The One, Big, Beautiful Bill Act Is Now Law:

Key Tax Changes for Individuals and Businesses

On July 4, President Trump signed into law the far-reaching legislation known as the One, Big, Beautiful Bill Act (OBBBA). As promised, the tax portion of the 870-page bill extends many of the provisions of the Tax Cuts and Jobs Act (TCJA), the sweeping tax legislation enacted during the first Trump administration. It also incorporates several of President Trump’s campaign pledges, although many on a temporary basis, and pulls back many clean-energy-related tax breaks.

While the OBBBA makes permanent numerous tax breaks, it also eliminates several others, including some that had been scheduled to resume after 2025. Here’s a rundown of some of the key changes affecting individual and business taxpayers. Except where noted, these changes are effective for tax years beginning in 2025.

BUSINESS TAX PROVISIONS

Accelerated depreciation. Makes permanent 100% bonus depreciation for the cost of qualified new and used assets acquired and placed into service after January 19, 2025. Under the TCJA, the deduction was limited to 40% for 2025, 20% in 2026 and 0% in 2027. In addition, the OBBBA increases the Sec. 179 expensing limit to $2.5 million and the expensing phaseout threshold to $4 million for 2025, with each amount adjusted annually for inflation.

Qualified production property deduction. The OBBBA introduces a 100% deduction for the cost of “qualified production property” (generally, nonresidential real property used in manufacturing) placed into service after July 4, 2025, and before 2031.

Section 199A qualified business income (QBI) deduction. The OBBBA makes the QBI deduction permanent. It also expands the deduction limit phase-in ranges for specified services, trades or businesses, and other entities subject to the wage and investment limitation. For these businesses, the deduction is reduced when taxable income falls within the phase-in range and is eliminated when taxable income exceeds the range. The new law expands the phase-in thresholds from $50,000 to $75,000 for individual filers and from $100,000 to $150,000 for joint filers.

The OBBBA also adds an inflation-adjusted minimum QBI deduction of $400, beginning in 2025. It’s available for taxpayers with at least $1,000 of QBI from one or more active businesses in which they materially participate.

Domestic research and experimental expenditures. The OBBBA permanently restores the immediate expensing of domestic research and experimental (R&E) expenditures under Section 174A for tax years beginning after December 31, 2024. This change reverses the mandatory five-year amortization rule that had taken effect in 2022. Taxpayers may now elect either to deduct these expenses in the year incurred or to capitalize and amortize them over a period of at least 60 months. Importantly, this treatment is limited to domestic R&E expenses; foreign R&E expenditures must still be amortized over a 15-year period. For small businesses with average annual gross receipts of $31 million or less, the legislation allows for retroactive application of the immediate expensing rule to tax years beginning after December 31, 2021.

Pass-through entity “excess” business losses. The Inflation Reduction Act, through 2028, limits deductions for current-year business losses incurred by noncorporate taxpayers. Such losses generally can offset a taxpayer’s income from other sources, such as salary, interest, dividends and capital gains, only up to an annual limit. “Excess” losses are carried forward to later tax years and can then be deducted under net operating loss rules. Under the OBBBA, the excess business loss limitation under section 461(I) has been made permanent.

International Provisions. Prior to 2017, the U.S. had the third-highest effective corporate tax rate of G-20 countries, which led many companies to shift profits overseas to countries with lower tax rates. The TCJA implemented three new international frameworks to combat erosion of the U.S. tax base and ensure multinational corporations pay their fair share of taxes: the global intangible low-taxed income (GILTI) tax, foreign-derived intangible income (FDII) tax, and the base erosion anti-abuse tax (BEAT).

The OBBBA makes permanent the FDII (renamed Foreign-Derived Deduction Eligible Income, “FDDEI”) and GILTI (renamed Net CFC Tested Income, “NCTI”) deductions. The deductions for FDDEI and NCTI have been reduced to 33.34% and 40% respectfully. The changes to the calculations of FDDEI and NCTI result in effective tax rates of  14%. It also makes permanent the minimum BEAT, increasing the tax rate to 10.5%. These changes take effect beginning in 2026.

