I hope you enjoyed a wonderful 4thof July holiday with family and friends. While many of us were celebrating, a significant piece of legislation was signed into law that could shape your financial and tax planning for years to come.
On Friday, President Donald Trump signed theOne Big Beautiful Bill Act (OBBB)into law which extends many of the expiring provisions from the Tax Cuts and Jobs Act (TCJA) and adds new elements that align closely with the tax priorities of the Trump administration.
Many provisions of this bill will be retroactive to the beginning of 2025 and appear to target low to middle income taxpayers which should result in large refunds for the vast majority of Americans.
While no tax bill is perfect, there are meaningful updates in this legislation that should be viewed as a win for many taxpayers and small business owners.The more certainty we have in our tax rules, the easier it becomes to plan proactively, and the OBBB provides a longer planning runway so you can make tax-smart decisions throughout the year.
Below, you will find my full breakdown of the major provisions.
Individual Taxpayers
1. Individual Tax Rates Made Permanent: The tax rates set by the 2017 TCJA are now permanent.This provides certainty for long-term tax planning.
2. Standard Deduction Permanently Increased: The TCJA’s larger standard deduction amounts are now permanent. In 2025, the standard deduction will be $15,750 for single filers, $23,625 for heads of household, and $31,500 for married filing jointly.This reduces taxable income for many households.
3. Temporary SALT Cap Increase: The limit on deducting state and local taxes (SALT) increases from $10,000 to $40,000 for tax years 2025 through 2029 (adjusted for inflation). The deduction starts phasing down for taxpayers with adjusted gross income over $500,000.This significantly benefits high state tax taxpayers in areas such as New York and New Jersey.
4. New Senior Deduction: Taxpayers aged 65 or older will receive a temporary $6,000 deduction from 2025 through 2028, phasing out when MAGI exceeds $75,000 ($150,000 for joint returns).This benefits seniors with moderate income.
5. No Tax on Tips: From 2025 through 2028, individuals can deduct up to $25,000 of qualified tips from taxable income. This deduction phases out when MAGI exceed $150,000 ($300,000 joint).This directly boosts take-home pay for tipped workers.
6. No Tax on Overtime: An above-the-line deduction of up to $12,500 ($25,000 joint) applies to qualified overtime compensation from 2025 through 2028. The deduction phases out at MAGI of $150,000 ($300,000 joint).Employees should ensure correct reporting to claim this benefit.
7. Estate and Gift Tax Exemption Expansion: The exemption for estates and lifetime gifts will rise to $15 million per individual ($30 million for married couples) in 2026 (adjusted for inflation).This provides higher thresholds for passing wealth to heirs.
8. Car Loan Interest Exclusion: For tax years 2025 through 2028, up to $10,000 in qualified passenger vehicle loan interest is excluded from personal interest, subject to phaseouts for MAGI above $100,000 ($200,000 joint). Only loans on vehicles assembled in the U.S. qualify.This incentivizes domestic vehicle purchases.
9. New Trump Accounts for Minors: “Trump Accounts” will be a new IRA designed exclusively for minors under age 18. These accounts are not Roth IRAs but follow similar rules. Contributions of up to $5,000 annually (adjusted for inflation) can be made during calendar years before the beneficiary turns 18, and distributions may begin when the beneficiary turns 18. Contributions are not allowed until 12 months after the date the bill is enacted.
In addition, the bill provides a $1,000 tax credit for opening a Trump Account for a child born between January 1, 2025, and December 31, 2028.Families may find these accounts a useful way to begin building wealth early for the next generation.
10. Expanded Child Tax Credit: The child tax credit rises to $2,200 per child starting in 2025 (adjusted for inflation). The $500 nonrefundable credit for dependents other than qualifying children remains in place.These changes give families greater financial relief and more certainty when planning ahead.
11. Child and Dependent Care Credit Boosted: The credit rate rises from 35% to 50% of qualifying expenses. For AGI over $15,000, the rate begins to phase down to 35%, then further phases down to 20% for AGI above $75,000 ($150,000 joint).This provides meaningful savings for working families.
12. Dependent Care Assistance Limit Increased: The annual maximum excludable amount under dependent care programs rises from $5,000 to $7,500.This eases the burden of childcare costs.
13. Partial Refundability of Adoption Credit: Up to $5,000 of the adoption credit will be refundable (adjusted for inflation).Adoptive families receive extra help with upfront costs.
