser of 10X the basis in the stock, or $15,000,000 (increased from $10,000,000), and is indexed to inflation. In addition, the limit on the value of the corporation’s assets is increased from $50 million to $75 million and indexed to inflation. 
• Employee retention credit payments are cut off for any claims related to Q3 2021 and Q4 2021 filed after Jan. 31, 2024. 
• Various international provisions were adjusted, including the removal of qualified business asset investment (QBAI) for both foreign-derived intangible income (FDII) deduction and global intangible low-taxed income (GILTI), and renames FDII as “foreign-derived deduction eligible income” (FDDEI) and GILTI as “net CFC tested income” (NCTI). The base erosion and anti-abuse tax (BEAT) rate is set permanently at 10.5%. 
• A new, permanent 1% taxable income floor for corporate deduction of charitable contributions is put in place in conjunction with the existing law limitation of 10% of taxable income.
• Opportunity zones (OZ) as policy are permanently extended with a rolling 10-year OZ designation beginning in 2027, allowing investors in OZs to defer and potentially exclude capital gains. 

Read Also: What Does The One Big Beautiful Bill Act (OBBBA) Mean For Research & Development (R&D) Costs?

Energy Tax Provisions 

OBBBA also made several significant changes to energy policy as influenced by tax credits and deductions. However, these changes are beyond the scope of this update. Generally, consumer-focused credits, such as the electric vehicle and residential energy credits, are terminated after either Sept. 30 or Dec. 31, 2025. Utility-focused credits, such as the clean electricity investment credit and the clean energy production credit, are terminated for wind and solar facilities placed in service after Dec. 31, 2027, and all other facilities (including geothermal, nuclear, etc.) after 2032. Additional updates are forthcoming.

As mentioned, the speed at which this legislation was enacted leaves many open questions for taxpayers and their advisors.  Additional updates will be released by GBQ over the coming months. Please consult with your GBQ tax advisor about your specific situation or questions. You may also click here to sign up for updates. 

By Mark Silvaggio, JD, CPA, Tax and Business Advisory & Tim Schlotterer, CPA, Director of Tax Service

« Back