August 7, 2025 Update
The IRS recently released some clarification about the One Big Beautiful Bill and taxes. Specifically, for the 2025 tax year, the IRS confirmed there will be no changes to certain information returns and withholding tables related to the act.
According to the agency:
• Form W-2, existing Forms 1099, and Form 941 will remain unchanged for 2025
• There will be no change to federal income tax withholding tables in 2025
• Employers and payroll providers should continue using existing procedures for reporting and withholding
The IRS said it’s working on new guidance and updated forms for TY 2026. That information will include how tips and overtime pay are reported.
Previously Released OBBB Details
It’s probably not surprising that the One Big Beautiful Bill Act has big tax implications for businesses and individuals alike. If the details of the bill seem a little fuzzy, we’re here to clear things up.
The bill makes most provisions of the 2017 Tax Cuts and Jobs Act permanent, while adding new credits and deductions. Some of the changes are effective in 2025, and others start in 2026.
The IRS is set to provide additional guidance within 90 days of the bill’s passage date of July 4. In the meantime, we’ve hit some of the highlights of the bill below.
We’ll update this post as new info comes out. So, keep checking back to stay up to date.
Tax Law Impacts for Individuals
- The TCJA individual income tax rates are now permanent at 10%, 12%, 22%, 24%, 32%, 35%, 37% with continued inflation adjustments.
- The standard deduction increases to $ 15,750 for single filers and $31,500 for married filing jointly and will adjust for inflation. The deduction for personal exemptions remains permanently eliminated.
- The deduction cap for state and local taxes — or SALT — increases to $40,000 for 2025 through 2029, reverting to $10,000 in 2030. There are phaseouts for high-income taxpayers.
- The Child Tax Credit goes up to $2,200 per child, with $1,700 refundable and annual inflation adjustments. The bill also expanded Social Security Number requirements for qualifying children.
- The $500 Other Dependent Credit is now permanent.
- The estate and gift tax exemption permanently increases to $15 million in 2026 and will adjust with inflation after that year.
- The Alternative Minimum Tax exemption and phase-out thresholds are now permanent. There is a higher phase-out rate for upper-income filers.
- The mortgage interest deduction is permanently limited to interest on loans up to $750,000. Also, the rule that interest from home equity loans isn’t deductible is now permanent.
- The limit on deducting casualty losses to federally declared disasters is now permanent. However, it has been slightly expanded to some state-declared disasters.
- Miscellaneous itemized deductions are permanently eliminated, except for certain educator expenses.
- The “Pease” limitation on itemized deductions is permanently repealed. The bill replaced it with a cap on the tax benefit of itemized deductions for top-bracket taxpayers.
New and Expanded Credits and Deductions
- A new $6,000 deduction for taxpayers and their spouses 65 or older for tax years 2025-28. This senior deduction is subject to phase-out for the adjusted gross income that exceeds $75,000 or $150,000 for joint filers.
- A charitable deduction for non-itemizers of up to $1,000 or $2,000 for a joint return beginning in 2026.
- A new, temporary deduction of up to $25,000 per year per taxpayer available 2025-28 for those who earn tips in jobs where tipping was customary before Jan. 1, 2025, with a phase-out for higher income filers. (Note: We’ll be keeping an eye on how payroll companies decide to handle reporting and calculations for tips and overtime under the new rules.)
- A new, temporary deduction of up to $12,500 and $25,000 for joint filers per year per taxpayer from 2025-28 for those who earn qualified overtime, with a phase-out for higher income filers.
- A temporary deduction of up to $10,000 for interest paid on new car loans for U.S.-assembled passenger vehicles.
- The exclusion for student loan discharge because of death or disability is permanent. Employer payments of student loans under educational assistance programs are now permanent and inflation-adjusted.
- The adoption credit is partially refundable and inflation-adjusted. Section 529 plan-qualified expenses are expanded to include more K-12, homeschool, and credentialing expenses.
- The “Trump Account” — a new type of tax-preferred account — allows for a federal $1,000 contribution for qualifying children born in 2025-28.
Tax Law Impacts for Businesses
- The 20% Section 199A Qualified Business Income deduction is now permanent. There are, however, increased phase-out amounts and a new minimum deduction.
- 100% bonus depreciation is reinstated and extended for property placed in service after Jan. 19, 2025.
- The Section 179 expensing limit is increased to $2,500,000, with a phaseout threshold of $4,000,000.
- Full expensing for domestic research and experimental costs beginning in 2025, with retroactive application for small businesses. The legislation provides small businesses with the option to apply this change retroactively back to 2022 through amended returns. It also allows taxpayers to accelerate the deduction of the unamortized balance of any previously capitalized research expenditures.
- The limit on deducting business losses is now permanent. For any losses you can’t use right away, there are new ways you can carry them forward to future years
- The Childcare Credit is increased to 40% and 50% for small businesses, with a higher maximum and inflation adjustment.
- The Form 1099 reporting threshold is increased to $2,000 and will adjust for inflation.
- The Section 1202 Qualified Small Business Stock exclusion is modified to a tiered system, and the asset limit is increased to $75 million.
Energy Tax Incentives
- There are now accelerated expiration dates for several energy credits and deductions, including the Clean Vehicle Credits — which end for vehicles acquired after Sept. 30, 2025 — and Residential Energy Credits, which end for property placed in service after Dec. 31, 2025.
- The New Markets Tax Credit is permanently extended.
Effective Dates
USAFacts put together a handy timeline showing when the various provisions take effect.
Most are effective for tax years beginning after Dec. 31, 2025. However, some — like the standard deduction and bonus depreciation — are effective as of Jan. 1, 2025. Still others, such as full expensing for R&E costs, allow retroactive application for small businesses.
Questions about the One Big Beautiful Bill? Let us know.