The One Big Beautiful Bill Act is Now Law

On July 4, 2025, President Trump signed the One Big Beautiful Bill Act into law, following its approval by the Senate on July 1 and the House on July 3. The legislation’s passage capped a whirlwind of Congressional activity, marked by prolonged debates, unprecedented voting marathons, and numerous negotiations to secure passage in a narrowly divided Congress.

Observation. To comply with Senate reconciliation requirements, the Act’s official title was altered, removing the “One Big Beautiful Bill” designation, a practice seen in prior reconciliation measures like the 2022 Inflation Reduction Act and the 2017 Tax Cuts and Jobs Act.

The Act introduces extensive tax reforms, permanently extending or adjusting many tax provisions nearing expiration, incorporating new tax measures pledged by President Trump in his 2024 campaign, repealing or revising most green energy tax credits, and enacting various other changes impacting individuals and businesses. Beyond tax policy, the Act includes non-tax provisions that sparked dissent within the GOP majority, though opponents ultimately supported the bill to ensure its passage.

Many provisions of the 2017 Tax Cuts and Jobs Act (TCJA) carried expiration dates to meet budgetary constraints. These included reduced individual tax rates, an enhanced standard deduction, the elimination of personal exemptions, a $10,000 cap on state and local tax (SALT) deductions, revisions to the alternative minimum tax, and other rules, all set to lapse after 2025. Without new legislation, the tax system would have largely reverted to 2017 rules.

During the 2024 campaign, Trump and numerous GOP legislators advocated for permanently codifying these expiring TCJA provisions. The Act achieves this goal but at a substantial cost, estimated by some at $5 trillion over a decade. This expense is partially offset by reductions in non-tax government spending and the elimination of many green energy tax incentives from the Inflation Reduction Act.

Observation. This summary does not aim to detail every provision in the Act’s roughly 400-page tax section but focuses on its primary components. Stay tuned to our website for additional posts focusing on specific sections of the Act in greater detail.

EXTENDED INDIVIDUAL PROVISIONS

Individual Extenders

Several TCJA provisions for individuals, scheduled to expire after 2025, are made permanent under the Act, with some adjustments. These include:
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Tax rates of 10, 12, 22, 24, 32, 35, and 37 percent, effective since 2018;
Removal of personal exemptions;
Elevated AMT exemption and phase-out thresholds;
Reduced cap on mortgage interest deductions;
Restrictions on casualty loss deductions;
Elimination of miscellaneous itemized deductions; and
Permission for rollovers from qualified tuition programs to ABLE accounts.

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The Act permanently allows mortgage insurance premiums to be deducted as qualified residence interest and permits unreimbursed educator expenses as a miscellaneous itemized deduction. It also resets the AMT exemption phase-out threshold for joint filers to 2018 levels, disregarding the prior seven years of inflation adjustments.
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Observation. From 2008 to 2021, homeowners could deduct mortgage insurance premiums as qualified residence interest. Current law allows teachers a $300 above-the-line deduction for classroom expenses in 2024 and 2025, but the Act removes this cap and expands its scope.
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The Act permanently eliminates personal exemptions but introduces a $6,000 deduction for individuals aged 65 and older, effective from 2025 through 2028. This deduction phases out for those with modified adjusted gross income above $75,000 (or $150,000 for joint filers).
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Observation. The House version of the bill proposed a $4,000 expansion of the standard deduction for seniors, but the final Act opted for a higher, temporary deduction.
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Standard Deduction

The TCJA significantly increased the standard deduction for tax years after 2017. For 2025, prior to the Act, inflation-adjusted amounts were $30,000 for joint filers, $22,500 for heads of household, and $15,000 for single filers and married individuals filing separately. These elevated amounts were set to expire post-2025.

The Act raises the 2025 standard deduction to $31,500 for joint filers, $23,625 for heads of household, and $15,750 for single filers and married individuals filing separately, with future inflation adjustments.

Observation. The House-passed bill proposed temporary increases of $2,000, $1,500, and $1,000 for 2025–2028. The Senate initially suggested identical increases but made them permanent with inflation adjustments. The final, lower amounts reflect a compromise to reduce costs.

SALT Deduction

The TCJA’s $10,000 cap on SALT deductions, a contentious provision, prompted immediate pushback from lawmakers in high-tax states, forming the “SALT Caucus” to advocate for its revision or repeal.

The Act raises the SALT cap to $40,000 for 2025, increasing by 1% annually through 2029, before reverting to $10,000 in 2030. The cap decreases by 30% of the amount by which a taxpayer’s modified adjusted gross income exceeds $500,000 (adjusted 1% yearly through 2029).

Observation. The $40,000 cap was a hard-fought compromise. SALT Caucus members expressed dissatisfaction but ultimately supported the House bill. The Senate initially resisted raising the cap but aligned with the House’s proposal after negotiations.

