July 7, 2025 Update:

On July 3, 2025, Congress finalized and passed “The One Big Beautiful Bill,” and President Trump signed it into law on July 4. This sweeping legislation enacts significant tax changes for both individuals and businesses, with most provisions taking effect beginning in the 2025 or 2026 tax years, some retroactively as of January 1, 2025.

This comprehensive legislation extends and revises several major provisions of the Tax Cuts and Jobs Act of 2017 (TCJA), many of which were set to expire at the end of 2025. Below is a summary of key tax provisions included in the final version of the bill:

TCJA Individual Tax Provisions Extended or Made Permanent

• SALT Limitation Increase to $40,000 – Temporarily increases the state and local tax (SALT) itemized deduction cap to $40,000 for most taxpayers beginning in 2025, phasing down for incomes above $500,000, and reverting to $10,000 in 2030.
• Extension of Modification of Rates - Makes the TCJA tax rates permanent and modifies the inflation adjustment mechanism for the various brackets.
• Increased Standard Deduction- Makes the TCJA’s increased standard deduction amounts permanent with annual inflation adjustments.
• Increased Child Tax Credit - Makes permanent the TCJA’s increased and enhanced child tax credit and ups the maximum credit to $2,200 per child beginning in 2025, indexed for inflation.   $500 credit for other dependents made permanent.
• Increased Estate and Gift Tax Exemption Amounts - Permanently increases the lifetime estate and gift tax exemption to $15 million per person ($30 million if married), subject to inflation adjustments after 2025.
• Termination of Overall Limitation on Itemized Deductions - Permanently eliminates the overall cap on itemized deductions (Pease limitation) and replaces it with a provision requiring taxpayers to reduce the value of itemized deductions claimed against the top individual income tax rate (37%) by 2/37. (Effectively capping the benefit at the 35% tax bracket instead of the 37% bracket).
• Limitation on Deduction for Qualified Residence Interest - Permanently sets the limit for mortgage interest deductions at $750,000 in home mortgage acquisition debt and permanently excludes home equity indebtedness from the definition of qualified residence interest.
• Termination of Miscellaneous Itemized Deductions - Permanently eliminates the Sec. 67(g) deduction for “2%” miscellaneous itemized deductions.
• Extension of current alternative minimum tax (AMT) rules – Makes the TCJA’s increased AMT exemption amount and phaseout thresholds permanent.

TCJA Business Tax Provisions Extended or Made Permanent 

• Deduction for Qualified Business Income – Makes permanent the 20% Sec. 199A deduction for qualified business income at 20%, with expanded eligibility to include qualified business development company (BDC) interest dividends.
• 100% Bonus Depreciation (1/19/2025) - Permanently reinstates the 100% first-year (bonus) depreciation for property acquired and placed in service after January 19, 2025.
• 163(j) Return to EBITDA Standard - Permanently reinstates the EBITDA-based calculation (adding back depreciation and amortization) for the interest expense limitation starting in 2025 and adds a new limitation for capitalized interest.
• Excess Business Loss Limitations - Makes permanent the limitation on excess business losses of a taxpayer other than a corporation. (In the final bill, excess business losses still become net operating losses (NOLs) for subsequent years.)

