Key Tax Changes from the 2025 One Big Beautiful Bill Act

On July 4, 2025, President Trump signed the H.R.1, One Big Beautiful Bill Act (OBBBA) into law. This legislation includes a range of tax changes affecting businesses and individuals. While it extends or modifies multiple provisions from the Tax Cuts and Jobs Act of 2017 (TCJA), the Bill also introduces significant updates, particularly in clean energy incentives and credits impacting individuals and employers. Below is a summary of several key tax provisions.

Business Tax Provisions

Businesses may be affected by the following tax provisions:

Bonus Depreciation for Qualified Property: Reinstates and makes permanent 100% bonus depreciation for qualified personal property placed in service after January 19, 2025, along with specified plants planted or grafted after that date.

Also permits an additional first-year depreciation deduction of 100% for the cost of “qualified production property” (nonresidential real property used as an integral part of manufacturing, production or refining tangible personal property) if construction begins after January 19, 2025, and before January 1, 2029, to be placed in service before January 1, 2031.

Limitation on Business Interest: Reinstates Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) limitation under Section 163(j), effective for tax years beginning in 2025. Under this provision, adjusted taxable income will be computed without regard to depreciation, amortization and depletion. This provision was made permanent for years beginning after December 31, 2024. Additionally, it expands the definition of ‘motor vehicle’ to allow interest deductions on floor plan financing for certain trailers and campers.

Research and Development Expenses under Section 174: Allows taxpayers to immediately deduct domestic research or experimental expenditures paid or incurred in tax years beginning after December 31, 2024. Small businesses with average annual gross receipts under $31 million may retroactively expense previously capitalized R&D costs by filing an amended tax return. Foreign research expenses must still be amortized over 15 years under Section 174.

Qualified Business Income (QBI) Deductions (Section 199A): Permanently extends the 20% Section 199A QBI deduction, and for tax years starting after December 31, 2025, it expands the phase-in for specified service trade or business (SSTB) and entities subject to wage and investment limits by raising the thresholds to $75,000 for non-joint filers and $150,000 for joint filers. The Bill also introduces a minimum deduction of $400 for taxpayers with aggregated QBI of at least $1,000 from trades or businesses in which they materially participate.

Section 179 Expenses: Increases the maximum amount a taxpayer can expense to $2.5 million, with phaseout starting at $4 million of qualifying property.

Business Loss Limitations Under Section 461(l): Extends and modifies the limitation on excess business losses for noncorporate taxpayers, making it permanent.

Advanced Manufacturing Investment Credit: Increases the credit rate from 25% to 35%, effective for property placed in service after December 31, 2025.

Charitable Contributions: Allows corporations to deduct charitable contributions only if the total equals at least 1% of their taxable income, with a maximum deduction capped at 10% a year. This provision is effective for tax years beginning after December 31, 2025.

Base-Erosion and Anti-Abuse Tax (BEAT) under Section 59A: Increases the current rate from 10% to 10.5%, instead of rising to 12.5% after 2025.

Employee Retention Credit (ERC) Refunds: Includes enforcement provisions targeting fraudulent ERC claims and retroactively invalidates claims filed after January 31, 2024, for the third and fourth quarters of 2021.

Expansion of Childcare Credits: Increases employer-provided childcare credits from 25% to 40% (50% for eligible small businesses) and increases the maximum annual credit from $150,000 to $500,000 for employers ($600,000 for eligible small businesses). This applies to taxable years beginning after December 31, 2025.

Farmland Sales: Adds a new provision that allows income tax resulting from the sale of farmland to a qualified farmer to be paid in four annual installments.

Paid Family and Medical Leave Credit: Amended to make the employer credit for paid family and medical leave permanent.

Percentage-of-completion method: Provides an exemption to the Section 460(e) requirement to use the percentage-of-completion accounting method for certain residential construction contracts entered into after the date of the Bill’s enactment.

Individual Tax Provisions

Key provisions for individual taxpayers include:

Tax Rates: Makes individual tax rates previously enacted under TCJA permanent, along with inflation indexing.

Standard Deduction: Increases the standard deduction for 2025 to $15,750 for single filers, $23,625 for heads of household and $31,500 for married individuals filing jointly.

Charitable Contribution Deduction: Allows nonitemizers to deduct up to $1,000 (single filers) or $2,000 (married filing jointly) for qualified charitable contributions. For itemizers, imposes a 0.5% floor on the charitable deduction by reducing the deductible amount by 0.5% of the taxpayer’s contribution base for the tax year. Both items are effective for tax years beginning after December 31, 2025.

State and Local Tax (SALT) Cap: Temporarily increases the cap to $40,000 from the current $10,000 and adjusts it for inflation. In 2026, the cap will be $40,400 and will increase annually by 1% through 2029. In 2030, the SALT cap will revert to $10,000. The deduction available phases down for taxpayers with modified adjusted gross income (AGI) over $500,000, but the limit cannot go below $10,000.