Child Tax Credit
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The TCJA raised the child tax credit from $1,000 to $2,000 for 2018–2025, with phase-out thresholds increased to $400,000 for joint filers and $200,000 for others.
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The Act permanently sets the credit at $2,200, adjusted for inflation, while maintaining the $1,400 refundable portion (adjusted to $1,700 for 2025). Claimants, their spouses (if married), and qualifying children must provide Social Security numbers.
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Estate Taxes
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The TCJA doubled the estate tax exclusion for decedents dying through 2025 (adjusted to $13.99 million for 2025), which would have reverted to 2017 levels without action. The Act raises the exclusion to $15 million for 2026, with ongoing inflation adjustments.
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Observation. The $15 million figure approximates what inflation would have yielded for 2026 under the TCJA.
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NEW INDIVIDUAL PROVISIONS
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No Tax on Tips
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A key 2024 campaign promise, President Trump proposed exempting tip income from taxation, which became taxable in the 1980s under Reagan-era laws.
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The Act allows a deduction for tip income, up to $25,000, without requiring itemization, but claimants must provide a Social Security number. The deduction phases out for modified adjusted gross income above $150,000 ($300,000 for joint filers) and expires after 2028. It also extends the employer credit for Social Security taxes on tips to the beauty service industry, previously limited to food and beverage.
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No Tax on Overtime
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Trump’s campaign also proposed tax-free overtime pay. The Act permits a deduction for overtime compensation, as defined by the Fair Labor Standards Act of 1938, up to $12,500 ($25,000 for joint filers), without itemization. A Social Security number is required, and the deduction phases out at $150,000/$300,000 income levels, expiring after 2028.
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Observation. The Act leaves detailed implementation rules for this deduction to Treasury Regulations.
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Social Security Income
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Despite Trump’s campaign pledge to exempt Social Security income from tax, neither the Senate nor House versions included such a provision.
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Observation. The senior deduction may serve as an alternative to achieve similar relief.
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Itemized Deduction Limitation
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Before the TCJA, high-income taxpayers faced a phase-out of itemized deductions (the “Pease” limitation). The Act reinstates this limit for those in the 37% tax bracket, effective post-2025.
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Automobile Loan Interest
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Previously, auto loan interest was nondeductible personal interest. The Act allows a deduction of up to $10,000 for interest on auto loans for vehicles purchased after 2024 (but only those assembled in the U.S.), available to itemizers and non-itemizers, through 2028.
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Trump Accounts
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The Act establishes tax-advantaged “Trump Accounts” for newborns, seeded with $1,000 and governed by rules similar to individual retirement accounts.
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Additional Provisions
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The Act also provides:
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A tax credit for donations to scholarship organizations;
Expanded 529 plan eligibility for elementary, secondary, and homeschool expenses; and
A revived COVID-era charitable contribution deduction for non-itemizers.

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BUSINESS PROVISIONS
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Bonus Depreciation
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The TCJA allowed 100% expensing of certain business property through 2022, decreasing by 20% annually to 0% by 2027 (40% in 2025). The Act permanently reinstates 100% bonus depreciation for property acquired after January 19, 2025.
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Research and Experimental Expenditures
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Previously, research and experimental costs had to be amortized, though a deduction was available before 2022. The Act permanently allows deductions for domestic research costs incurred after 2024, with an option to deduct or amortize. Small businesses with average annual gross receipts of $31 million or less can apply the deduction retroactively to 2022.
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Qualified Business Income Deduction

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The TCJA’s Code Sec. 199A deduction for qualified business income, set to expire after 2025, is made permanent under the Act, with expanded eligibility criteria.
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Additional Provisions

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The Act includes:
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Higher Section 179 deduction limits post-2024;
An exclusion for interest on loans secured by rural or agricultural property; and
Enhancements to the low-income housing credit.

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International Extensions

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The Act permanently retains TCJA international provisions, including:
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Deductions for foreign-derived intangible income (FDII) and global intangible low-taxed income (GILTI); and
The base erosion minimum tax.

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Post-2025, the FDII rate adjusts to 33.34% (from 37.5%) and the GILTI rate to 40% (from 50%).
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Observation. These rates were set to decrease to 21.875% and 37.5% under the TCJA, making this a tax increase for 2026 onward.
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The base erosion minimum tax rate rises to 10.5% from 10% post-2025.
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Observation. This is lower than the TCJA’s planned 12.5% rate, representing a tax reduction.
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The Act also revises rules for “tested” controlled foreign corporation income and foreign tax credits.
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GREEN ENERGY TERMINATIONS

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The Act eliminates most tax credits from the 2022 Inflation Reduction Act to fund its provisions, a major point of contention. The House favored phasing out credits for clean energy producers with existing investments by 2026 or later, while the Senate initially pushed for immediate or 2025 terminations. The final Act adopts a longer phase-out for producers, allowing credits for construction starting in 2026.

Consumer-side green energy credits, terminated generally after 2025, include:
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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; and
New energy efficient home credit.

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IRS PROCEDURAL PROVISIONS

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The Act mandates the termination of the IRS Direct File program within 30 days, allocating funds to explore a public-private “free file” replacement. It imposes $1,000 penalties per instance for fraudulent promoters of employee retention credit schemes, with no cumulative cap.

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Observation. The House bill initially proposed higher penalties for ERTC promoters, but a June 11 rescissions bill removed this provision. The impact of that rescission on the final Act remains unclear.

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(This is Blog Post #1766)

About the Author: Roger Rossmeisl, CPA

Roger Rossmeisl, CPA, brings over 40 years of experience helping small business owners who have outgrown their current CPA firm and larger companies seeking responsive, cost-effective solutions they’re not receiving from their current CPA Firm. He goes beyond tax compliance, explaining the “why” behind the numbers and their impact on cash flow and other decision making. An avid follower of federal monetary policy, Roger adds insight into how government actions affect business and wealth. With a niche in franchised new vehicle dealerships, he has served over 100 franchise stores and groups through decades of evolving IRS rules and legislation.