After passing Congress, the “One Big Beautiful Bill Act” was signed into law by the President. This
sweeping legislation fundamentally reshapes the U.S. tax code, making immediate and long-term
changes for individuals and businesses.
WHY WAS THIS BILL ENACTED?
Many of the signature provisions from the Tax Cuts and Jobs Act of 2017 (TCJA)—including lower individual tax rates, a higher standard deduction, and the cap on state and local tax deductions—were set to expire at the end of 2025. Without this new legislation, tax rules would have reverted to their pre-2017 status, resulting in a significant tax hike for many Americans.
The new law makes most of those expiring provisions permanent while also introducing several new tax policies. Here’s a breakdown of what you need to know.
KEY CHANGES FOR INDIVIDUALS AND FAMILIES
The new law brings significant and permanent changes designed to lower the tax burden for American families:
- Lower Individual Tax Rates and Larger Standard Deduction: The lower individual tax rates and the increased standard deduction, which were set to expire, are now permanent, providing long-term certainty for taxpayers.
- Enhanced Child Tax Credit: The Child Tax Credit has been increased to $2,200 per child and will be adjusted annually for inflation, offering greater support for families.
- New Deduction for Seniors: Seniors aged 65 and older can now claim a new $6,000 deduction through 2028, subject to income limitations.
- Temporary Deductions: From 2025 to 2028, new deductions for tips, overtime, and car loan interest will be available to provide temporary relief.
- “Trump Accounts” for Minors: The law introduces new “Trump Accounts,” allowing annual savings of up to $5,000 for minors, with a federal pilot program providing initial funding for newborns.
- Green Energy Credits Repealed: Clean vehicle credits for new and used vehicles expire on September 30, 2025; and the energy efficient home improvements credit and the residential clean energy credit for property placed in service after December 31, 2025.
- Charitable Contributions: Beginning in 2026, non-itemizing taxpayers may claim a below-the-line deduction for charitable contributions of $1,000 ($2,000 for married filing jointly). For itemizing taxpayers, beginning in 2026, a 0.5% floor on the deduction of charitable contributions will be in place, meaning that the deduction will be reduced by 0.5% of the taxpayers adjusted gross income.
KEY CHANGES FOR BUSINESSES
The legislation includes several provisions aimed at boosting business investment and growth:
- 100% Bonus Depreciation: 100% bonus depreciation is retroactively reinstated for qualifying assets purchased after January 19, 2025, allowing businesses to immediately write off the full cost of new investments.
- Increased Section 179 Expensing: The Section 179 expensing limit has been raised to $2.5 million, with the phaseout threshold increased to $4 million, enabling small and medium-sized businesses to deduct more of their capital expenditures.
- Favorable R&D and Interest Rules: The law implements more favorable rules for the expensing of research and development (R&D) costs and eases limitations on business interest deductions.
- Expanded QSBS Exclusions: The Qualified Small Business Stock (QSBS) exclusion has been expanded to include partial exclusions for holding periods of 3–5 years and increased thresholds, encouraging investment in small businesses.
INVESTMENT AND COMMUNITY INCENTIVES
The act also includes provisions to encourage investment in communities and provide relief from state and local taxes:
- Permanent Qualified Opportunity Zone (QOZ) Program: The QOZ program is now permanent, with updated deferral and exclusion rules for investments made after 2026, promoting long-term investment in designated low-income communities.
- Increased SALT Deduction Cap: The State and Local Tax (SALT) deduction cap is temporarily increased to $40,000 for 2025 subject to income limits, before gradually phasing down in subsequent years.
REPORTING AND COMPLIANCE
Finally, the law simplifies reporting requirements for businesses and individuals:
- Increased 1099 Filing Threshold: The filing threshold for Form 1099-MISC and Form 1099-NEC has been increased to $2,000, reducing the reporting burden for small payments.
- Reinstated Third-Party Payment Threshold: The $20,000/200 transaction threshold for third-party payment networks has been reinstated, simplifying tax compliance for online sellers and gig economy workers.
