The One Big Beautiful Bill Act Taxes Explained

The House recently passed The One, Big, Beautiful Bill Act, potentially reshaping the tax landscape for individuals and businesses alike. This new tax law introduces provisions that could have significant implications for your bottom line.

From business-related tax breaks to individual-focused incentives, here’s a quick guide to understanding what’s inside this legislation.

Business Tax Provisions

The bill includes several changes that could affect businesses’ tax bills.

• Bonus Depreciation - Under the TCJA, first-year bonus depreciation phased down 20 percentage points annually since 2023 and was set to drop to 0% in 2027. The depreciation deduction would reset to 100% for eligible property acquired and placed in service after January 19, 2025, and before January 1, 2030.
• Section 199A qualified business income (QBI) deduction - he TCJA, the QBI deduction is available through 2025 to owners of pass-through entities — such as S corporations, partnerships and limited liability companies (LLCs) — as well as to sole proprietors and self-employed individuals. The deduction generally equals 20% of QBI, not to exceed 20% of taxable income. Under the OBBBA, the deduction would be made permanent. Additionally, the deduction amount would increase to 23% for tax years after 2025.

• Domestic research and experimental expenditures - The OBBBA would reinstate a deduction available to businesses that conduct R&D. Specifically, the deduction would apply to R&D costs incurred after 2024 and before 2030.

• Section 179 expensing election- The OBBBA would increase the expensing limit to $2.5 million and the phaseout threshold to $4 million for property placed into service after 2024. The amounts would continue to be adjusted annually for inflation. (Under current law, for 2025, the expensing limit is $1.25 million and the phaseout threshold is $3.13 million.) 

• Pass-through entity “excess” business losses - The Inflation Reduction Act limits deductions for current-year business losses incurred by non-corporate taxpayers. Such losses generally can offset a taxpayer’s income from other sources, such as salary, interest, dividends and capital gains, only up to an annual limit. “Excess” losses are carried forward to later tax years and can then be deducted under net operating loss rules. The OBBBA would make the excess business loss limitation permanent.

Individual Tax Provisions

The OBBBA would extend or make permanent many existing individual tax provisions of the TCJA.

• Individual income tax rates - The OBBBA would make permanent the TCJA income tax rates. If a new law isn’t enacted, the top rate returns to 39.6%.The law maintains the existing tax brackets but adjusts income thresholds.
• Itemized deduction limitation - The bill would make permanent the existing repeal of the Pease limitation on itemized deductions.
• Standard deduction - The new bill would temporarily boost standard deduction amounts for tax years 2025 through 2028. Currently, the inflation-adjusted standard deduction amounts for 2025 are $30,000 for joint filers, $22,500 for heads of households and $15,000 for singles. The amounts would increase $2,000 for married couples filing jointly, $1,500 for heads of households and $1,000 for single filers. For seniors age 65 or older who meet certain income limits, an additional standard deduction of $4,000 would be available for those years.
• Child Tax Credit (CTC) - Under existing legislation, the $2,000 per child CTC is set to drop to $1,000 after 2025. The OBBBA would make the CTC permanent, raise it to $2,500 per child for tax years 2025 through 2028 and retain higher income phaseout thresholds. It would preserve the requirement to provide a child’s SSN and expand it to require an SSN for the taxpayer claiming the child credit. After 2028, the CTC would return to $2,000 and be adjusted annually for inflation.
• State and local tax (SALT) deduction - The OBBBA would increase the existing TCJA’s SALT deduction cap from $10,000 to $40,000 for 2025. The limitation would phase out for taxpayers with incomes over $500,000. After 2025, the cap would increase by 1% annually through 2033.
• Miscellaneous itemized deductions - Through 2025, the TCJA suspended deductions subject to the 2% of adjusted gross income (AGI) floor, such as professional fees and unreimbursed employee business expenses. An example is: employees can’t deduct their home office expenses. The OBBBA would make the current suspension permanent.
• Federal gift and estate tax exemption - Beginning in 2026, the bill would increase the federal gift and estate tax exemption to $15 million. This amount would be permanent but annually adjusted for inflation. This is relevant for our estate planning customers. 
  

New Tax Provisions

• Tax on Tips - The OBBBA offers a deduction from income for amounts a taxpayer receives from tips. Tipped workers wouldn’t be required to itemize deductions to claim the deduction. However, they’d need a valid SSN to claim it. The deduction would expire after 2028. (Note: The Senate recently passed a separate no-income-tax-on-tips bill that has different rules. To be enacted, the bill would have to pass the House and be signed by the President.)
• No Tax on Overtime - The OBBBA would allow workers to claim a deduction for overtime pay they receive. Like the deduction for tip income, taxpayers wouldn’t have to itemize deductions to claim the write-off but would be required to provide an SSN. Also, the deduction expires after 2028. 
• Car loan interest deduction - should the bill pass the Senate, it would allow taxpayers to deduct up to $10,000 of interest payments on car loans for 2025 through 2028. Final assembly of the vehicles must take place in the United States, and there would be income limits to claim the deduction. Both itemizers and non-itemizers would be able to benefit.
• Charitable deduction for non-itemizers - The bill would create a charitable deduction of $150 for single filers and $300 for joint filers for non-itemizers.

What's Next?

These are only some of the tax provisions in the House bill. It is highly likely the proposed legislation will change (perhaps significantly) as it moves through the Senate and back to the House. Disagreements about the tax provisions and spending cuts will be the two of the issues raised in the Senate. Regardless, tax changes are expected in 2025. Contact us if you'd like to hire a tax expert who keeps track of these changes to keep your taxes compliant.