News Alert: One Big Beautiful Bill Act Signed into Law

The One Big Beautiful Bill Act (OBBBA) was signed into law on July 4, 2025, introducing significant tax changes for individuals and businesses. This bill makes many of the Tax Cuts and Jobs Act (TCJA) provisions permanent while adding new benefits. Below is a breakdown of the most significant tax provisions affecting individuals and businesses.

Business Tax Updates in the One Big Beautiful Bill Act

Bonus Depreciation: The bill permanently extends the Section 168 Bonus Depreciation deduction, increasing the allowance to 100 percent for property acquired and placed in service.

Section 179 Expensing: The bill raises the Section 179 expensing limit to $2.5 million, with the deduction reduced dollar-for-dollar when total qualifying property exceeds $4 million.

Research & Development Expenses: The bill allows taxpayers to immediately deduct domestic research or experimental expenses incurred in tax years after December 31, 2024. However, research expenses incurred outside the U.S. must continue to be capitalized and amortized over 15 years under Section 174. Small businesses with average annual gross receipts of $31 million or less can apply this change retroactively to tax years after 2021. Additionally, all taxpayers who incurred domestic research expenses between January 1, 2022, and December 31, 2024, may elect to accelerate the remaining deductions over one or two years.

Limitation on Business Interest: The bill reinstates the EBITDA-based limitations under Section 163(j) for tax years starting after December 31, 2024. For these years, adjusted taxable income is calculated without considering depreciation, amortization, or depletion deductions. Additionally, the bill expands the definition of “motor vehicle” to allow interest on floor plan financing for certain trailers and campers to be deductible.

Excess Business Losses: The bill makes the Section 461(l)(1) limitation on excess business losses of non-corporate taxpayers permanent.

Percentage-of-Completion Method: The bill exempts residential construction contracts signed after enactment from the Section 460(e) requirement to use the percentage-of-completion method.

Opportunity Zones: The bill makes opportunity zones permanent and includes several changes, including a narrower definition of “low-income community.” These changes will take effect January 1, 2027.

Qualified Small Business Stock: The bill increases the Section 1202 gain exclusion for qualified small business stock. Stock acquired after the bill’s enactment and held for at least four years qualifies for a 75 percent exclusion of gain from gross income. If held for five years or more, the exclusion rises to 100 percent.

Clean Energy Incentives: The bill rolls back numerous clean energy tax incentives, with many credits, such as those for clean vehicles, energy-efficient buildings, and hydrogen production, set to expire between 2025 and 2028. It also ends clean electricity credits for wind and solar facilities after 2027 and restricts eligibility for entities with foreign ownership. The clean fuel production credit is extended through 2029 and bans the use of foreign feedstocks.

New Markets Tax Credit: The bill permanently extends the Section 45D New Markets Tax Credit.

Individual Tax Changes in the One Big Beautiful Bill Act

Estate & Gift Tax Exemptions: The bill amends Section 2010 to permanently raise the estate and lifetime gift tax exemptions to $15 million for single filers and $30 million for married couples, with amounts indexed annually for inflation thereafter.

Personal Exemptions & Senior Deduction: The Senate bill permanently eliminates the personal exemption by setting its value to zero. However, it introduces a temporary $6,000 deduction under Section 151 for individuals aged 65 or older. This senior deduction phases out when the modified adjusted gross income (MAGI) exceeds $75,000 for individuals or $150,000 for joint filers and is effective from 2025 through 2028.

Tax Rates: The bill makes permanent the tax rates established by the TCJA. It also extends inflation adjustments by one additional year to determine the income thresholds where tax brackets above 12 percent end and those above 22 percent begin.

Standard Deduction: The bill makes permanent the increased standard deduction amounts from the TCJA. For tax years beginning after 2024, the standard deduction will increase to $15,750 for single filers, $23,625 for heads of household, and $31,500 for married individuals filing jointly. These amounts will be adjusted annually for inflation, with the adjustments applying retroactively to the 2025 tax year.

QBI Deduction: The bill makes permanent the Section 199A Qualified Business Income (QBI) deduction, maintaining the 20 percent deduction rate. It expands the phase-in range for specified service trades or businesses (SSTBs) and other entities subject to the wage and investment limit by raising the threshold from $50,000 to $75,000 for non-joint filers, and from $100,000 to $150,000 for joint filers. Additionally, the bill introduces an inflation-adjusted minimum deduction of $400 for taxpayers with at least $1,000 of QBI from active businesses where they materially participate.

SALT Cap: The bill temporarily raises the federal cap on the state and local tax (SALT) deduction from $10,000 to $40,000, with inflation adjustments through 2029. The cap will be $40,400 in 2026, then increase by 1 percent each year before reverting to $10,000 in 2030. In 2025, taxpayers with MAGI of $500,000 or more will see their SALT deduction phased down, reduced by 30 percent of the amount exceeding the threshold, but not below $10,000. The threshold will adjust for inflation through 2029.

Charitable Contribution Deduction: The bill allows non-itemizers to deduct up to $1,000 for single filers and $2,000 for married joint filers. For itemizers, it introduces a 0.5 percent floor, reducing the deduction by 0.5 percent of the contribution base. Corporations face a 1 percent floor based on taxable income, with deductions capped at the current 10 percent limit.

Alternative Minimum Tax Exemption: The bill permanently extends the TCJA’s higher individual AMT exemption amounts and resets the exemption phaseout thresholds to their 2018 levels of $500,000 for singles and $1 million for joint filers. It also doubles the phaseout rate from 25 percent to 50 percent of the amount by which a taxpayer’s alternative minimum taxable income exceeds the threshold.

No Tax on Overtime: The bill offers a temporary deduction for qualified overtime pay, up to $12,500 for individuals and $25,000 for joint filers. The deduction phases out when the MAGI exceeds $150,000 for individuals and $300,000 for joint filers. Qualified overtime compensation is any overtime pay above the regular hourly rate, as defined by labor laws. To qualify, it must be reported separately on Form W-2 or Form 1099 for non-employees. This deduction applies for tax years 2025 through 2028.

Here to Help

If you have any questions, we are here to help. We build value-added relationships with each client to understand their business structure and provide solid solutions. Our approach offers direct access to the firm's decision-makers. Our innovative cross-functional services help businesses address the challenges ahead.