Sweeping Tax Reform Signed Into Law: What the One Big Beautiful Bill Act Means for You and Your Business

21 July 2025

On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act (OBBBA)—a landmark piece of legislation that cements several provisions of the 2017 Tax Cuts and Jobs Act (TCJA), while introducing new benefits and compliance considerations for both individuals and businesses.  This legislation aims to create tax certainty, stimulate economic growth, and streamline deductions and incentives across the tax code. Here’s a breakdown of key highlights that may impact your tax strategy going forward: 

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INDIVIDUAL TAX CHANGES 

→ Tax Brackets: The reduced TCJA tax rates—including the top rate of 37%—are now permanent. 

→ Estate Tax: The lifetime exemption increases to $15 million per person, indexed for inflation. 

→ Standard Deduction & Exemptions: The standard deduction is permanently preserved. Personal exemptions are eliminated, but seniors receive a temporary additional $6,000 deduction through 2028. 

→ Child Tax Credit: Now set at $2,200 per child, adjusted for inflation annually. 

→ Charitable Contributions: 

• Above-the-line deduction restored: $2,000 (joint) / $1,000 (single). 
• New charitable “floor”: 0.5% for individuals; 1% for corporations. 

→ State and Local Tax (SALT) Deduction: 

• SALT Cap raised to $40,000 through 2029 subject to phaseouts for higher earners, then returns to $10,000. 
• PTET workarounds remain a viable planning tool with no SALT limitation for pass-through entities. 

→ New Targeted Deductions: 

• Tip income: Deduction up to $25,000 for certain taxpayers. 
• Overtime income: Deduction up to $12,500 through 2028. 
• Car loan interest: Up to $10,000 for new U.S.-assembled vehicles (2025–2028). 
• Educator expenses: Reinstated as deductible. 

BUSINESS TAX CHANGES 

→ Qualified Business Income (QBI) Deduction: 

• Made permanent with higher phaseout levels. 
• New $400 minimum deduction for active income. 

→ Bonus Depreciation: 

• 100% bonus depreciation made permanent for qualified property acquired after January 19, 2025. 
• Added category of Qualified Production Property “Manufacturing Property”.  

→ Section 179 Expensing: 

• Limit increased to $2.5M; phaseout begins at $4M, both indexed for inflation. 

→ Interest Expense Limitation: 

• Now calculated based on EBITDA (vs. EBIT), allowing greater deductions. 

→ Excess Business Losses: 

• The limitation is made permanent subject to annual inflation increases (essentially a 1 year deferral of excess business losses). 

→ R&D Expense Reform: 

• 100% expensing of U.S.-based Qualified Research Expenses (QREs) reinstated. 
• Retroactive expensing of R&D for taxpayers with average annual gross receipts of $31 million or less. 

→ Qualified Small Business Stock (QSBS) Reforms: 

• New tiered capital gains exclusion: 50% (3 years), 75% (4 years), 100% (5 years). 
• Cap increased to $15M; asset threshold raised to $75M. 

OTHER SIGNIFICANT CHANGES 

→ 1099 Reporting: Threshold increased from $600 to $2,000 subject to annual inflation increases. 

→ 529 Plans: Expanded to allow tax free distributions ($20,000 per year) for K–12 and credentialing. 

→ Opportunity Zones: 

• New rolling 10-year deferral window and rural zone enhancements. 

CORPORATE ACCOUNTING & COMPLIANCE IMPLICATIONS 

Under U.S. GAAP, changes in tax law are accounted for in the period of enactment. For US federal purposes, the enactment date under US GAAP is the date legislation is signed by the President. Some of the biggest impacts to account for under ASC 740 may include: 

→ Bonus Depreciation: Potentially creates additional taxable temporary differences. 

→ R&E Expensing: Companies must assess which election they may take with their unamortized domestic R&E expenditures and how that may impact other aspects of tax planning. 

→ Interest Deduction Reform: EBITDA-based adjustments likely allow more companies to deduct higher levels of interest expense. 

→ International Tax Provisions: FDII, GILTI, and BEAT adjustments change the may allow for additional planning opportunities to maximize the benefits (i.e. the removal of the deemed tangible income return (DTIR) threshold). 

→ Energy Credit Phaseouts: Several clean energy incentives under the Inflation Reduction Act are repealed or sunset. 

→ Excise Taxes on Endowments: Higher education institutions face tiered rates and broader definitions of investment income. 

WHAT YOU SHOULD DO NOW 

1. Review your current tax strategy to see how the new deductions and expensing opportunities apply. 
2. Reassess your deferred tax assets and liabilities in light of new accounting treatments. 
3. Evaluate your entity structure and compensation planning, particularly for C-corporations and large employers. 
4. Model state-level impacts, as state conformity to federal law will vary significantly. 
5. Act quickly, but thoughtfully, to amend prior filings, especially if eligible for R&D retroactive deductions or charitable giving carryforwards. 

Let’s Talk Through It 

Tax reform of this magnitude creates both opportunities and complexity. If you would like to better understand how these updates may impact personal or business tax planning or need help evaluating the impact these updates may have on financial statement positions and/or disclosures, out team is here to help. Please check out our more detailed summary chart outlining key details of the OBBB. 

For more information, contact a member of our team. 

 

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