The One Big Beautiful Bill Act (OBBBA), a sweeping tax and policy reform package, has officially passed both the House and Senate and was signed by President Trump on July 4th. The legislation introduces permanent extensions of key provisions from the Tax Cuts and Jobs Act (TCJA) and brings broad changes to income tax rates, business incentives, estate planning, and IRS enforcement.

A summary of the current tax changes included in the bill is as follows:

---

Extension and Modification of TCJA Individual Provisions

• Individual Income Tax Rates
  • The seven tax brackets (10%, 12%, 22%, 24%, 32%, 35%, and 37%) are made permanent.
  • This provision prevents previously scheduled increases set to take effect after 2025.
• Standard Deduction
  • Would be made permanent, with a one-year inflation adjustment and a temporary increase of $1,000 for single filers and $2,000 for couples who are married filing jointly.
  • The standard deduction amounts for 2025 are $31,500 for joint filers $23,625 for heads of households, and $15,750 for single taxpayers and married taxpayers filing separately.
• Personal Exemption is Repealed Permanently.
• Child Tax Credit (CTC)
  • CTC increases to $2,200 per child in 2025, indexed for inflation after 2025.
  • The refundable portion of $1,400 will be indexed for inflation ($1,700 for 2025).
  • Income phaseouts for the credit start at modified adjusted gross income of $200,000 ($400,000 joint filers).
  • A Social Security Number (SSN) requirement is added for eligible children.

SALT Deduction Cap Increase

• The State and Local Tax (SALT) deduction cap increases substantially from $10,000 to $40,000.
• This change primarily benefits taxpayers in states with high property and income taxes, potentially lowering their federal tax burden.
• There will be a one percent increase in the cap each year through 2029 before returning to the $10,000 limit in 2030. The cap is reduced by 30% of the amount by which the taxpayer’s modified adjusted gross income exceeds a threshold amount. That threshold amount is $500,000 for 2025, with a one percent increase each year through 2029.

New and Expanded Deductions for Individuals

• Tip and Overtime Income Deduction
  • From 2025 to 2028, up to $25,000 in qualified tips and $12,500 in overtime income will qualify as a deduction.
  • The deduction on tips and overtime begins to phaseout when a taxpayer’s modified adjusted gross income exceeds $150,000.
  • Tip and Overtime Income will still be subject to state income taxes and payroll taxes.
• Car Loan Interest Deduction
  • Up to $10,000 of interest on personal auto loans becomes deductible in 2025 through 2028 for a car purchased after 2024.
  • The deduction is available for both taxpayers who itemize as well as those who take the standard deduction.
  • The deduction begins to phaseout at modified adjusted gross income of $100,000 for single filers or $200,000 for joint filers.
• Senior Standard Deduction Enhancement
  • Individuals 65 and older will receive an additional $6,000 deduction beginning in 2025 through 2028.
  • The deduction begins to phaseout at modified adjusted gross income of $75,000 for single filers or $150,000 for joint filers.
  • The deduction completely phases out at $175,000 modified adjusted gross income for single filers or $250,000 for joint filers.
• Charitable Contribution Deductions
  • Those who take the standard deduction can deduct up to $1,000 ($2,000 if filing jointly) in cash contributions.
  • For an individual to claim a charitable contribution deduction, the total amount of contributions must be greater than 0.5% of the individual’s adjusted gross income for the year.
  • A soon-to-expire provision that allows cash charitable deductions up to 60% of the individual’s contribution base is made permanent.

Corporate Tax and Business Incentives

• Corporate Tax Rate
  • Remains at 21%, avoiding the proposed hike to 28%.
• Bonus Depreciation
  • Restoration and permanent extension of 100% first-year bonus depreciation for qualified property.
• Section 179 Expensing
  • The expensing limit increases to $2.5 million, allowing more assets to be immediately deducted.
• Qualified Business Income Deduction (Section 199A)
  • Deduction percentage of 20% is now permanent.
• Research & Development (R&D) Expenses
  • Domestic R&D expenditures may be fully deducted in the year incurred rather than amortized.
  • Foreign activity must still be amortized over 15 years.
  • Small businesses with gross receipts of $31 million or less may apply retroactively to tax years beginning after 12/31/2021.
• Business Interest Limitation
  • Business interest deductions will be limited, in part, to 30% of a company’s earnings before interest, taxes, depreciation, and amortization (EBITDA).
• Pass-Through Entity Tax Deductions
  • PTETs remain fully deductible.
• Corporate Charitable Contribution Deductions
  • For a corporation to claim a charitable contribution deduction, the total amount of contributions must be greater than 1% of the company’s taxable income for the year.
  • The deduction is limited to 10% of taxable income.
• Treatment of Capital Gains from Sale of Certain Farmland Property
  • Income tax resulting from the sale of farmland to a qualified farmer can be paid in four annual installments.

Electric Vehicle (EV) Credits

• Eliminates EV tax credits for vehicles acquired after September 30, 2025.

Estate and Gift Tax

• Starting in 2026, the federal estate and gift tax exemption increases to $15 million per individual, indexed for inflation.
• This avoids the previously scheduled drop to about $7 million and is made permanent.

Excess Business Loss Limitation

• The cap on non-corporate excess business losses is extended, continuing to restrict the offsetting of large business losses against non-business income.

1099 Reporting

• The information-reporting threshold for certain payments to persons engaged in a trade or business and payments of remuneration for services is $2,000 in a calendar year (from $600), with the threshold amount to be indexed annually for inflation in calendar years after 2026.
• 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 with respect to a participating payee for the year exceeds $20,000 and the aggregate number of such transactions with respect to a participating payee exceeds 200.

Excise Tax on Private Universities and Colleges

• Increased tax on net investment income of endowment funds of private universities and colleges in a tiered system. Historically endowment funds have been tax-free.
  • 1.4% for endowments of $500,000 to $750,000
  • 4% for endowments of $750,000 to $2,000,000
  • 8% for endowments over $2,000,000

If you have any questions, please reach out to your tax advisor within the firm.