Adam Cox – Tax Senior @acoxlouisplung.com
Manika Steele – Tax Senior @[email protected]
Overview
The One Big Beautiful Bill Act (OBBBA) was signed into law by President Trump on July 4, 2025. The Act has significant implications for both individual and business taxation, addressing many federal tax provisions enacted by the 2017 Tax Cuts and Jobs Act (TCJA), as well as enacting new laws.
Individual Tax Provisions
From the perspective of individual income tax, the main provisions of OBBBA fall into two broad categories:
- TCJA provisions
- New deductions
TCJA Provisions
The Act makes permanent several provisions enacted under the TCJA. These will come into effect December 31, 2025. The most prominent of these include:
- Lowered individual income tax rates with inflation adjustment applied to the lowest three brackets
- Inflation indexed increased standard deduction
- Child Tax Credit permanently increased
- The individual State and Local Tax (SALT) deduction increased to $40,000
The Other Dependent Credit, Qualified Business Income deduction, and mortgage interest deduction are other provisions that have been permanently extended.
New Deductions
OBBBA lays out new above-the-line tax deductions that will reduce Adjusted Gross Income for Individuals. These adjustments are set to phase out by 2028, and include:
- Exclusion of tip income and overtime income (subject to limits)
- Increased standard deduction for individuals aged 65 and older
- Deduction for US-made car interest payments
Charitable Contributions
Charitable contributions in cash up to $2,000 (Married Filing Jointly) can be deducted by non-itemizers. This provision is permanent, starting after 2025.
Business Tax Provisions
While not as extensive as the individual tax changes, the business taxation provisions of OBBBA are still significant. The following items are a few of the biggest needle movers enacted by this legislation:
Bonus Depreciation:
The TCJA era provision that allowed for a 100% depreciation deduction of most fixed assets placed in service was permanently extended. This 100% deduction had begun phasing out at the end of the 2022 tax year, decreasing by 20% each year until expiring at the end of 2026.
Research & Development (R&D):
All expenses incurred domestically that relate to research and development may now be fully expensed in the year they are incurred, thereby reversing the rules brought forth by Section 174 in 2023 calling for such costs to be amortized over a 5-year period. Any taxpayers that had previously amortized their R&D expenses under Section 174 are now eligible to accelerate the amortization expense taken, either on their 2025 tax return, or retroactively, dating back as far as their 2022 tax returns. Note that this 100% deduction does not apply to R&D costs incurred outside the US – those still must be amortized over 15 years under the provisions of Section 174.
Section 179 Depreciation:
As an alternative – or in addition to – bonus depreciation, business taxpayers can elect Section 179 depreciation, so long as the total depreciation expense is under $2.5 million. This deduction limit is phased out if the cost of eligible property placed in service exceeds $4 million. Both figures have increased under the new legislation.
In addition to these items, the limitation on the deductibility of excess business losses on individual returns has been made permanent. Previously set to expire at the end of 2028, this allows individual taxpayers to deduct the full amount of losses generated by their businesses over time as an offset to income, rather than having them be treated as net operating losses (NOLs). NOLs come with expiration dates and other income limits.
Finally, the new legislation also removes most clean energy tax incentives that had been in place for businesses.
The OBBBA is a substantial piece of tax legislation. Here we have covered some of the highlights. There is more to follow with respect to tax planning advice.
Questions? We’re Here to Help
If you have additional questions about this new law or how it may impact your personal or business taxes, please reach out to your Louis Plung & Company Tax Advisor or email [email protected].
