Recap of the One Big Beautiful Bill Act (OBBB)

On July 4, 2025, President Donald J. Trump officially signed the One Big Beautiful Bill Act into Law.  This nearly 900-page piece of legislation is set to completely change the economic game for businesses and individuals nationwide.  This includes an expansion on the tax cuts enacted by the Tax Cuts and Jobs Act (TCJA).  Here are some of the important changes that impact business owners and individual taxpayers.  Please be advised that many of the following changes will be subject to inflationary adjustments.

To see the full bill for more information, please see the text here.

Bonus Depreciation

The One Big Beautiful Bill Act (OBBB) brings significant changes to bonus depreciation rules, aiming to incentivize business investment. Here's a summary of the key adjustments:

• Permanently restores 100% first-year bonus depreciation expensing of qualified assets acquired and placed in service beginning January 20, 2025.  Prior to this bill, bonus depreciation was set to phase out with a first-year 40% expensing in 2025 and 20% first-year expensing in 2026.
• New Bonus Depreciation for Manufacturing QPP (Section 168(n)):
  Expands the scope of qualified production property assets to include manufacturing buildings.   This QPP will be eligible for 100% bonus depreciation until 2029, (special property until 2030) a significant benefit for domestic manufacturers and supply-chain operators.

Section 179 Expensing Cap Increased

Small businesses can expense up to $2.5 million in qualifying property (up from $1.22M), with the phase-out starting threshold also rising to $4 million (up from $3.15M).

Limited Business Interest Expense

There is a permanent provision to restore the TCJA’s EBITDA type calculation of the business interest deduction limit for tax years beginning in 2025. 

Previously starting in 2022, taxpayers were to use an EBIT type calculation to determine the allowable interest expense deduction which increased the number of taxpayers that were limited in their business expense deductions.

Innovation, Research and Development

• Permanent provision that allows for the immediate expensing of domestic research costs.  Foreign R&D expenditures must still be capitalized under IRC Section 174.  Under previous law, all R&D expenditures were required to be capitalized and amortized over 5 or 15 years, domestic and foreign expenses, respectively.
• Eligible small businesses (annual average gross receipts ≤ $31 M over the past three years) may elect to retroactively apply full expensing to tax years beginning in 2022, allowing them to amend prior returns and recover previously amortized costs.  
  
  • The retroactive election must be made within one year from the enactment, which means that amended returns for 2022–2023 must be filed by July 2026.
  • If a 2024 tax return has not yet been filed, then the originally filed tax return can include these changes for R&D expensing for 2024, but the catch-up will wait until the 2025 tax return for the 2022 and 2023 expenses (If not amending the prior year tax returns).
  • If the 2024 tax return has already been filed, an amended return can be filed before July 2026 to recoup the previously amortized 2024 R&D costs.
• For those businesses not wanting to amend previously filed tax returns or not eligible under the gross receipts limit, the OBBB provides an ability to accelerate the remaining unamortized amounts of the previously capitalized research costs incurred in 2022 through 2024 as a single deduction on the 2025 tax return or spread out evenly on the 2025 and 2026 tax returns.  This acceleration will be done through an automatic adjustment on Form 3115, guidance pending.
  

Section 199A: Qualified Business Income Deduction

• Makes the QBI deduction a permanent provision at 20%.
• Expands the limitation phase-in window for certain taxpayers from $50,000 for single filers ($100,000 for married filing jointly) to $75,000 for single filers ($150,000 for married filing jointly). 
• Creates a minimum deduction of $400 for taxpayers who materially participate and have $1,000 or more in qualified business income.
  

Qualified Small Business Stock (QSBS) Provision of Section 1202

Expands the Section 1202 benefit in three ways:

1. Provides a tiered gain exclusion for QSBS, allowing a:
   
   • 50% exclusion for shares held more than three years, 
   • 75% exclusion for shares held more than four years, and a 
   • 100% exclusion for shares held more than five years. 
2. Increases the corporate-level gross assets ceiling from $50 million to $75 million. 
3. Increases the per-issuer lifetime exclusion dollar cap from $10 million to $15 million.
   