New Individual Tax Provisions 

• No Tax on Tips - Creates a new above-the-line tax deduction of up to $25,000 for tips (from an occupation that customarily receives tips) that an individual receives and are included on Form W-2, 1099-K, or 1099-NEC for tax years 2025-2028. The deduction phases out for incomes over $150,000 for single filers or $300,000 if married filing jointly.
• No Tax on Overtime - Establishes a new above-the-line deduction for tax years 2025-2028 that allows individuals to deduct qualified overtime compensation received during the tax year, subject to a cap of $12,500 ($25,000 if married) with a phaseout of incomes over $150,000 for single filers or $300,000 if married filing jointly. Overtime pay must be separately stated on the individual’s W-2 or 1099. 
• Enhanced Deduction for Seniors - Establishes a temporary $6,000 deduction for individuals aged 65 and older (and eligible spouses on joint returns) for tax years 2025-2028, with a phaseout beginning at $75,000 AGI ($150,000 MFJ).
• No Tax on Car Loan Interest - Establishes a temporary above-the-line deduction for tax years 2025-2028 of up to $10,000 for qualified interest paid on passenger vehicle loans, subject to various restrictions, including a requirement that final vehicle assembly occur in the United States. The deduction would phase out for taxpayers with modified adjusted gross income exceeding $100,000 for single taxpayers, $200,000 for married couples filing jointly.
• 529 Plan Rule Changes - Expands the definition of ‘qualified higher education expenses’ under Sec. 529 plans to include certain costs associated with enrollment or attendance at K-12 public, private, or religious schools, as well as homeschooling and post-secondary credentialing programs.
• Reinstatement of Partial Deduction for Charitable Contributions of Individuals Who Do Not Elect to Itemize - Reinstates a partial above-the-line charitable deduction of up to $1,000 for single filers and $2,000 for joint filers.
• New Limit on Itemized Charitable Deductions - New 0.5% of AGI “haircut” on overall charitable itemized deductions.
• New Tax Credit for Charitable Contributions to Scholarship-Granting Organizations – New credit of $1,700 for charitable contributions to scholarship-granting organizations for elementary and secondary education. Contributions must be in cash, must be reduced by any state tax credit, and cannot be double-counted as charitable deductions. Each state is to provide a list of qualifying organizations each year.   
• New limit on Gambling losses – Starting in 2026, only 90% of gambling or wagering losses can be used to offset gambling or wagering income.
• Trump Accounts - Establishes Trump Accounts, which are tax-advantaged savings accounts under the IRA (individual retirement account) rules for U.S. citizen children under the age of 18 at the time the account is opened. Contributions of up to $5,000 per account per year (indexed for inflation) are allowed, and distributions before age 18 are prohibited. Potential $1,000 tax credit for Trump Accounts created for children born between 2025 and 2028.
• Dependent care assistance programs – Increases the annual dependent care assistance program from $5,000 to $7,500.
• New Opportunity Zone Investments - Makes opportunity zones permanent. Starting 7/1/2026, Governors will designate new QOZs, which will then be in effect for 10 years. Capital gains invested after 1/1/2027 will be deferred until the earlier of the date of disposition or five years from the date of the investment in a QOZ. Holding the property for five years creates a 10% basis increase (30% for rural funds). Holding for 10-30 years eliminates all gain when the investment is disposed. The final law leaves multiple open questions. Further regulations will be needed for additional guidance.
• Removal of Residential Green Energy Tax Credits After 12/31/25 - Terminates the residential energy-efficient home improvement credit (Sec. 25C) and the residential clean energy credit (Sec. 25D) for property placed in service after 2025.
• SALT PTET Workarounds– No limitation in the final version of the law. Neither the House SSTB limitation nor the Senate PTET cap are in the final bill.

New Business Tax Provisions

• Deduction of Domestic Research and Experimental Expenditures - Permanently restores immediate deductibility of domestic research or experimental expenditures for tax years starting after 12/31/2024. Allows small businesses (under $31 million in gross receipts) to retroactively expense unamortized R&D costs dating back to January 1, 2022.
• New 179 Expense Limitations - Increases the maximum amount a taxpayer may expense under Sec. 179 to $2.5 million and increases the phaseout threshold amount to $4 million.
• 100% Depreciation for Qualified Production Property - First-year depreciation deduction equal to 100% of the adjusted basis of “qualified production property,” which is generally nonresidential real property used in manufacturing, placed in service before 2030, and for which construction began between 1/19/25 and 1/1/2029.  
• Residential Percentage-of-completion method – New exception to Percentage-of-completion method for certain residential construction contracts.
• Minimum Deduction for Qualified Business Income – New minimum deduction of $400 (annual inflation adjustment) for taxpayers who have at least $1,000 of QBI from one or more active trade or businesses in which they materially participate.
• New Limit on Itemized Charitable Deductions - New 1% of taxable income “haircut” on overall charitable itemized deductions for C-Corporations.
• Return to $20,000 1099-K Reporting Threshold - Reverts to the previous Form 1099-K reporting threshold, requiring third-party settlement organizations to report only if a participating payee’s aggregate transactions exceed $20,000 in value and 200 in number within a calendar year.
• 1099 Reporting Threshold Increase from $600 to $2,000 - Raises the information reporting threshold for certain business-related payments and service remuneration to $2,000 per calendar year (up from $600), with the threshold indexed annually for inflation beginning in 2027.
• Qualified Small Business Stock – For qualified small business stock acquired after the date of enactment, there is a 50% benefit if held for 3 years, 75% for 4 years, and 100% for five years. Up to $15 million of gain can be excluded (but the 10 times basis rule does not change). The gross asset limit increases from $50 million to $75 million.
• Removal of Recent Green Energy Tax Credits - Repeals or phases out numerous clean energy provisions, including the clean vehicle credit and credits for certain types of clean energy property (e.g., solar, wind, geothermal, fuel cells, etc.). The specific termination or phase-out dates vary by credit.

This legislation represents one of the most significant overhauls to the federal tax code since the TCJA. While many provisions are now permanent, others are temporary and may evolve with future administrations. We are closely monitoring IRS guidance as implementation unfolds and will provide further updates as they become available.

If you have questions about how these changes may affect your individual or business tax planning, please contact us.

Contributors: Leslie Masek, Adam Pfeiffer