One Big Beautiful Bill

Introduction

On July 4, 2025, President Trump signed the One Big Beautiful Bill Act. This sweeping piece of legislation covered many areas, and we hope to be your go-to resource for the tax changes. As with any legislation, there are some items that are cut and dry, some that need some study, and still others that will need additional guidance from regulatory authorities.

As we sort through it all, we hope to provide updates to what matters most to you, our valued clients! We hope you find this helpful, and we welcome any questions.

Extended Provisions

One of the main achievements in the bill was to make permanent provisions from the 2017 Tax Cuts and Jobs Act. This included the following items:

Permanent Extension of Tax Rates – the rates in place since 2018 will continue to apply. These range from 10% to 37%.
Permanent Higher Standard Deduction – the higher standard deduction in place since 2018 will continue to apply.
Permanent Changes to Itemized Deductions – changes that have been in place since 2018 will continue to apply. These include $750,000 mortgage interest limitation, HELOC non-deductibility, casualty losses only deductible for declared disasters, and no deduction for miscellaneous itemized deductions.
Child Tax Credit – the higher credit and higher phase-outs in place since 2018 will continue to apply. The 2025 credit will be $2,200 per child, and it will be indexed for inflation going forward.
Permanent Higher AMT Exemption and Phase-out Thresholds – the amounts in place since 2018 will continue to apply.
Permanent Change to Moving Expenses – moving expense are not deductible, and moving expense reimbursement is not excludable from income. This has been in place since 2018 and will continue to apply.
Child and Dependent Care Credit – the higher amounts were made permanent.

Itemized Deductions

In 2025, the primary change to the itemized deductions is the increase in the SALT cap. The cap is raised from $10,000 (or $5,000 for MFS) to $40,000 (or $20,000 for MFS) until 2029. It will have a 1% increase each year. The deduction is reduced for income that exceeds $500,000 (or $250,000 for MFS).

In 2026, there will be additional changes to itemized deductions. A new floor will be in place for charitable donations. You must donate more than .5% of your AGI before the donations start to help you as an itemized deduction. In addition, taxpayers in the top bracket of 37% will have the value of their itemized deductions limited to a 35% deduction.

Campaign Promises

There were a handful of campaign promises that resulted in new tax provisions. Most of these items have limitations on how much can be deducted and income limits, but here are the details:

Temporary Senior Deduction - $6,000 deduction for individuals 65 and older. This deduction starts to phase out for taxpayers with MAGI over $75,000 (or $150,000 for MFJ return).
Tip Deduction – Up to $25,000 deduction on tip income for 2025 through 2028. This deduction starts to phase out for taxpayers with MAGI over $150,000 (or $300,000 for MFJ return).
Overtime Deduction – Up to $12,500/$25,000 deduction on the overtime premium earned for 2025 through 2028. This deduction starts to phase out for taxpayers with MAGI over $150,000 (or $300,000 for MFJ return).
Car Loan Interest Deduction – Up to $10,000 deduction for new car loan interest purchased from 2025 through 2028. This is for any vehicle which has final assembly in the U.S. This deduction starts to phase out for taxpayers with MAGI over $100,000 (or $200,000 for MFJ return).

Other Individual Changes

In addition to all of these changes, there are several other items impacted by the bill.

Charitable Deduction for Non-Itemizers – Up to $1,000 (or $2,000 for MFJ) can be deducted for donations to qualifying charities. This applies beginning in 2026.
Gift and Estate Tax Exemption – The 2026 exemption is now $15 million (or $30 million for MFJ), and it will be indexed for inflation going forward.
Dependent Care FSA – The annual limit has increased from $5,000 to $7,500 starting in 2026.
529 Expenses – Additional expenses are included, and the K-12 tuition expenses has increased from $10,000 to $20,000/year.
Termination of Clean Vehicle Credit – The $7,500 max credit now expires on 9/30/25.
Termination of Energy Efficient Home Improvement Credit – This credit now expires on 12/31/25.
Educator Expense Deduction – The above the line deduction still applies, but any additional amount can be included with your itemized deductions.
Wagering Losses Deduction – Losses are limited to 90% of deductible losses, which are limited to gambling winnings. This applies beginning in 2026.
Adoption Credit – A portion of the credit is now refundable, but it still has income phase outs.

Business Changes

In addition to the changes to individual returns, there are also several business related changes. Here are a few of the most important.

Qualified Business Income Deduction – This deduction is now permanent, and the phase-out range for 2026 going forward has increased from $50,000/$100,000 to $75,000/$150,000. There is also now a minimum deduction of $400.
Bonus Depreciation – Starting with property placed in service on or after 1/20/25, 100% bonus depreciation is available for qualifying property.
Section 179 – These limits have increased to a deduction of $2.5 million and is reduced when purchases exceed $4 million.

1099 Reporting Changes

Over the next couple of years, there will be some changes to the 1099 reporting thresholds.

Forms 1099-K – these will be issued if payees have $20,000 in sales and more than 200 separate transactions starting for 2025.
Forms 1099-NEC – the filing threshold will increase from $600 to $2,000 in 2026.

Final Thoughts

If you’ve made it this far, thanks for sticking with it! There are several items we want to point out as we wrap up the post. While there are some provisions that will impact only a few clients, there are others that we think will provide planning opportunities for several.

The SALT cap – timing of Q4 state estimated payments or year-end property taxes could matter. This can also impact whether state PTET deductions are still advantageous.
Charity and itemized deduction limits – with these items impacting 2026, there may be an opportunity to speed deductions up into 2025 when they are more valuable.
Bonus depreciation – purchases this year for practices and short-term rentals may be more advantageous than previously thought.

We are also watching to see how states interact with the new tax bill. Some states automatically adopt these provisions, while others will have to act in their state legislatures. There’s still lots to unfold, and we hope you’ll follow along with us!