Charitable Contributions

• Creates a 1% floor on corporate charitable deductions, allowing deductions only for contributions exceeding 1% of taxable income. It also adds a 0.5% floor for individual itemizers. The disallowed portion may be carried forward. 
• Starting in 2026, individuals who do not itemize their deductions, can claim an above the line cash charitable deduction of up to $1,000 (or $2,000 for married couples filing jointly). 
  

Phaseout of Certain Credits

The act has repealed the federal clean vehicle (EV) credit and several other green energy tax incentives, effective for vehicles placed in service and projects starting after September 30, 2025. The bill shifts focus away from green tax credits as part of its broader tax reform package and accelerates the phaseout for primarily wind, solar, tax incentives. 

Individual State And Local Tax Deduction Limitation (SALT Cap)

• The SALT limitation is increased to $40,000 ($20,000 for married separately filers) and indexed for inflation through tax year 2029, after which the limitation would revert to $10,000 ($5,000 for married separately filers). The limitation is phased down for taxpayers with modified adjusted gross income over $500,000, but not to be reduced below $10,000.  AMT rules could come into play again.
• Pass-through entity tax (PTET) elections: No new limitations are placed on pass-through entity taxes.
  

Personal Exemptions

Includes a temporary increase to a $6,000 deduction for qualified individuals over the age of 65, up from $1,600.  There will be phaseouts for modified adjusted gross income exceeding $75,000 ($150,000 married filing jointly).  No change has been made directly to the taxation of social security income as previously discussed in Congress.

Cash Tips

Up to $25,000 in cash tips can now be deducted from federal income tax for tax years 2025 through 2028 (phases out over $150K individual / $300K married filing jointly). Tips remain subject to Social Security (FICA), Medicare, state and local taxes, and reporting rules. 

Overtime Pay

Up to $12,500 (single) or $25,000 (married filing jointly) in overtime pay may be deducted from federal income tax (2025 through 2028), phasing out like the tips provision.  Overtime wages are still fully subject to Social Security, Medicare, and state/local taxes. 

Car Loan Interest

• There is a new deduction for up to $10,000 per year for qualified interest paid on loans used to purchase new U.S. assembled personal-use vehicles beginning on January 1, 2025.
• The tax deduction for auto loans phases out for incomes between $100,000 and $150,000 for an individual and between $200,000 and $250,000 if you file jointly.
• The gross vehicle weight rating must be under 14,000 pounds to qualify.
  

Child Tax Credit

Permanently increases the Child Tax Credit to $2,200 per qualifying child under the age of 17, with up to $1,800 of the amount refundable through the Additional Child Tax Credit. The phaseout thresholds increase to $500K for married filing jointly taxpayers, $250K for single and married filing separately, and $375K for head of household taxpayers.

Individual Trust Accounts (Trump Accounts)

Creates a new type of tax-favored account designed to benefit children under age 18 for education, small business investments and first home purchases. The annual contribution limitation to the accounts would be $5,000. This provision also includes a one-time government funded $1,000 deposit for qualifying children born between Dec. 31, 2024, and Jan. 1, 2029, and enables employers to make tax-free contributions to these accounts annually.

Estate Planning

Increases the estate, gift, and generation-skipping tax exemption amounts to $15 million in 2026, adjusted for inflation, and makes them permanent.  The 2025 lifetime exemption will be $13.99 million per person and the gift tax exemption will be $19,000 per donee.

What This Means For You

The OBBB changes mean tax planning for 2025 is super important, especially with the third-quarter estimated tax payment deadline coming up fast. Chat with your tax advisor and accountant to get a handle on how this bill might hit your business's taxes, cash flow, and profits, and what it means for your personal tax picture. 

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Need help figuring it all out? Contact Accountfully for any tax support.