Enacted July 4, 2025

The One Big Beautiful Bill Act is a $3.4 trillion tax and spending package structured as a reconciliation bill.  It includes tax reforms, spending and program changes.  Additionally, it increases the debt ceiling by $5 trillion.  Key tax provisions are:

Individual Provisions

  • Extends currently enacted tax rates permanently and modifies the inflation adjustment for some tax rate brackets after 2025.
  • Reinstates and expands 2020-2021 $300 above-the-line charitable contribution deduction for non-itemizers at up to $2,000 joint/$1,000 single permanently after 2025; reduces charitable contribution deductions for itemizers by 0.5% of the taxpayer’s AGI; extends 60% AGI limit for cash contributions permanently; effective after 2025.
  • Enacts an overall limitation on itemized deductions, reducing otherwise allowable itemized deductions by 2/37 of the lesser of (1) the amount of itemized deductions, or (2) the amount of the taxpayer’s taxable income that exceeds the start of the 37% tax rate bracket after 2025.
  • Extends mortgage interest deduction limitation to the first $750,000 of acquisition debt permanently, excludes the deduction for home-equity debt permanently, and treats certain mortgage insurance premiums on acquisition debt as mortgage interest after 2025.
  • Enacts deduction for loan interest related to new automobile with final assembly in the US, limited to $10,000 annually, phase out begins at $200,000 joint/$100,000 single, for loans incurred after 12/31/24 for 2025-2028.
  • Terminates miscellaneous itemized deductions except for unreimbursed educator expenses including coaches and certain non-athletic instructional equipment after 2025.
  • Extends limitation on personal casualty losses to those casualties from federally declared disasters permanently and expands the casualty loss deduction to include certain state-declared disasters effective after 2025.
  • Increases the deduction for state and local sales, income, and property taxes (SALT) from $10,000 to $40,000 for 2025, sets the deduction at $40,000 for 2026 through 2029, and limits the deduction to $10,000 after 2029, with income phase downs beginning at $500,000 from 2025 through 2029; maximum phase down to $10,000 deduction; sets inflation adjustment for limitation and phase down at 1% annually starting in 2026 through 2029.
  • Limits wagering loss deductions to 90% of such losses, deductible only to the extent of same year wagering gains, after 2025.
  • Enacts deduction for reported tip income for individuals in traditionally and customarily tipped industries up to $25,000, phase out beginning at $300,000 joint/$150,000 single from 2025 through 2028.
  • Enacts deduction for overtime income (excess over regular rate) up to $25,000 joint/$12,500 single/$0 married separate, phase out beginning at $300,000 joint/$150,000 single from 2025 through 2028 for overtime compensation separately stated on Form W-2.
  • Terminates personal exemptions permanently except allows $6,000 personal exemption for those 65+, phase out begins at $150,000 joint/ $75,000 single, beginning in 2025 through 2028.
  • Extends and increases nonrefundable child tax credit to $2,200 per child permanently, extends refundable child tax credit of $1,400 per child permanently, phase out beginning at $400,000 joint/$200,000 single; indexed for inflation.
  • Increases the child and dependent care tax credit from 35% to 50% permanently, phase down begins at $15,000 of adjusted gross income, after 2025.
  • Extends increased alternative minimum tax (AMT) exemption at $1,000,000 joint/$500,000 single permanently, indexed for inflation, and adjusts phase out of the exemption from 25% to 50% after 2025.
  • Enacts “Trump Accounts”, similar to nondeductible IRAs but limited to investments in certain mutual or exchange traded funds while beneficiary is under 18, for qualifying children allowing annual contributions of $5,000 indexed for inflation after 2029, beginning 7/4/2026; contributions can only be made in years before beneficiary turns 18; distributions can only be made starting in year the beneficiary turns 18; Employers are allowed to make contributions up to $2,500 indexed for inflation after 2029 to Trump Accounts which will be excluded from employee’s income; pilot program allows $1,000 tax credit (seed money) to go directly to a Trump Account for a child born between 1/1/2025 and 12/31/28.
  • Expands 529 plan tax-exempt distributions to include additional expenses in connection with elementary and secondary schools and increases the annual amount to $20,000; expands post-secondary school expenses to include credentialing expenses and required continuing education; effective after 12/31/25.
  • Extends the enhanced contribution for ABLE accounts and the inclusion of ABLE account contributions as eligible for the saver’s credit, and increases the maximum saver’s credit to $2,100 permanently, after 2025 (note that except for this ABLE provision, the saver’s credit expires after 2026).
  • Enacts credit for contributions to scholarship-granting organizations of the greater of $5,000 or 10% of AGI; beginning in 2027 and allocated on first-come, first-served basis, up to $4 billion annual cap.