14. Alternative Minimum Tax (AMT) Changes: The increased AMT exemption from the TCJA are now permanent and the phaseout reverts to the 2018 level of $500,000 ($1 million joint) but the phaseout rate doubles from 25% to 50% of excess income.This could pull some higher-income taxpayers back into the AMT.
15. Mortgage Interest Deduction Limits Maintained: The limit on deducting interest on home acquisition debt remains at $750,000 permanently.This keeps the post-TCJA mortgage rules in place for homeowners.
16. Casualty Loss Deduction Clarified: The limit restricting personal casualty loss deductions to federally declared disasters now includes some state-declared disasters.This ensures consistency for taxpayers facing disaster losses.
17. Pease Limitation Replaced: This limitation on itemized deductions is permanently repealed. It’s replaced with a new rule that reduces itemized deductions by 2/37 of the lesser of the total deductions or taxable income exceeding the 37% bracket threshold.High-income taxpayers should watch this carefully.
18. New Limits for Gambling Losses: Losses from gambling are now capped at 90% of such losses, and deductible only up to the taxpayer’s total gambling winnings for the year.These tighter limits mean it is more important than ever to track and report gambling transactions carefully.
19. Credit for Contributions to Scholarship Organizations: A new credit equal to the greater of $5,000 or 10% of AGI applies to donations to scholarship-granting organizations. The bill also excludes qualifying scholarships for K–12 expenses from income.This supports education funding and offers valuable credits.
20. Expanded Use of 529 Plans: The bill allows tax-exempt distributions from 529 savings plans to be used for elementary or secondary school and can be used to cover qualified postsecondary credentialing expenses.This broadens how families can use 529 plans as part of a flexible, tax-smart education savings strategy.
21. Charitable Deduction for Non-Itemizers: Taxpayers who do not itemize could now claim a charitable contribution deduction of up to $1,000 as single, or up to $2,000 if filing jointly.These changes mean thoughtful planning is essential to make the most of your charitable gifts while staying tax-smart.
22. Form 1099-K Reporting Threshold Reverts to Prior Level: A third-party settlement organization must file a Form 1099-K only if the total value of third-party network transactions for a participating payee during the year exceeds $20,000 and the total number of such transactions exceeds 200. This replaces the law that would have dropped the threshold to $600 starting next year.This helps small sellers and gig workers avoid unnecessary reporting headaches.
Business Taxpayers
1. No Restrictions on PTET Deductions: Unlike some earlier proposals, the final version of the bill does not restrict or limit the pass-through entity tax (PTET) workaround.For many of you, this could mean real savings that should be factored into your tax-smart planning strategies in the coming years.
2. Bonus Depreciation Fully Extended: The new law permanently extends the additional first-year, or bonus, depreciation deduction. This allowance increases to a full 100% for property acquired and placed in service on or after January 19, 2025.This remains one of the most powerful incentives for businesses investing in new property or equipment.
3. Higher Section 179 Expensing Limits: The maximum amount that can be expensed under Section 179 rises to $2.5 million, and this amount will be reduced dollar-for-dollar when the cost of qualifying property exceeds $4 million.This helps small and mid-sized businesses immediately deduct more of their capital costs.
4. Qualified Business Income Deduction Made Permanent: The 20% Sec. 199A QBI deduction is permanent. A new minimum QBI deduction of $400 applies to taxpayers with at least $1,000 of QBI from active trades or businesses.This remains a powerful tax-saving opportunity for many self-employed and small business owners.
5. Opportunity Zones Made Permanent with Adjustments: The Opportunity Zone program is now permanent, although its definition of a low-income community will be narrowed starting January 1, 2027.Investors and developers gain more certainty for long-term community revitalization projects.
6. Numerous Clean Energy Incentives Phased Out: A long list of clean energy tax incentives will be terminated under this law over the coming months and years.
7. Higher Form 1099 Reporting Threshold for Payments: The bill raises the information reporting threshold for certain payments made to individuals engaged in a trade or business and for payments for services. The new threshold is $2,000 per calendar year (adjusted for inflation), up from $600.This modernizes a threshold that had not kept pace with economic realities.
The One Big Beautiful Bill brings extensive changes that touch nearly every area of the tax code. From new deductions and credits, this legislation creates both opportunities and important considerations for individuals, families, business owners, and investors.
Now is the right time to revisit your tax-smart strategies, update your estate plans, and make sure your business structure is aligned to take advantage of these provisions. Careful planning can help you make the most of the certainty this new law provides for the years ahead.
John Vento Jr., CPA
Vice President
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