On July 4, 2025 the One Big Beautiful Bill Act was signed into law. There has been much discussion about the provisions of this legislation since Trump’s election results were secured last November. Some things were included, some were omitted, and others were changed from the current existing law. In this summary we will include information about the most applicable provisions with the most impact to clients of our Certified Public Accounting firm. You are welcome to request information about other provisions not covered in this summary.

I will also caution you as readers of this summary - so far, we have Congressional law. The process of determining changing tax rules is a complicated one that happens over time according to this process.

1. Congress passes legislation.
2. The IRS (and other agencies) write regulations based on an interpretation of what the laws mean at an application level.
3. The IRS and individual taxpayers interpret these regulations differently as they apply to various issues. This usually gets hashed out through audits and court actions over a multiple year period.

My point is, our interpretation today could change in the future. This bill is job security for accountants, for certain! 

Individual Tax Provisions
1. State and Local Tax (SALT) limitation – starting in 2018, there has been a cap of $10,000 for these types of deductions on the itemized deductions schedule. If your house taxes, state income taxes, local taxes and car taxes (to name the most common) equaled $15,000, you could only deduct $10,000. This was creating an inordinate burden on individuals in states with income taxes, particularly high-rate state taxes. This cap has been raised to $40,000. This will be effective starting in 2025. There will be a phase out for taxpayers with incomes over $500,000. 2. Individual tax rates – have been made permanent at the lower rates that have been in effect from 2018 forward. These were scheduled to expire at the end of 2025.
3. Standard deductions – taxpayers deduct either their actual itemized deductions, or the standard deduction as designated by law from their income before calculating tax. The standard deduction was substantially increased starting in 2018. This amount has been raised again starting in 2025 - $15,750 for a single taxpayer and $31,500 for married taxpayers. These amounts will increase each year beginning in 2026 based on an inflation adjustment. 
4. Estate and gift taxes – starting in 2018, the amount of assets that could be transferred by an individual either during their lifetime as a gift or left behind to heirs at death was substantially increased. Further, this amount has been increased through inflation adjustments each year since then. These higher exclusion amounts were scheduled to revert to lower amounts based on previous law at the end of 2025. This bill makes these amounts permanent and raises the exclusion to $15,000,000 for an individual or $30,000,000 for a married couple starting in 2026.
5. 529 Plans - the cap on distributions annually has been $10,000 through 2025. Starting in 2026, this cap is raised to $20,000. The categories of qualifying expenses that are covered are being expanded as well.
6. Charitable Contributions - starting in 2026, non-itemizers will be able to deduct up to $1,000 as an individual or $2,000 as a married couple of charitable contributions. For itemizers, there will be a floor of one-half of one percent of adjusted gross income - only charitable contributions in excess of that will qualify for deduction.
7. Child Tax Credit - the childcare credit is being increased starting in 2025 from $2,000 to $2,200 for qualified children. Starting in 2026 the amount will increase based on an inflation calculation.
8. Adoption credit - starting in 2025, up to $5,000 of this credit will be refundable.
9. Deduction for Tip Income - a new deduction for tip income is allowed for up to $25,000 per year during years 2025 through 2028. This deduction phases out starting at $150,000 of income for an individual or $300,000 for a married couple. 
10. Deduction for Overtime Pay - a new deduction for overtime pay is allowed for $12,500 for individuals or $25,000 for a married couple effective for tax years 2025 through 2028. This deduction phases out starting at $150,000 of income for an individual or $300,000 of income for a married couple.
11. Senior Deduction - a new deduction for individuals at least 65 by the end of 2025 is allowed for $6,000 per individual. This deduction is allowed for tax years 2025 - 2028. The deduction phases out for individuals whose income exceeds $75,000 or married couples with income in excess of $150,000.
12. Deduction for Car Loan Interest - a new deduction for car loan interest relating to cars bought starting in 2025 that are assembled in the US. Up to $10,000 of interest will be deductible. This deduction phases out starting at $100,000 of income for an individual or $200,000 for a married couple. This deduction will be available for tax years 2025 through 2028. 
13. Trump Accounts - a new type of tax-exempt savings account called a “Trump Account” will be available starting in 2026. Parents of any child under age 8 may open this type of account for their qualifying child. Up to $5,000 annually may be contributed into the account. Beginning at age 18, account holders may withdraw up to 50% of the funds in the account for specified purposes including higher education. The other 50% is available for the same specified purposes starting at age 25. At age 30, the remaining funds can be withdrawn for any purposes. For US Citizens born between January 1, 2024, and December 31, 2028, the government will contribute $1,000 into every eligible account. 

Business Tax Provisions
1. Qualified Business Income deduction - this was a new creation from the original 2018 Tax Cuts and Jobs Act. Business profits for the last seven years have only been 80% taxable, with 20% eliminated from being subject to US tax. This extends this QBI deduction beyond 2025 and makes it permanent.
2. Bonus Depreciation - bonus depreciation allows for most of the cost of acquired equipment to be written off in the year of purchase. This allowance was for 100% of the cost of equipment in 2018 through 2022. In 2023, this allowance decreased to 80% of cost, 2024 decreased to 60%. The deduction was scheduled to further decrease in 2025. The OBBBA has restored this deduction to 100% of cost for assets bought on or after January 19, 2025 and future years.
3. Section 179 Expensing - another popular asset cost expensing rule has been expanded to include up to $2.5M of assets in any year. This amount will be indexed to increase by an inflation allowance starting in 2026.
4. Research and Development Cost Expensing - beginning in 2025, R & D expenditures can be expensed instead of capitalized. For smaller businesses this rule can be applied to expenditures for 2021 through 2024 as well.
5. Forms 1099-MISC and 1099-NEC - the minimum filing requirement for filing a form for payments to independent contractors has been $600 or more per contractor in any specific year for a number of years. This minimum filing requirement has been raised to $2,000 per year beginning in 2026.
6. Capital Gains from Farmland Sales - for tax years beginning after July 4, 2025, the taxes from sales of farm land that meets certain criteria can be spread over a four year period.
7. Qualified Small Business Stock Gains - gains from qualified small business stock sales can be excluded if the stock meets specific criteria and is held for a minimum holding period. Stock held for three years allows for an exclusion of 50%, four years qualifies for 75% exclusion and five or more years qualifies for 100% exclusion.