One Big Beautiful Bill was signed into law on July 4, 2025. The bill makes many provisions from the Tax Cuts and Jobs Act of 2017 permanent, as well as terminating many of the energy incentive provisions. In this summary, we outline the key aspects of the tax bill that may affect you or your business.
Individual Provision Summary
- Tax Brackets remain at 10%, 12%, 22%, 24%, 32%, 35%, and 37%.
- The estate and gift lifetime exemption will be $15 million starting in 2026 and indexed for inflation going forward.
- Personal exemption deduction is permanently repealed.
- The basic standard deduction is $15,750 for single and married filing separately, $23,625 for head of household, and $31,500 for married filing jointly.
- Individuals 65 and over will receive an additional $6,000 deduction if their adjusted gross income is less than $75,000 (or $150,000 for joint filers) between 2025 and 2028.
- In 2026, the child tax credit will increase to $2,200 per child and will adjust annually with the inflation index.
- The State and Local Tax Deduction (SALT) cap has increased from $10,000 to $40,000 for tax years 2025 through 2029. The cap will increase each year by 1%. The $40,000 cap is phased out for taxpayers with income over $500,000.
- Qualified residential home mortgage interest remains limited to $750,000 of home mortgage acquisition debt.
- Miscellaneous itemized deductions are permanently eliminated, except for educators, for unreimbursed employee expenses.
- Gambling losses can only offset 90% of winnings starting in 2026.
- Individuals in the top tax bracket will have a reduction of their itemized deductions to result in an effective tax benefit of 35%.
- Starting in 2026, the AMT exemption will be permanently increased to $500,000 (or $1 million for married filing jointly) and indexed for inflation. The phaseout rate for higher-income taxpayers will increase from 25% to 50%.
- Individuals, including non-itemizers who purchase a new U.S.-assembled vehicle after December 31, 2024, will be able to deduct the interest on the vehicle purchase between 2025 and 2028, up to $10,000.
- Non-itemizers can claim a charitable deduction of up to $1,000 ($2,000 for married filing jointly) for cash contributions, starting in 2026.
- Trump Account is a new tax-deferred investment account for children under the age of 18. The accounts can be opened after July 4, 2026. The Treasury will deposit $1,000 into the account for all U.S. citizens born between January 1, 2025, and December 31, 2028. The contributions are limited to $5,000 a year, indexed for inflation. In addition, employers can contribute up to $2,500 into the accounts for their employees’ children. There are limited exceptions to any withdrawals before the age of 18.
- Certain taxpayers will be eligible for a deduction of up to $25,000 on qualified cash tips received. The deduction is phased out for incomes over $150,000 (or $300,000 for married filing jointly). The deduction is only for tax periods between 2025 and 2028.
- Certain taxpayers will receive a deduction of up to $12,500 (or $25,000 for married filing jointly) on qualified overtime pay. The deduction is phased out for income exceeding $150,000 (or $300,000 for married filing jointly). The deduction is only for tax periods between 2025 and 2028.
Business Provisions Summary
- Section 199A, Qualified Business Income Deduction, was made permanent and established a minimum deduction of $400 if there is $1,000 or more of qualified business income.
- Section 174 expenses on domestic research are once again fully deductible in the year incurred. Certain taxpayers will be allowed to go back and amend their 2022–2024 returns to claim unamortized research expenditures. Otherwise, the remaining unamortized amount can be deducted on the 2025 return or over two years starting in 2025.
- Bonus deprecation is permanently increased to 100% for property acquired after January 19, 2025.
- Bonus depreciation is expanded to include qualified production property.
- Section 179 has been increased to $2.5 million, with a phaseout beginning at $4 million of purchases.
- Corporations can only deduct charitable contributions in excess of 1% of their taxable income, but not more than 10% of their taxable income.
- Section 163j interest limitation calculation is revised and reverts to adding back depreciation and amortization starting in 2026.
- Qualified small business stock (QSBS) gain exclusion is modified for a 50% exclusion for stock held for 3 years, 75% for 4 years, and 100% for 5 or more years.
- In 2026, the advanced manufacturing investment credit will increase from 25% to 35%.
- Starting in 2026, the threshold for filing 1099-NEC and MISC forms increases from $600 to $2,000.
- Form 1099-K reporting thresholds by third-party networks revert to $20,000 and 200 transactions.
- The Federal FICA tip credit is expanded to include beauty services businesses.
- The Paid Family and Medical Leave Credit was made permanent.
- The Employer Provided Child Care Credit was enhanced to 40% of the qualified childcare expenditure (or 50% for qualified small businesses). The credit cannot exceed $500,000 (or $600,000 for qualified small businesses).
- Employees can elect to exclude up to $7,500 (or $3,750 for married filing separately) for dependent care assistance starting in 2026.
- Employers can continue to exclude up to $5,250 per year of student loan repayments from employees’ income after 2025. In addition, the $5,250 is not adjusted for inflation after 2026.
Energy Incentives
- The energy-efficient commercial buildings deduction is terminated for property that begins construction after June 30, 2026 (Section 179D).
- Energy Efficient Home Improvement Credit is terminated for property placed in service after December 31, 2025 (Section 25C).
- Residential Clean Energy Credit is terminated for property placed in service after December 31, 2025 (Section 25D)
- Previously Owned Clean Vehicle Credit is terminated for expenditures after September 30, 2025 (Section 25E)
- Alternative Fuel Refueling Property Credit is terminated for property acquired after June 30, 2026 (Section 30C)
- Clean Vehicle Credit is terminated for vehicles acquired after September 30, 2025 (Section 30D)
- New Energy Efficient Home Credit is terminated for homes acquired after June 30, 2026 (Section 45L).
- Commercial Clean Vehicle Credit is terminated for vehicles acquired after September 30, 2025 (Section 45W).
- The Clean Electricity Production Credit and the Clean Electricity Investment Credit have been terminated for wind and solar facilities placed in service after December 31, 2027, and for all other facilities after 2032 (Sections 45Y and 48E).
If you have any questions about these topics or others, please don’t hesitate to contact one of our experts. At Vrakas CPAs + Advisors, we strive to alleviate financial worry for business owners, allowing them to focus on running their businesses, serving their customers, and staying ahead of the competition.
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