One Big Beautiful Bill – A Summary of Final Tax Provisions

Overview

On July 4, 2025, the President signed into law the final tax legislation emerging from the 2025 reconciliation process. The legislation reflects the Senate-amended version of H.R. 1, incorporating numerous changes to individual, business, and energy tax provisions. Below is a summary of the key provisions now enacted.

I.  Individual Tax Provisions

• Individual Income Tax Rates:
  
  • Current income tax rates are made permanent
• Standard Deduction: Effective 01/01/25
  
  • Permanently increased to $31,500 for joint filers and surviving spouses; $23,625 for heads of household; and $15,750 for singles and married individuals filing separately.
• Child Tax Credit (CTC): Effective 01/01/25
  
  • CTC increased to $2,200 per child; Social Security Number required for child and at least one parent.
• Estate & Gift Tax: Effective 01/01/26
  
  • U.S citizens and residents can use $15 million ($30 million if married filing jointly) towards lifetime gift exclusion, adjusted for inflation.
• Charitable Deductions: Effective 01/01/26
  
  • Itemizers: Deduction for charitable cash contributions to the extent that they exceed 0.5% of the taxpayer’s contribution base (adjusted gross income).
  • Non-itemizers: Permanent charitable contribution deduction from adjusted gross income of $1,000 for single filers or $2,000 for married filing jointly for certain charitable contributions made in cash to a public charity.
• No Tax on Tips/Overtime: Effective 01/01/25
  
  • Tips: Taxpayers may deduct up to $25,000 for qualified tips (excludes highly compensated employees), received in certain occupations (as defined by Treasury); Qualifying criteria include proper reporting of tips and recipient’s occupation on IRS approved forms, tips must be voluntary, not negotiated, not received in specified service trade or business. Social Security Number is required to claim the deduction. It is available to non-itemizers and can be claimed in addition to standard deduction. Deduction expires 12/31/28.
  • Overtime: Taxpayers may deduct up to $12,500 per year in qualified overtime compensation ($25,000 for joint filers). Overtime must be properly reported on IRS forms such as W-2s (for employees) or 1099s (for non-employees). Taxpayers must include a valid Social Security Number on their return. The deduction is available to non-itemizers, can be claimed in addition to the standard deduction. Employers must report the total amount of qualified overtime compensation on employees' W-2 forms. Businesses must also report this information for non-employees on applicable 1099 forms. Deduction expires 12/31/28.
• Senior Deduction: Effective 01/01/25
  
  • Taxpayers aged 65 or older with incomes less than $75,000 ($150,000 if filing jointly) can claim a $6,000 deduction per qualified individual.
• Car Loan Interest: Effective 01/01/25
  
  • The Act provides a temporary tax deduction up to $10,000 of interest paid on loans used to purchase a new personal-use passenger vehicle weighing less than 14,000 pounds.
• SALT (State and Local Taxes) Cap: Effective 01/01/25
  
  • Individual SALT deduction cap increased from $10,000 to $40,000 for 2025. The cap will increase by 1% each year until 2029 and the deduction will phase out depending on modified income but will not reduce below $10,000.
  • Under the Act, the individual SALT deduction cap will revert to $10,000 beginning in 2030.

II. Business Tax Provisions

• Corporate Tax Rate:
  
  • Remains at 21%
• Qualified Business Income Deduction (Section 199A): Effective 01/01/26
  
  • 20% deduction was made permanent.
• Pass-Through Entity Tax Deductions: Effective 01/01/25
  
  • Individual SALT deduction is $40,000 for most filers. Additionally, there would be no SALT limitation for pass-through entities.
• Bonus Depreciation: Effective 01/19/25
  
  • 100% expensing made permanent for property placed in service after Jan. 19, 2025.
• Research and Experimenting Expensing: Effective 01/01/25
  
  • Allows full expenses for domestic research and experimentation. Foreign research and experimentation remains at 15-year amortization. In addition, the bill would provide small businesses with the option to apply this change retroactively back to 2022 through amended returns. It would also allow taxpayers to accelerate any remaining Section 174 deductions over a one-or-two year period.
• Section 179 Expensing: Effective 01/01/25
  
  • The Act increases the statutory expensing limit to $2,500,000 and increases the phase-down threshold to $4,000,000.
• Interest Limitation (Section 163(j)): Effective 01/01/26
  
  • Limitation returns to EBITDA basis permanently.
• Qualified Small Business Stock (Section 1202): Effective 07/04/25
  
  • Under the Act, capital gain on the applicable percentage (50% for stock held for 3 years, 75% for stock held for 4 years, 100% for stock held for 5 years) is excluded from gross income. Applies to Qualified Small Business Stock acquired after 07/04/25.
  • The maximum gain exclusion per issuer has been raised from $10 million to $15 million, with inflation adjustments beginning in 2027.
  • The Act also increases the $50 million aggregate gross asset limit to $75 million, with inflation adjustments beginning in 2027. Applies to stock acquired after 07/04/25.
• Form 1099 Threshold: Effective 01/01/26
  
  • The Act increases the general reporting threshold and the reporting threshold for remuneration to non-employees from $600 to $2,000.
• 1099-K Threshold: Effective 01/01/25
  
  • Only aggregate transactions in a year for a payee exceeding $20,000 and 200 transactions are required to be reported.
  • Both components of the de minimis exception - dollar amount and transaction count - are considered for backup withholding.
• Charitable Deduction (Corporations): Effective 01/01/26
  
  • Corporations can deduct charitable contributions exceeding 1% of the taxable income for the year. The deduction can't exceed 10% of the corporation's taxable income (as computed without regard to the charitable contribution). Contributions in excess of 10% maximum or 1% threshold limit in any year can be carried forward and deducted over the next five years.

III. Energy Tax Provisions

• Following tax provisions expiring after 09/30/25
  
  • Clean Vehicle Credit
• Following tax provisions expiring after 12/31/25
  
  • Energy Efficient Home improvement credit
  • Residential Clean Energy Credit
• Following tax provisions expiring after 06/30/26
  
  • New Energy Efficient Home Credit
  • Alternative Fuel Vehicle Refueling Property Credit
  • Energy efficient Commercial Buildings Deduction

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We hope this summary provides clarity on the key tax changes enacted through the 2025 reconciliation legislation. These updates present both new opportunities and important considerations for your personal and business tax planning. As always, we are here to help you navigate these changes and ensure you are well-positioned to take full advantage of the available provisions.

If you have any questions or would like to discuss how these changes may impact your specific situation, please don't hesitate to reach out. We are happy to assist!

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