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On July 4, 2025, President Trump signed the One Big Beautiful Bill Act (OBBBA) into law. This major reconciliation package introduces sweeping changes to the federal tax code, impacting individuals, businesses, and international taxpayers.
Below is an overview of the key provisions and initial insights on how they may affect tax planning. We recommend reaching out to our team to discuss how these changes apply to your unique situation. As the IRS releases further regulatory guidance, we will continue to provide timely updates.
Business Tax Provisions
Qualified Business Income (QBI) Deduction
The 20% QBI deduction is now permanent for eligible businesses.
Bonus Depreciation
100% bonus depreciation is restored for qualified property placed in service after January 19, 2025.
Section 179 Expensing
The maximum expense amount increases to $2.5 million, with a phaseout beginning at $4 million. Both amounts are indexed for inflation after 2025.
Research & Experimentation (R&E) Expenses
Domestic R&E expenses paid or incurred in 2025 can be immediately deducted. Foreign R&E expenses must still be amortized over 15 years.
Excess Business Loss Limitation
The limitation on excess business losses is made permanent, along with the current treatment of loss carryforwards.
Business Interest Deduction
Interest expense limitations will now be calculated using EBITDA instead of EBIT, potentially allowing larger deductions.
FDII and GILTI
Beginning in 2026, deduction percentages are reduced to:
- 33.34% for foreign-derived intangible income (FDII)
- 40% for global intangible low-taxed income (GILTI)
Base-Erosion and Anti-Abuse Tax (BEAT)
The BEAT rate increases from 10% to 10.5%.
Form 1099-K Reporting Threshold
The reporting threshold returns to the previous requirement: over $20,000 in payments and more than 200 transactions.
Form 1099-MISC Threshold
Starting in 2026, the threshold for reporting payments for services increases to $2,000 annually (up from $600), and will be indexed for inflation starting in 2027.
Opportunity Zones Renewed
Opportunity Zone provisions are made permanent, with new limitations including a narrower definition of “low-income community,” effective in 2027.
Clean Energy and IRS Credits
Several clean energy credits introduced under the Inflation Reduction Act are eliminated.
Individual Income Tax Provisions
Lower Tax Rates and Brackets Made Permanent
The tax brackets established under the 2017 Tax Cuts and Jobs Act (TCJA) are now permanent. An additional year of inflation adjustment applies to the 12% and 22% rate thresholds.
Standard Deduction Permanence
The nearly doubled standard deduction is made permanent, with indexed amounts effective in 2025:
- Single & MFS: $15,750
- Head of Household: $23,625
- Married Filing Jointly: $31,500
Increased Child Tax Credit
Starting in 2025, the child tax credit increases to $2,200 per child and will be adjusted for inflation annually.
Estate and Gift Tax Exemption Increase
In 2026, the exemption increases to $15 million per individual ($30 million for married couples), indexed for inflation.
SALT Deduction Cap Raised
The state and local tax (SALT) deduction cap increases to $40,000 per household, with a phaseout for taxpayers with MAGI over $500,000. The cap reverts to $10,000 in 2030.
Above-the-Line Charitable Deduction
Beginning in 2026, taxpayers can deduct charitable contributions without itemizing:
- $1,000 for single filers
- $2,000 for joint filers
Tip and Overtime Deductions
From 2025–2028, above-the-line deductions are available for qualified tips and overtime pay in specific occupations, subject to income limits.
Enhanced Deduction for Seniors
A $6,000 deduction is available from 2025–2028 for taxpayers age 65+ with income below $75,000 (or $150,000 for joint filers).
Car Loan Interest Deduction
Up to $10,000 in interest on loans for U.S.-assembled passenger vehicles may be deducted from 2025–2028, subject to income phaseouts.
Moving Expense Deduction Eliminated
The deduction is permanently eliminated, except for active-duty members of the Armed Forces.
Mortgage Interest & Insurance Premiums
The $750,000 cap on mortgage debt and the treatment of mortgage insurance premiums as qualified residence interest are now permanent. The exclusion of home-equity debt from qualified residence interest is also made permanent.
Personal Casualty Loss Deduction
The limitation on personal casualty loss deductions is made permanent and expanded to include losses from state-declared disasters.
Other Deductions and Credits
Provisions made permanent include:
- The adoption credit
- Employer-provided childcare credit
- Paid family and medical leave credit
- Education-related tax benefits
How to Prepare
A phased planning approach can help you respond effectively to the timing and complexity of these changes:
- Short-Term: Focus on provisions taking effect in 2025 and ensure compliance.
- Mid-Term: Prepare for transition rules and opportunities emerging over the next 12–18 months.
- Long-Term: Align tax strategy with evolving policy for sustainable outcomes.
We’re Here to Help
Our team is ready to help you evaluate how the One Big Beautiful Bill Act may impact your tax situation. Reach out to us with any questions or to schedule a consultation.
Disclaimer: This summary is for general informational purposes only and does not constitute tax advice. Please contact your Hansen Hunter & Co. advisor to discuss how these changes may apply to your situation.