Interest Deduction Limitation. For taxable years beginning after December 31, 2024, the OBBBA permanently reinstates the interest deduction limitation using a calculation that excludes depreciation, amortization, or depletion.

Corporate Charitable Contributions. The OBBBA imposes new limitations on corporate charitable contribution deductions. Beginning in 2025, corporate taxpayers are subject to a minimum 1% floor for charitable deductions, meaning only contributions exceeding 1% of taxable income will be deductible. At the same time, the maximum deduction remains capped at 10% of taxable income, preserving the traditional upper limit.

This change effectively narrows the window for deductible giving by requiring corporations to exceed a baseline threshold before any charitable contribution can reduce taxable income. Businesses that make regular charitable contributions may need to reevaluate their giving strategies and consider timing and income management to optimize deductibility.

Energy. The OBBBA rolls back several clean energy tax incentives originally expanded under the Inflation Reduction Act. The Section 45L Energy Efficient Home Credit is terminated for residential homes acquired after June 30, 2026.

The OBBBA significantly alters the structure of the Section 48 Investment Tax Credit (commercial solar and wind projects), including the repeal of many enhancements introduced under the Inflation Reduction Act. However, transition relief is available. Projects that begin construction before July 5, 2026, and are placed in service before December 31, 2027, still qualify under the prior credit framework.

Section 30C Alternative Fuel Refueling Property Credit is terminated for property placed in service after June 30, 2026. These changes may materially impact businesses planning energy-related investments in 2025 and beyond. Projects already under construction may qualify under transition rules, but future investments should be carefully re-evaluated to account for diminished tax incentives.

Section 179D Deduction for Energy-Efficient Commercial Buildings. The OBBBA repeals the Inflation Reduction Act enhancements to the Section 179D deduction for energy-efficient commercial buildings but allows the deduction to remain available for property for which construction begins  before June 30, 2026. After that date, the deduction is eliminated.

Businesses considering qualifying energy-efficient construction or retrofits should ensure projects are completed and placed in service before the mid-2026 cutoff to take advantage of the remaining benefit.

Qualified Small Business Stock (QSBS). The OBBBA expands and permanently codifies the exclusion of gain from the sale of Qualified Small Business Stock under Section 1202. For QSBS acquired after July 4, 2025, the exclusion is tiered based on holding period: taxpayers may exclude 50% of gain for stock held at least three years, 75% for four years, and 100% for five years or more. This represents a significant expansion from the prior all-or-nothing five-year rule.

In addition, for QSBS acquired after July 4, 2025, the per-issuer cumulative gain exclusion cap is increased from $10 million to $15 million, and the aggregate gross assets test is raised from $50 million to $75 million, expanding eligibility for companies and investors. These changes are intended to encourage longer-term investment in startups and small businesses while providing more flexibility in liquidity planning.

Employer tax provisions. The new law makes permanent the exclusion from gross income (for employees) and from wages for employment tax purposes (for employers) for employer payments of student loans. It also provides that the maximum annual exclusion of $5,250 be adjusted annually for inflation after 2026.

In addition, the OBBBA permanently raises the maximum employer-provided childcare credit from 25% to 40% of qualified expenses, up to $500,000 per year. (For eligible small businesses, these amounts are 50% and up to $600,000, respectively.) The maximum dollar amount will be adjusted annually for inflation after 2026.

The OBBBA also makes permanent the employer credit for paid family and medical leave (FML) after 2025. Employers will also be allowed to claim the credit for a portion of premiums for paid FML insurance.

Employee Retention Tax Credit (ERTC). The OBBBA bars the IRS from issuing refunds for ERTC credits or refunds unless the claim was filed before February 1, 2024. The OBBBA also gives the IRS six years from the later of the date of filing or claim for refund is made to challenge ERTC claims

Qualified Opportunity Zones. The TCJA established the Quality Opportunity Zone (QOZ) program to encourage investment in distressed areas. The program generally allows taxpayers to defer, reduce or exclude unrealized capital gains reinvested in qualified opportunity funds (QOFs) that invest in designated distressed communities. The OBBBA creates a permanent QOZ policy that builds off the original program.

