On July 4, 2025, President Donald Trump signed the One Big Beautiful Bill Act (H.R.1) into law, marking a significant overhaul of U.S. tax policy and federal spending. This legislation, passed along party lines in both chambers of Congress, permanently extends and expands many provisions from the 2017 Tax Cuts and Jobs Act (TCJA) and introduces a host of new tax rules affecting individuals, families, and businesses.
This post provides an overview of the key tax provisions. Please contact the author or reach out to your GYF Tax Executive to discuss the potential impact on your specific circumstances.
Tax Changes Affecting Individuals and Families
- Individual Tax Brackets
- The 10%, 12%, 22%, 24%, 32%, 35%, and 37% tax brackets (applicable since 2018) are made permanent
- This change prevents the scheduled reversion back to the higher pre-TCJA tax rates (10%, 15%, 25%, 28%, 33%, 35%, and 39.6%)
- Increased SALT Deduction Cap
- The cap on state and local tax (SALT) deduction rises from $10,000 to $40,000 for taxpayers earning less than $500,000, effective for tax years 2025-2029
- The SALT cap reverts back to $10,000 after 2029
- Increased Standard Deduction
- The doubled standard deduction is locked in and further increased to $15,750 (single filers), $23,625 (head of household), and $31,500 (joint filers)
- No Tax on Tips and Overtime
- Deduction of up to $25,000 for cash tips; phase out begins when the taxpayer’s modified adjusted gross income exceeds $150,000 ($300,000 joint filers)
- Deduction of up to $12,500 for the amount of overtime pay received as required under section 7 of the Fair Labor standards Act of 1938; phase out begins when the taxpayer’s modified adjusted gross income exceeds $100,000 ($200,000 joint filers)
- Note: these are deductions that reduce taxable income, not full exclusions; payroll, Medicare, and state taxes still apply
- Automobile Loan Interest Deduction
- Deduction of up to $10,000 per year for interest paid on an automobile loan in 2025-2028 for a vehicle purchased after 2024; phase out begins for individuals earning over $100,000 annually ($200,000 joint filers) and is eliminated at $150,000 ($250,000 joint filers)
- Only new vehicles assembled in the United States qualify
- Senior Tax Relief
- A $6,000 deduction is allowed for taxpayers age 65 and older after 2024 and before 2029
- The deduction phases out for individuals with modified adjusted gross include exceeding $75,000 ($150,000 for joint filers)
- Increased Child Tax Credit
- Credit is permanently increased from $2,000 to $2,200
- Alternative Minimum Tax (AMT)
- The AMT exemption amounts for individuals are made permanent for tax years beginning after 2025
- The AMT exemption phaseout threshold for joint filers and surviving spouses in tax years beginning in 2026 reverts back to $1,000,000 ($500,000 single) as applicable in 2018, subject to inflation in future years, and the amount by which the exemption amount is reduced for taxpayers with alternative minimum taxable income in excess of the phaseout threshold is doubled
- Savings Accounts for Children
- Parents can now create tax-deferred “Trump Accounts” for their children’s future financial security
- Up to $5,000 per year can be contributed for each child
- Employers may contribute up to $2,500 per year, subject to the overall annual limit
- The federal government will make a one-time $1,000 contribution to each eligible child’s account for those born between 2025 and before 2029
- 529 Education Savings Expansion
- Expanded to cover more educational expenses including elementary, secondary, and home-schooling expenses
- Estate Taxes
- The basic exclusion amount for estate and gift taxes and the exemption amount for generation-skipping transfer (GST) tax purposes is increased to $15 million, before adjustment for inflation, for the estates of decedents dying and gifts and GSTs made after 2025
- The exclusion, which the TCJA doubled for decedents dying through 2025 (inflation adjusted to $13.99 million in 2025), would have reverted back to 2017 amounts if the TCJA expired
Tax Changes Affecting Businesses
- Permanent 20% QBI Deduction (Section 199A)
- The Qualified Business Income (QBI) deduction is made permanent, with the deduction rate remaining at 20%
- 100% Bonus Depreciation
- Businesses can permanently expense 100% of eligible property acquired after January 19, 2025 (bonus depreciation)
- The bonus depreciation rate was set at 40% for 2025
- Section 179 Deduction Cap
- Increased to $2.5 million
- Research and Experimental Expenditures (R&E)
- The deduction for domestic R&E costs incurred after 2024 is permanently reinstated
- Small businesses with average annual gross receipts of $31 million or less will be able to elect to claim the deduction retroactively to 2022
- Business Interest Deduction Expansion
- The more favorable EBITDA-based limitation for business interest deduction under Section 163(j) is restored, meaning the deductible business interest expense is now limited to 30% of EBITDA rather than EBIT
- This change increases the allowable deduction for many businesses, especially those with substantial depreciation and amortization expense
- Qualified Small Business Stock (QSBS) Expansion
- Increased gain exclusion and shorter holding periods
- The maximum gain exclusion for QSBS is increased from $10 million to $15 million for stock acquired after July 4, 2025
- The exclusion applies to the greater of $15 million or 10x basis
- A new tiered system allows for shorter holding periods
- After 3 years – 50% gain exclusion
- After 4 years – 75% gain exclusion
- After 5 years – 100% gain exclusion
- International Provisions
- Permanent extension of various international and foreign-related provisions under the TCJA, including the Deduction for foreign-derived intangible income (FDII), Deduction for Global intangible low-taxed income (GILTI), and the Base erosion minimum tax amount
- Changes to FDII and GILTI rate
- The FDII rate changes to 33.34% (currently 37.5%), and the GILTI rate changes to 40% (currently 50%) after 2025
- These rates were scheduled to drop to 21.875% and 37.5%, respectively
- The base erosion minimum tax amount changes to 10.5% (currently 10%) after 2025
- This rate was scheduled to increase to 12.5% after 2025
- Changes to the treatment of “tested” CFC income and the foreign tax credit
- Green Energy Terminations – many credits applicable to the consumer side of green energy have been terminated (generally after 2025)
- Previously owned clean vehicle credit
- Clean vehicle credit
- Qualified commercial clean vehicle credit
- Alternative fuel refueling property credit
- Energy efficient home improvement credit
- Residential clean energy credit
- New energy efficient home credit
