On July 4, 2025, President Trump signed the landmark reconciliation legislation unofficially dubbed the One Big Beautiful Bill Act, enacting sweeping changes for individual taxpayers and businesses alike.
In this article, we’ll break down the most important provisions, explain how they impact American tax filers and small businesses, and outline actionable steps you can take as you prepare for the next tax season.
1. Permanent Extension of TCJA Individual Provisions
Many of the Tax Cuts and Jobs Act (TCJA) individual benefits were set to expire at the end of 2025. The new Act makes these enhancements permanent:
- Income Tax Brackets & Standard Deduction: The lower seven tax brackets (10%, 12%, 22%, 24%, 32%, 35%, 37%) remain in place indefinitely. The standard deduction is boosted for 2025 to $31,500 for joint filers, $23,625 for heads of household, and $15,750 for single filers, with future inflation adjustments .
- Mortgage Insurance & Educator Expenses: Homeowners can continue deducting mortgage insurance premiums as qualified interest. Educators regain a miscellaneous deduction for classroom expenses beyond the existing $300 above-the-line deduction .
- Alternative Minimum Tax (AMT): The Act freezes AMT exemption phase‑out thresholds at 2018 levels for joint filers, effectively preventing gradual tightening .
- Personal Exemptions for Seniors: While personal exemptions remain eliminated, a new $6,000 deduction is available to filers aged 65+ through 2028, phasing out above $75,000 of AGI ($150,000 joint) .
Impact on Filers
Individuals can plan ahead with certainty, knowing that their 2025 tax brackets and standard deductions won’t revert to 2017 levels. Educators benefit from expanded classroom deductions, and senior taxpayers should factor in the new age‑based deduction when estimating liabilities.
2. Temporary Increase in SALT Cap
The longstanding $10,000 limit on state and local tax (SALT) deductions is raised to $40,000 for 2025, with a 1% annual creep through 2029 before reverting in 2030 . However, the cap phases out by 30% of AGI above $500,000 ($1M married couples, indexed).
Impact on High‑Tax States
Filers in California, New York, and New Jersey can deduct more SALT in the near term, but should monitor AGI thresholds. Because the cap declines after 2029, long‑term planning may involve prepaying state taxes or investigating alternative strategies.
3. Enhanced Child and Estate Tax Benefits
- Child Tax Credit: Permanently raises the base credit to $2,200 per child, inflation‑indexed, while the refundable portion stays at $1,400 (projected $1,700 in 2025). Earners must supply SSNs for all claimants .
- Estate Tax Exclusion: Boosts the 2026 exclusion to $15 million (inflation adjusted thereafter), safeguarding estates from tax exposure as inflation creeps higher .
Impact on Families & Estates
Parents gain a larger, permanent child credit. High‑net‑worth families should revisit estate plans with advisors to leverage the increased exclusion and evaluate wealth‑transfer strategies.
4. New Individual Deductions
Several novel deductions act as “tax breaks” without requiring itemization:
These are available non‑itemizers, but require SSNs .
Additionally, “Trump Accounts” seed newborns’ tax‑favored accounts with $1,000 at birth, with rules mirroring IRAs .
Impact on Workers
Hourly workers in hospitality and other tip‑driven industries see tax relief. Those logging overtime hours can deduct a portion of pay, reducing their effective marginal rate. New parents benefit from “Trump Accounts” as a small head start on future savings.
5. Small Business and Corporate Provisions
The Act solidifies many TCJA business breaks:
- 100% Bonus Depreciation: Made permanent for qualified property placed in service after January 19, 2025 .
- R&E Expenses: Restores immediate deduction for domestic research costs (with retroactive elections back to 2022) instead of mandatory amortization .
- Qualified Business Income (QBI) Deduction: Secures the 20% pass‑through deduction under Section 199A indefinitely, with expanded eligibility rules .
- Section 179 & Interest Exclusions: Raises expensing limits and excludes interest on rural/agricultural loans.
- International Provisions: Permanently retains FDII and GILTI deductions, though adjusts rates to 33.34% (FDII) and 40% (GILTI) for 2026+ .
Impact on Small Businesses
With permanent expensing and a reliable QBI deduction, planning capital investments and cash flow becomes far more predictable. R&D‑focused startups can deduct critical lab and product‑development costs immediately, improving early‑stage economics.
6. Green Energy Credit Terminations
As one major offset, the Act phases out numerous consumer‑side clean energy credits after 2025, including:
- Residential clean energy (solar, wind)
- Energy‑efficient home improvements
- Electric vehicle purchases
- Commercial clean vehicle and refueling property
Producers have a slightly longer phase‑out, but most incentives vanish by the end of 2025 .
Impact on Homeowners & Small Producers
If you’ve been considering rooftop solar, heat pumps, or energy‑efficient windows, act before 2026. Small manufacturers of clean tech will see reduced utility for existing credits—plan property acquisitions accordingly.
7. IRS Procedural Changes
- Termination of IRS Direct File: The “free file” in‑house program ends within 30 days of enactment, as the IRS shifts to exploring public‑private partnerships .
- Penalty Adjustments: New, albeit modest, $1,000 penalties per ERC promoter violation (no aggregate cap) .
Impact on Tax Preparers and Filers
DIY e‑filers must migrate to commercial software or approved providers. Preparers should update client advisories regarding IRS program changes and new promoter penalties.
Action Steps for Tax Filers and Small Businesses
- Review Withholding & Estimated Payments: Permanent bracket and deduction changes may alter 2025 liabilities—adjust now to avoid surprises.
- Accelerate or Delay Investments: 100% bonus depreciation and green energy credit phase‑outs make timing crucial for asset purchases and clean energy projects.
- Maximize New Deductions: Track tip and overtime income diligently; ensure Social Security numbers are on file for all eligible deductions.
- Plan Estate & Trust Strategies: Use the $15 million exclusion increase and child tax credit boost to fine‑tune wealth transfers.
- Update Tax Software & Processes: Transition away from IRS Direct File, and educate staff on promoter penalty changes.
By understanding these provisions and tailoring strategies accordingly, American taxpayers and small businesses can fully leverage the One Big Beautiful Bill Act’s benefits and mitigate its phase‑outs. Consult your tax advisor to optimize your 2025 return and beyond.