It retains the existing benefits and provides for investors to receive incremental reductions in gain starting on their investment’s first anniversary. Taxpayers investing in a QOF on or after January 1, 2027 that hold the investment for at least five years can receive a 10% step up in basis. The OBBBA also introduces a new type of QOF for rural areas. Investments in such funds will receive a 30% step-up in basis.

INDIVIDUAL TAX PROVISIONS

Individual income tax rates. The OBBBA permanently extends the TCJA individual income tax rates, including the top marginal rate of 37%. Beginning in 2025, the tax brackets will be indexed using chained CPI, which provides a more favorable inflation adjustment than prior indexing rules

Limitation on itemized deductions. The OBBBA permanently removes the overall limitation on itemized deductions (known as the Pease limitation) but replaces it with a new limitation that effectively caps the benefit of an itemized deduction at 35% (e.g., this limitation applies only if a taxpayer’s highest federal marginal income tax rate exceeds 35%).

Standard deduction. Under the OBBBA, the TCJA’s larger standard deduction is now permanent ($31,500 in 2025 for married filing joint taxpayers and $15,750 for most other filers, both up slightly from 2024).

The OBBBA also creates a new bonus deduction for 2025-2028 of up to $6,000 for taxpayers age 65 or older, subject to phase outs starting at $75,000 adjusted gross income for single filers ($150,000 for joint filers). The deduction is completely phased out at adjusted gross income levels of $175,000 for single filers and $250,000 for joint filers.

Child Tax Credit (CTC). The OBBBA permanently increases the Child Tax Credit (CTC) to $2,200 per qualifying child, effective for tax years beginning after December 31, 2024. The credit amount will be indexed for inflation starting in 2026, ensuring gradual increases over time.

The CTC retains its prior structure, including income phaseouts beginning at $200,000 for single filers and $400,000 for married filing jointly. A valid Social Security number remains a requirement for both the child and the taxpayer in order to claim the credit.

State and local tax (SALT) deduction. The OBBBA temporarily increases the state and local tax (SALT) deduction cap to $40,000 for tax years 2025 through 2029, replacing the $10,000 cap enacted under the TCJA. The increased cap begins to phase out for taxpayers with modified adjusted gross income (MAGI) over $500,000, with the deduction reduced by 30% of MAGI above that threshold, but not below $10,000.

In addition, the $40,000 cap is set to increase by 1% annually during the five-year window (e.g., $40,400 in 2026), after which the cap reverts back to $10,000 in 2030 unless further legislation is passed.

Importantly, these changes did not eliminate the availability of state-level pass through entity (PTE) tax regimes.

Miscellaneous itemized deductions. The OBBBA makes permanent the suspension of a wide range of miscellaneous itemized deductions that were originally paused under the TCJA. These deductions—previously allowed prior to the TCJA only to the extent they exceeded 2% of a taxpayer’s adjusted gross income (AGI)—include investment advisory fees, tax preparation fees, and unreimbursed employee business expenses. Under the new law, these expenses are no longer deductible for any taxpayer, regardless of income level.

Federal gift and estate tax exemption. The OBBBA permanently sets the unified gift and estate tax exemption at $15 million per individual ($30 million for married couples in total), effective for decedents and gifts in 2026 and beyond. This amount will be indexed for inflation going forward. The generation-skipping transfer (GST) tax exemption is also aligned with this $15 million threshold.

Alternative Minimum tax (AMT)  exemption. The OBBBA makes permanent the increased AMT exemption amounts and phaseout thresholds that were originally enacted under the TCJA. For tax year 2025, the exemption amounts are set at $85,700 for single filers and $133,300 for married couples filing jointly. The phaseout begins at $609,350 for single filers and $1,218,700 for joint filers. These thresholds will continue to be indexed for inflation beginning in 2026, providing more stable long-term planning for middle- and upper-income taxpayers.

Mortgage interest. Permanently reduces the mortgage debt limit for the home mortgage interest deduction to $750,000 ($375,000 for separate filers) but includes mortgage insurance premiums as deductible interest.

