Written by Ken Rosenfield, CPA, Founder & Partner
On July 3rd, Congress passed the OBBBA (One Big Beautiful Bill Act), and it was signed by the President on July 4th, 2025.
Some of the most important items in the new act are:
Business Provisions
One of the most notable changes to business deductions is the reinstatement of the 100% deduction for Bonus Depreciation of qualified assets in the year they were put into service. This is effective for all property acquired beginning Jan. 20, 2025.
The Business interest limitation has been updated to revert to the EBITDA Computation method rather than the equation of items currently in effect. This should enhance the amount of Business Interest Expense that can be deducted.
Another prominent provision is the new treatment on Domestic Research and Development Expenses. Effective at the beginning of this tax year is the immediate expense, and deduction of domestic R&D expenses. This means that companies could deduct the full cost in the year it’s incurred, rather than amortizing it over several years as currently required under the Tax Cuts and Jobs Act (TCJA) of 2017. This provision is through costs incurred through January 1st, 2030.
With respect to foreign R&D expenses, they would still need to be capitalized and amortized over a 15-year period.
For pass-through entities, the Act makes permanent, the section 199A qualified business income deduction. There will be no change to the current 20% deduction percentage. Additionally, the bill expands the limitation phase-in window from $50,000 for single filers ($100,000 for married filing jointly) to $75,000 for single filers ($150,000 for married filing jointly). The new itemized deduction threshold on individuals does not impact the determination of deduction for QBI purposes.
The Act places a 1% floor on charitable corporate deductions. This means that charitable expenses can only be deducted to the extent that they exceed 1% of taxable income. It also adds a 0.5% floor for individual itemized deductions.
Beginning in 2026, that Act will disallow deductions for various expenses related to on-premises employer-provided meals, so that certain businesses will be exempt from the disallowance. Basically, OBBA makes a significant disallowance of entertainment expense deductions, while generally maintaining a 50% deduction for business meals. Businesses must carefully document the business purpose of meal expenses to ensure they qualify for the deduction.
OBBA accelerates the phase out of tax credits for Wind, Solar and Electric Vehicles. These credits will expire for Electric Vehicles acquired after September 30th, 2025.
OBBA ends the wind and solar investment and production tax credits for facilities placed in service after Dec. 31, 2027. There is an exception for facilities that begin construction within 12 months from the date of enactment, or July 4th, 2025.
Another provision terminates the section 179D deduction for energy-efficient commercial buildings for property. This is effective for construction which commences after June 30, 2026. The Act also eliminates the Wind and Solar Investment and Production Tax Credits for facilities placed in service after December 31st, 2027 except for facilities that begin construction as of the date of enactment, July 4th, 2025.
The Act permanently removes the income exclusion and deduction for moving expenses, except for certain members of the Armed Forces.
The Act also makes adjustments to the Foreign Tax Credit Computations, Global Intangible Low-Tax Income, Foreign Derived Intangible Income and Specified Foreign Corporations.
Individual Provisions
Although there are changes to individual tax provisions, they are not many and most have little impact over the long run. The current tax rates in effect, under OBBA will become permanent.
One of the biggest benefits to individual taxpayers is the increase in the amount of state and local income taxes that can be deducted as an itemized deduction. The current limitation is increased to $40,000 ($20,000 for married separate filers) and indexed for inflation through tax year 2029. After which, the limitation would revert back to the current $10,000 ($5,000 for married separate filers). The limitation is phased down for taxpayers with modified adjusted gross income over $500,000. In this case, the $40,000 limitation is reduced by 30% of the excess of modified adjusted gross income (AGI) over the threshold amount, not to be reduced below $10,000. For tax years after 2029, the limitation returns to $10,000. This essentially becomes a short-term program.
Another item enacted makes the standard deductions enacted by the TCJA permanent, effective Dec. 31, 2025. Additionally, the act increases the standard deduction to $15,750 for a single filer, $23,625 for a head of household filer, and $31,500 for married individuals filing jointly, adjusted for inflation for taxable years beginning after 2025.
A large item that impacts individuals is that the elimination of miscellaneous itemized deductions, was made permanent, so items such as unreimbursed business expenses will continue to be, not deductible. Additionally, personal exemptions are permanently eliminated.
Other items include a new auto loan interest deduction. This is a temporary deduction of up to $10,000 for interest paid on certain car loans for vehicles assembled in the United States, and is available to both itemizers and nonitemizers.
For our senior citizens over 65 years old or older, there is now a temporary additional deduction of $6,000 for years 2025 through 2028. The deduction phases out at higher income levels. For singles, it fully phases out at $175,000 of income, and for married couples filing jointly, it fully phases out at $250,000.
OBBA includes relief for workers who receive tip income. The Act implements a deduction of $25,000 of tip income per individual, and a deduction for overtime compensation ($12,500 per individual or $25,000 for joint filers). The income phase-out for the tip income deduction starts when a taxpayer’s income exceeds $150,000 annually ($300,000 for joint filers). The deduction is then reduced by $100 for each $1,000 of income above that threshold. This deduction applies to up to $25,000 of qualified tip income.
Another big item in the Act permanently increased the Estate Tax Exemption to $15 million for single individuals ($30 million for married couples), adjusted for inflation.
A novel item is the President named a Trust after himself, the “Trump Account”. This is 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 account is $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 such accounts annually.
There are a number of other provisions in the Act, but the above are some of the most significant aspects.
The Act does provide some tax planning opportunities that should be considered.
With the new interest limitation rules, consider reviewing Sale/Leaseback transactions rather than traditional financing of major asset purchases. This could eliminate the interest deduction limitations.
Review related party loans between brother/sister entities. This could generate Section 163j limitations on the amount of interest expense that can be deducted by for the borrower.
Also review asset purchase agreements that may generate large Goodwill and other assets with large depreciation or amortization deductions. This may limit interest deductions. Consider equity acquisitions and review ability for outside Goodwill or methods to reduce Amortization and Depreciation expenses.
We are available to review any tax planning strategies and how the act will impact on your tax structure. Feel free to reach out to any member of our staff with questions or for personalized guidance.