Don Johnston and Ryan Fronius, leaders in GYF’s Tax Services Group, presented Key OBBBA Tax Provisions at our firm’s annual CPE Day. Don and Ryan identified the key permanent and temporary Federal tax provisions outlined in the new legislation.
The recently enacted One Big Beautiful Bill Act (OBBBA) sought to extend and codify many of the tax provisions from the 2017 Tax Cuts and Jobs Act (TCJA) that were set to expire in 2026. The OBBBA also added several new provisions to the Internal Revenue Code targeted to benefit individuals and businesses.
Tax Provisions Impacting Individuals
Permanent Changes
Notable permanent changes to the IRC that will impact families and individuals alike include:
- Permanent extension of the lower TJCA Individual Tax Rates for years after 2025, which were set to revert at the end of 2025
- Permanent increase to the Estate and Gift Tax Exemption, now increased to $15 million for years beginning after December 31, 2025, and indexed for inflation annually
- Permanent extension of the increase to the Standard Deduction at $15,750 for Single and Married Filing Separate filers, $23,625 for those who claim Head of Household status, and $31,500 for filers Married Filing Joint
Temporary Changes
In conjunction with the permanent changes, the OBBBA included several new temporary provisions focusing on individual taxpayers, including:
- Enhanced deduction for Seniors, for tax years 2025 to 2028, adding a $6,000 deduction for taxpayers over the age of 65 in addition to the standard deduction; includes a phaseout when modified AGI is greater than $75,000 (or $150,000 for those filing jointly)
- Deduction of the first $25,000 of “qualified tips,” defined as any cash tip received in an occupation that customarily and regularly received tips on or before December 31, 2024, for tax years 2025 to 2028, applicable to both itemizers and non-itemizers; includes a phaseout that reduces the deduction by $100 for each $1,000 by which modified AGI is greater than $150,000 (or $300,000 for MFJ)
- Deductible car loan interest of up to $10,000 paid on new car loans, for tax years 2025 to 2028, only for cars that underwent final assembly in the United States; includes a phase out of the deduction by $200 for every $1,000 when AGI is greater than $100,000 ($200,000 for MFJ)
- Deduction of up to $12,500 ($25,000 for MFJ) allowed for “qualified overtime compensation” under the Fair Labor Standards Act, which is to be included on individuals W-2s; includes a phaseout that reduces the deduction by $100 for each $1,000 by which modified AGI is greater than $150,000 ($300,000 MFJ)
- Temporary increase to the State & Local Tax (SALT) Deduction cap to $40,000, from the previous $10,000, for 2025; indexed for inflation until reversion to $10,000 in 2029, with a phaseout reduced by 30% of excess modified AGI greater than $500,000 but cannot be reduced below $10,000
Other relevant individual provisions that pertain to individuals include mortgage interest deduction, casualty loss deduction, Pease limitations, child tax credits, 529 plans, and Trump accounts. See other blog posts for more details.
Tax Provisions Impacting Businesses
The OBBBA aslo included permanent and temporary changes to key business provisions.
Section 174 Research & Experimental (R&E) Expenditures
- Permanent immediate expensing of Section 174 expenditures paid or incurred after December 31, 2024; foreign R&E expenditures must still be amortized over 15 years
- Retroactive treatment of previously amortized R&E expenditures, allowing small businesses, or those with average annual gross receipts of $31m or less, to apply the deduction to tax years beginning after December 31, 2021
- This change allows any small business taxpayer with domestic R&E expenditures incurred after 2021, and before 2025, to deduct any remaining expenses ratably over a one-year or two-year period under Rev. Proc. 2025-28
Qualified Production Property
- Addition of a new asset class, “Qualified Production Property,” or the portion of nonresident real property used as an integral part of a “qualified production activity,” defined as manufacturing, production (limited to agricultural and chemical), or refining of qualified products resulting in substantial transformation of the property,
- The property must be constructed after January 19, 2025 but before January 1, 2029, and placed into service before 2031
- The property must be placed in service in the United States, and the original use must begin with the Taxpayer
- Provision is generally applicable to new construction, but special rule allows existing property to qualify
- Bonus depreciation cannot be claimed by taxpayers who own the facility and lease to manufacturers
Section 163(j) – Business Interest Expense Limitation
- Restoration of the use of EBITDA for calculation of Section 163(j)
- Deduction limited to 30% of Adjusted Taxable Income
- Effective for tax years beginning after December 31, 2024
Other Relevant Business Provisions
- Section 199A Qualified Business Income (QBI) deduction
- The 20% deduction was made permanent for tax years after December 31, 2025
- Section 1202 Qualified Small Business Stock Exclusions
- Changes to the tiered gain exclusion for qualified small business stock acquired after July 4, 2025 – starting at 50% exclusion of gain for stock held for three years, increasing to 75% for stock held for four years, and finally 100% for stock held for 5 years or more, with a maximum gain exclusion equal to the greater of $15 million or ten times basis
- Businesses must pass the $75 million in gross assets test in order to qualify
If you have any questions about the changes noted, please contact your GYF tax professional. Be sure to revisit our blog for future updates as new guidance is released and issued.
Click here to access copies of the slides, links to resources and a video of the presentation
About GYF’s CPE Day: The firm presents this program each year to bring together clients, friends of the firm, and other professionals who are interested in gaining knowledge. The day is always filled with interesting presentations and great networking opportunities, and is generally attended by 300+ guests. If you have any questions about the material covered, or other issues we did not have time to address, please reach out to your GYF Executive or contact the office at 412-338-9300. We look forward to seeing everyone next year!