Business Provisions

  • Reinstates 100% bonus depreciation for property acquired and placed in service after January 19, 2025 and before January 1, 2030, election available to use 40% for first year ending after 12/31/25.
  • Increases section 179 expense limitation to $2,500,000 reduced by the amount by which the cost of qualifying property exceeds $4,000,000, effective for years beginning after 12/31/24.
  • Reinstates immediate expensing of domestic research and experimental expenditures, election available to amortize certain expenditures effective for amounts paid or incurred in taxable years beginning after 12/31/24; election available to accelerate unamortized amounts capitalized after 12/31/21 and before 1/1/25 over a one- or two-year period; small taxpayers (average annual gross receipts of $31 million or less) can file amended return and be permitted retroactive application to years beginning after 12/31/21.
  • Extends qualified business income (QBI) deduction permanently at 20%, with a minimum deduction of $400 (indexed for inflation after 2026) for those with at least $1,000 of QBI from active businesses in which they materially participate, beginning in 2026; expands the deduction limit phase-in range for specified service trades or businesses (SSTBs) and other entities subject to the wage and investment limitation to $150,000 joint/$75,000 single (up from $100,000 joint/$50,000 single) (note QBI deduction still available for businesses providing services in the fields like law, healthcare, accounting, and consulting).
  • Extends the disallowance of deductions for noncorporate excess business losses (originally set to expire after 2028) permanently, and modifies the indexing years for the inflation adjustment calculation effective for years beginning after 12/31/25.
  • Creates a 100% bonus depreciation deduction for qualified production property (generally nonresidential real property used in manufacturing) placed in service after 7/4/25 and before 2031.
  • Reinstates the earnings before interest, taxes, depreciation, and amortization (EBITDA) limitation (which favorably disregards the deductions allowable for depreciation, amortization, and depletion) in the calculation of adjusted taxable income in determining the business interest deduction limitation permanently for years beginning after 12/31/2025.
  • Excludes from gross income 50% of gains from the sale or exchange of qualified small business stock (Section 1202 stock) held for at least 3 years, 75% for at least 4 years, and 100% for at least 5 years for stock acquired after 7/4/25, exclusion limit increased from $10,000,000 to $15,000,000 effective 7/4/25 adjusted for inflation for years beginning after 2026.
  • Reduces charitable contribution deduction for corporations by 1% of the corporation’s taxable income, effective for years beginning after 12/31/25; (note the charitable contribution deduction cannot exceed the current 10% of taxable income limit).
  • Enacts exception to the scheduled 2026 disallowance of deductions for employer-provided meals and de minimis food and beverage fringe benefits (such as snacks and coffee provided to employees) allowing 100% deduction for meals provided on certain fishing boats and certain fish processing facilities after 12/31/25.
  • Increases dependent care assistance program contributions to $7,500 ($3,750 married separate) for years beginning after 12/31/25.
  • Extends Opportunity Zone benefits permanently; five year gain deferral and 10% basis step-up after 5 years for gains invested after 12/31/26.

Estate and Miscellaneous Provisions

  • Increases the estate and gift tax exemption amount permanently to $15,000,000, indexed annually for inflation effective after 2025.
  • Terminates a large number of clean energy tax incentives, including clean vehicle credit (9/30/25), alternative fuel vehicle refueling credit (6/30/26), energy-efficient improvement credit (12/31/25), residential clean energy credit (12/31/25), and the 179D energy-efficient commercial buildings deduction (where construction begins after 6/30/26).
  • Terminates the clean electricity production credit for wind and solar facilities placed in service after 12/31/27 and the electricity investment credit for wind and solar facilities for construction beginning after 7/4/26.
  • Increases the information-reporting threshold for certain payments for services from $600 to $2,000, indexed annually after 2026, effective for payments made after 12/31/25.
  • Restores the previous threshold for third-party settlement organizations to issue Form 1099-K only when payee receives over $20,000 and the aggregate number of transactions exceeds 200, effective as if included in the American Rescue Plan Act.
  • Enacts election for installment tax payments over four years for sales of farmland to a qualified farmer effective for sales in years beginning after 7/4/25.
  • Modifies and permanently enacts many international and foreign-related provisions.

 

Prior to engaging in any transactions that may be affected by the new tax bill provisions, consult with competent tax counsel to determine the tax implications of the proposed transactions.  This advice isn’t intended or written to be used for the purpose of avoiding penalties and cannot be used for that purpose.

 

©Copyright Meara Welch Browne, P.C. and Wealth Builders Press, LLC 2025