The “One Big Beautiful Bill Act” (OBBBA) was passed recently, making permanent many of the provisions of the 2017 Tax Cuts and Jobs Act (TCJA) and introducing several new, permanent and temporary, measures.
Below are the key provisions of the new tax bill that affect individuals and business owners and need to be considered for tax planning
FOR HIGH-NET-WORTH INDIVIDUALS
Tax brackets: The seven-bracket structure, including the 37% top marginal rate of the TCJA Individual Tax Rates has been permanently retained.
Standard Deduction Amounts: The increased standard deduction amounts (e.g., $15,750 for single filers, $31,500 for married filing jointly (MFJ) for 2025) have been made permanent and will continue to be inflation-indexed.
Alternative Minimum Tax: The bill permanently extends higher individual AMT exemptions but lowers phase-out thresholds to 2018 levels ($500,000 single/$1,000,000 MFJ) and increases the phase-out rate, potentially impacting more upper-middle-income taxpayers.
Permanent Repeal of Personal Exemption Deduction: The personal exemption deduction remains permanently repealed.
Increased State and Local Tax (SALT) Deduction Cap: The SALT deduction cap has been temporarily increased to $40,000 for tax years 2025-2029. This increased cap is subject to a phase-down for MAGI exceeding $500,000 (Single, MFJ), but not below $10,000. The cap and income thresholds are indexed at 1% annually through 2029, reverting to $10,000 in 2030.
Charitable Deductions for Non-Itemizers: A deduction for cash contributions of up to $1,000 (single) / $2,000 (joint) has been permanently reinstated for non-itemizers, effective for tax years beginning after December 31, 2025.
New 0.5% Floor on Charitable Deductions for Itemizers: Beginning in tax year 2026, itemized charitable deductions are allowed only to the extent they exceed 0.5% of the taxpayer’s contribution base (Usually Adjusted Gross Income).
Modified Limitation on Itemized Deductions (“Pease” Replacement): For taxpayers in the top marginal tax bracket, a new limitation effectively caps the value of all itemized deductions at a 35% effective rate. This replaces the former “Pease” limitation, which was suspended by the TCJA and scheduled to return.
Expansion of Qualified Small Business Stock (QSBS) Exclusion: A tiered capital gain exclusion now applies for QSBS issued on or after July 5, 2025: 50% for stock held at least three years, 75% for four years, and 100% for five years or more. The gross asset threshold for QSBS has also been raised to $75 million, with inflation adjustments beginning in 2027.
Estate and Gift Tax Exemption: The estate and gift tax exemption has been permanently set to $15 million per person/$30 million for MFJ (indexed for inflation), preventing a scheduled reduction.
Opportunity Zone (OZ) Program: The program has been permanently extended, including the full exclusion of capital gain on OZ investments held for 10 years. New rules include a rolling, 5-year deferral period for prior gain invested in an opportunity fund (beginning 2027) and redrawing of OZ census tracts every 10 years with new low-income definitions. Additional incentives are provided for rural Opportunity Zones.
Permanent Mortgage Interest Deduction Rules: The $750,000 limit on mortgage debt eligible for interest deduction and the disallowance of interest on home equity lines of credit (with exceptions) have been made permanent. Deductibility of mortgage insurance premiums has been made permanent starting in 2026
Expansion of 529 Education Savings Accounts: Use of 529 accounts has been broadened to include expenses related to acquiring and maintaining professional credentials (e.g., real estate licenses, certifications) and career training. Additionally, up to $20,000 per year of tuition and related expenses for K-12 schools can be treated as qualified education expenses starting in 2026.
New “Trump Accounts” for Newborns: A new savings vehicle has been established for newborns between January 1, 2025, and December 31, 2028, allowing annual contributions up to $5,000 with $1,000 in federal seed money. These accounts grow tax-free, cannot be withdrawn until the beneficiary turns 18, then convert to traditional IRAs.
Clean Energy Tax Credits: Many clean energy tax credits enacted under the Inflation Reduction Act (IRA) have been curtailed, phased out, or repealed. This includes most clean vehicle credits (electric vehicles), residential clean energy and energy efficiency credits, and the clean hydrogen production credit.
OTHER PROVISIONS FOR INDIVIDUALS
Increased Child Tax Credit (CTC): The CTC has been permanently increased to $2,200 per qualifying child. A Social Security Number (SSN) is now explicitly required for both the qualifying child and the claiming parent/guardian. Like before, a portion of the credit remains refundable.
Qualified Tip Income: For tax years 2025-2028, a deduction for up to $25,000 of qualified tip income has been introduced. This above the line deduction phases out for Modified Adjusted Gross Income (MAGI) above $150,000 ($300,000 MFJ).
Qualified Overtime Compensation: For tax years 2025-2028, an above-the-line deduction for up to $12,500 ($25,000 MFJ) of qualified overtime compensation has been introduced. This deduction phases out for MAGI above $150,000 ($300,000 MFJ).
Temporary Additional Tax Deduction for Seniors: For tax years 2025-2028, an additional $6,000 standard deduction is now available for individuals aged 65 and older, subject to income phase-outs at MAGI $75,000 single/$150,000 MFJ.
Temporary Deduction for Auto Loan Interest: For tax years 2025-2028, an above-the-line deduction of up to $10,000 is permitted for interest paid on loans for passenger vehicles whose final assembly occurred in the U.S. This deduction phases out for MAGI over $100,000 ($200,000 MFJ). Certain vehicles (e.g., RVs, campers) are explicitly excluded.
BUSINESS/SELF-EMPLOYED TAX PROVISIONS
Permanent Section 199A (QBI) Deduction: The 20% deduction for qualified business income from pass-through entities has been made permanent. The income-based phase-out thresholds for the deduction, including for SSTBs, are expanded (e.g., from $100,000 to $150,000 for MFJ). A new minimum deduction of $400 (inflation-indexed) is introduced for taxpayers with $1,000+ of QBI.
Increased Section 179 Deduction Cap: The maximum Section 179 expensing limit is increased to $2.5 million, with a phase-out threshold of $4 million, both indexed for inflation.
Permanent 100% Bonus Depreciation: 100% bonus depreciation is permanently reinstated for qualified property acquired and placed in service on or after January 19, 2025. This eliminates the previously scheduled phase-down.
Immediate Expensing of Domestic R&D Costs (Section 174A): Taxpayers may now immediately deduct 100% of qualified domestic research and experimentation (R&E) expenses incurred in tax years beginning after December 31, 2024.
Preservation of Pass-Through Entity Tax (PTET) Deductibility: The OBBBA does not include provisions restricting the federal deductibility of state and local taxes paid at the entity level under elective PTET regimes, preserving this workaround to the individual SALT cap.