Energy tax credits. The OBBBA eliminates several clean energy tax credits, generally after 2025, including:

• Termination of Clean Vehicle Credit (for vehicles acquired after 9/30/2025)
• Residential energy-efficient home improvements: 30% credit (up to $1,200 credit previously) for items such as exterior doors, windows, heat pumps, etc. is eliminated for any property placed in service after December 31, 2025.
• Residential clean energy credits (qualified solar electric property, solar water heating property, qualified fuel cell property, qualified battery storage technology. The credit (previously 30%) terminates these credits unless installed on or prior to December 31, 2025.

Wagering Loss Changes. The OBBBA modifies the treatment of gambling losses beginning in 2026, allowing taxpayers to deduct wagering losses only up to 90% of the amount of losses incurred in the tax year, from gambling activities, to the extent of gains from such transactions. This marks a departure from prior law, which permitted a full deduction of gambling losses to the extent of winnings. The 90% limitation applies across all forms of wagering, including casino games, sports betting, and online platforms.

Casualty Loss Deduction. The OBBBA permanently extends the ability of individual taxpayers to claim a personal casualty loss deduction for losses attributable to federally declared disasters. In a notable expansion, the law now allows deductions for losses stemming from state-declared disaster areas as well. This change removes a key limitation from prior law, which only permitted deductions tied to federal declarations.

To claim the deduction, taxpayers must still meet substantiation requirements and demonstrate that the loss was not reimbursed by insurance or other sources.

NEW TAX PROVISIONS

The OBBBA incorporates several tax policy ideas originally proposed during President Trump’s campaign, most of which are temporary and include income-based limits and compliance requirements

No tax on tips. Beginning in 2025, the law provides an above-the-line deduction of up to $25,000 for reported tip income. Taxpayers are not required to itemize to claim the deduction, but a valid Social Security number (SSN) is required. The deduction is available through 2028 and applies only to tip income that is properly reported for federal tax purposes. Social Security and Medicare taxes still apply to all tipped wages. The deduction is subject to phaseouts starting at $150,000 for single filers ($300,000 for married couples filing jointly). The Treasury is expected to issue guidance to clarify employer reporting obligations and verification standards.

No tax on overtime. Similarly, the OBBBA allows a deduction of up to $12,500 annually ($25,000 for married couples filing jointly)  for qualified overtime pay received between 2025 and 2028. Like the tip deduction, this benefit is available to all eligible taxpayers—regardless of whether they itemize— and is also subject to income-based phaseouts starting at $150,000 (single) and $300,000 (joint). Overtime income remains subject to employment taxes.

Car loan interest deduction. The OBBBA permits taxpayers to deduct up to $10,000 in interest paid on car loans from 2025 through 2028, provided the vehicle’s final assembly occurred in the United States. The deduction is available to both itemizers and nonitemizers and is subject to income limitations beginning at $100,000 (single) and $200,000 (joint).

Charitable deduction for nonitemizers. For tax years 2026 and beyond, non-itemizing taxpayers may deduct up to $1,000 (single) or $2,000 (joint) in charitable contributions. This provision aims to expand charitable giving incentives to a broader group of taxpayers, although itemizers will face a new 0.5% adjusted gross income (AGI) floor on deductions.

Trump Accounts. The OBBBA introduces a new tax-advantaged savings vehicle known as the Trump Account. Parents may contribute up to $5,000 annually tax-free, and qualifying children born between January 1, 2025, and January 1, 2029, will receive a $1,000 government-funded contribution. Funds can be accessed starting at age 18, with up to 50% available for higher education, job training, or a first-time home purchase. No additional contributions are allowed after the account holder turns 18.

WHAT’S NEXT???

Now that the OBBBA has been signed into law, the focus shifts to regulatory implementation and IRS guidance, particularly for newly created deductions and savings programs. Taxpayers should assess how these provisions may impact their 2025 planning, and businesses should begin modeling changes to depreciation, R&E expensing, and other incentives.

The OBBBA creates both opportunity and complexity. We’re here to help you understand the changes and build a tax plan that works for your goals. Contact the experienced PP&Co professionals at info@ppandco.com to get started today.