The recently passed One Big Beautiful Bill Act introduces several significant tax changes for individuals and businesses. Below is a detailed breakdown of the most impactful updates, including specific numbers and limitations. Take a look to see which of these may apply to your specific situation.
FOR INDIVIDUALS
Top Existing Changes Made Permanent
- Existing Tax Brackets – Simply this means tax rates are not going up to the pre-2018 tax rates in place.
- Increased Standard Deduction – Similarly, the higher standard deductions we’ve enjoyed since 2018 have also been solidified.
- Lower Mortgage Interest Deduction – Interest on a personal use residence is deductible on up to $750,000 principal balance.
- Moving Expenses Still Only Deductible for Armed Forces (and now Intelligence Community)
- Unreimbursed Employee Expenses Still Non-Deductible for Federal Tax – Still potentially deductible for state income tax purposes.
Top New Changes
- State and Local Tax (SALT) Deduction Raised from $10,000 to $40,000 (2025 to 2029) – Threshold increased 1% per year and subject to income phase-outs.
- No Income Tax on Overtime Pay (2025 through 2028) – Maximum offsetting deduction cap and income phase-outs apply.
- No Income Tax on Tips (2025 through 2028) – Maximum offsetting deduction cap and income phase-outs apply.
- Senior Deduction (2025 through 2028) – Additional $6,000 single / $12,000 joint standard deduction replaces Trump’s proposal to not tax Social Security benefits, which could not be done under budget reconciliation. Income phase-outs apply.
- Enhanced Family Tax Credits – Child Tax Credit increased to $2,200 per child starting in 2025 with income phase-outs; Dependent Care FSA cap raised from $5,000 to $7,500.
- Charitable Contribution Deductions – New deduction for non-itemizers up to $1,000 individual / $2,000 joint.
- Clean Energy Provisions – Clean Vehicle (EV) Credit Terminated After 09/30/2025; EV Charger Credit Terminated After 6/30/2026 (still subject to census tract requirements); Energy Efficient Home Improvement Credit and Residential Clean Energy (Solar) Credit Terminated After 12/31/2025
- Car Loan Interest Deduction (2025 through 2028) – Capped at $10,000 with U.S. assembly required. Income phase-outs apply.
- $1,000 Investment Accounts for Newborns (2025 through 2028) – Every child of a parent with a Social Security Number will receive a government-funded investment account with $1,000 deposited at birth with annual contribution caps of $5,000 (plus employer contribution caps of another $2,500). You can open these accounts for your child even if they were born before 2025, but without the $1,000 starter money, and distributions can be taken at 18, not 59.5.
- Gambling Losses – Unfortunately gambling losses are now limited to 90% of gambling winnings, making 10% of gambling winnings taxable.
FOR BUSINESSES
- Qualified Business Income Deduction Made Permanent at 20% – Applies to eligible self-employed individuals and owners of pass-through businesses.
- 100% Bonus Depreciation – For property (including business vehicles with over 6,000 lbs GVWR) acquired after 1/19/2025. Not otherwise retroactive.
- Research and Experimental Expenses – 100% year 1 deduction after 12/31/2024 with retroactive adjustments for small businesses with gross receipts of $31 million or less beginning after 12/31/2021.
- SALT Workarounds Preserved (i.e. PTE Tax Election / CA AB150) – If you’ve already been taking advantage of this workaround in recent years, the good news is you can continue to do so if it still makes sense. And you get the potential added bonus of an already increased SALT cap.
- Expanded Section 179 Expensing – Increased $2.5 million limit from $1.22 million, reduced as costs exceed $4 million (from $3.05 million).
- 1099 Reporting Requirements – Increased from a threshold of $600 to $2,000.
- 1099-K Reporting Requirements – Increased back to greater than $20,000 and more than 20 transactions.
FOR REAL ESTATE INVESTORS
Restoration of 100% Bonus Depreciation means if you qualify as a “Real Estate Professional” or are otherwise eligible to take advantage of the “Short Term Rental Loophole” and utilize a Cost Segregation Study then you can accelerate a large amount of depreciation expense to your first year of property ownership, and generate enough losses to help potentially offset not only rental income but extend to other active sources of W-2 or business related income. This strategy just got up to 2.5x more valuable as of January 20, 2025 compared to what it was before the passing of the bill. Major win for active real estate investors to help build massive generational wealth!
Overall, these changes are designed to provide significant tax relief and encourage economic growth. If you have questions about how these updates apply to your specific situation, please contact us for personalized guidance.