Itemized Deduction Cap: Permanently repeals the Pease limitation and replaces it with a new rule that reduces itemized deductions by 2/37 of the lesser of the total itemized deductions or the taxpayer’s taxable income exceeding the start of the 37% tax bracket. This applies to taxable years beginning after December 31, 2025.

Estate and Gift Exemption: Permanently increases the estate and gift tax exemption to $15 million for individuals ($30 million for married filing jointly) starting in 2026, with future inflation adjustments.

Child Tax Credit: Starting in 2025, the Bill increases the child tax credit to $2,200 per child and indexes it for inflation. It also permanently extends the $1,400 refundable portion (also inflation-adjusted), the higher phaseout thresholds ($200,000 single filers/$400,000 joint filers) and the $500 credit for other dependents.

Tip Tax Deduction: Creates a temporary above-the-line deduction of up to $25,000 for qualified tips received in tip-based jobs, available from 2025 to 2028. This applies to both employees and independent contractors and phases out for modified AGI over $150,000 ($300,000 joint filers). A transition rule allows employers to estimate 2025 tip amounts using a reasonable method.

Overtime Compensation Deduction: Offers a temporary above-the-line deduction of up to $12,500 ($25,000 for joint filers) for qualified overtime pay from 2025 through 2028. It phases out for modified AGI over $150,000 ($300,000 joint filers) and requires overtime amounts to be separately reported on Form W-2 or 1099.

Seniors 65 and Over: Provides a temporary $6,000 deduction under Section 151 for seniors aged 65 and over. The deduction begins to phase out when a taxpayer’s modified AGI income exceeds $75,000 ($150,000 for joint returns) and will be in effect from 2025 to 2028.

Form 1099-K: Repeals the $600 threshold and returns to the $20,000/200 transaction threshold.

Form 1099-MISC and 1099-NEC: Raises the reporting threshold for business and service payments from $600 to $2,000, with annual inflation adjustments starting in 2027.

Car Loan Interest Deduction: Allows a deduction for qualified passenger vehicle loan interest by excluding it from the definition of personal interest under Section 163(h) for tax years 2025 through 2028. The loan must be incurred after December 31, 2024, secured by a first lien and used to purchase a passenger vehicle for personal use that had its final assembly in the United States.

The exclusion is capped at $10,000 per year and will phase out for taxpayers with modified AGI that exceeds $100,000 ($200,000 for married taxpayers filing jointly).

Trump Accounts: Establishes tax-free savings accounts for the benefit of individuals under 18, classified as a new type of individual retirement account (IRA) under Section 408(a). Eligible investments would include mutual funds and indexed exchange-traded funds (ETFs). Contributions, other than qualified rollover contributions, can be made prior to the beneficiary turning 18, up to $5,000 annually (adjusted for inflation after 2027). The account must be designated as a Trump account and contributions cannot be made until 12 months after the enactment date of the Bill.

The Bill introduces a new Section 128 that will allow employers to contribute to Trump accounts, which will be excluded from the employee’s income. In addition, Section 6434 creates a Trump account contribution pilot program, which provides a $1,000 tax credit for opening an account for a child born between January 1, 2025, and December 31, 2028. $410 million is appropriated to fund Trump accounts, and will remain available through September 30, 2034.

Clean Energy Provisions

The Clean Fuel Production Credit (Section 45Z) has been extended through 2029, and prohibitions were placed on the use of foreign feedstocks.

While the Clean Fuel Production Credit is extended, the Bill phases out or eliminates several clean energy incentives, as outlined below.

Section	Name	Termination Date
25E	Previously owned clean vehicle credit	After September 30, 2025
30D	Clean vehicle credit	After September 30, 2025
45W	Qualified commercial clean vehicle credit	After September 30, 2025
6426(k)	Sustainable aviation fuel credit	After September 30, 2025
25C	Energy-efficient home improvement credit	After December 31, 2025
25D	Residential clean energy credit	After December 31, 2025
168 (e)(3)(B)(vi)	Cost recovery for certain energy property and qualified clean energy facilities, property and technology	After December 31, 2025 (energy property); after date of enactment (qualified clean energy facilities, property and technology)
179D	Energy-efficient commercial buildings deduction	For property the construction of which begins after June 30, 2026
45L	New energy-efficient home credit	After June 30, 2026
30C	Alternative fuel vehicle refueling credit	After June 30, 2026
45Y	Clean electricity production credit	After December 31, 2027 (terminated for wind and solar facilities placed in service)
48E	Clean electricity investment credit	After December 31, 2027 (terminated for wind and solar facilities placed in service)
45V	Clean hydrogen production credit	After January 1, 2028

The One Big Beautiful Bill Act introduces significant and wide-ranging tax changes that will impact planning strategies across all sectors. Businesses and individuals alike should review these provisions carefully and consult with their tax advisors to understand how the new rules may affect current and future tax years—especially considering the temporary deductions and upcoming phaseouts. If you have any questions regarding the key tax provisions, please contact a Brown Plus tax advisor.