CONGRESS PASSES THE ONE BIG BEAUTIFUL BILL ACT ENACTING SWEEPING TAX CODE CHANGES

CONGRESS PASSES THE ONE BIG BEAUTIFUL BILL ACT ENACTING SWEEPING TAX CODE CHANGES

The “One Big Beautiful Bill Act” (the Act), a sweeping tax and policy bill representing one of President Trump’s legislative priorities, was signed into law on July 4, 2025. Similar to the provisions of the 2017 Tax Cuts and Jobs Act (TCJA), the Act addresses a wide range of tax topics. This article summarizes the most significant provisions of the 870-page bill, and all provisions described herein are scheduled to become effective January 1, 2026, unless otherwise expressly noted.

The Act extended, renewed, or made permanent many provisions/concepts previously enacted under the TCJA. While some of these provisions/concepts were extended, renewed, or made permanent in their existing forms, others were modified from their original enactment. A summary of the extended provisions is as follows:

TCJA Provisions Affecting Individuals

• Gift and Estate Tax Exemption: The basic exclusion amount will be permanently increased to $15,000,000 with annual adjustments for inflation.
• Income Tax Rates: The lower rates introduced by the TCJA and inflation adjustment mechanism are made permanent.
• Standard Deduction: The increased standard deduction amounts are made permanent.
• Child Tax Credit: The modifications to the child tax credit are made permanent, with the credit further increased to $2,200 and adjusted each year for inflation.
• SALT Deduction Cap: The State and Local Tax (SALT) deduction cap is temporarily increased through 2029. The cap has been increased to a maximum of $40,000, and phases down to a minimum of $10,000 based on the taxpayer’s adjusted gross income.
• Miscellaneous Itemized Deductions: Miscellaneous itemized deductions under Section 67 have been permanently eliminated.

TCJA Provisions Affecting Businesses

• Section 199A: The Act makes the 20% qualified business income deduction for pass-through entities permanent. The deduction limit phase-in range for Specified Service Trades or Businesses (SSBTs) is increased to $75,000 for single filers and $100,000 for joint filers.
• 163(j) Deductions: The Act permanently increases deductions for interest expenses by redefining “adjustable taxable income” under Section 163(j) to be based on EBITDA. This is more favorable for taxpayers under current law than Pre-TCJA definition, which used EBIT.
• Qualified Production Property Deductions: Taxpayers may elect to immediately deduct 100% of qualifying production property costs for newly constructed or acquired non-residential real property used for manufacturing, agricultural or chemical production, or refining of a qualified product acquired or placed in service on or before January 1, 2031. Notably, property used by a lessee does not qualify as qualified production property of the lessor.
• Bonus Depreciation Renewal: The Act reinstates and makes permanent 100% immediate expensing (i.e., bonus depreciation) for equipment and machinery for qualifying property acquired and placed in service after January 19, 2025. The limitation on deductions for qualified depreciable property as business assets is increased from $1 million to $2.5 million with a phaseout through $4 million.
• Excess Business Losses Extended: The limitation on excess business losses for noncorporate taxpayers is made permanent. For 2025, the maximum amount of business losses taken in a year is $313,000 for single filers and $626,000 for joint filers. Further losses can be carried forward to future taxable years.

The Act also incorporates a number of new provisions that were not previously included in the TCJA:

New Provisions Affecting Individuals

• Itemized Deductions: Use of itemized deductions is limited for taxpayers in the highest income tax bracket (i.e., 37%).
• Senior Deduction: Individuals aged 65 or older will now receive a bonus deduction of up to $6,000 for tax years 2025 through 2028. The deduction amount phases out for individual filers with an adjusted gross income exceeding $75,000 and joint filers with an adjusted gross income exceeding $150,000.
• No Tax on Certain Tips: An above-the-line deduction of up to $25,000 for “qualified tips” is available from 2025 through 2028. The deduction begins to phase out for single filers with AGI in excess of $150,000, and for joint filers with AGI in excess of $300,000.
• No Tax on Certain Overtime Pay: An above-the-line deduction of up to $12,500 for single filers and $25,000 for joint filers for qualified overtime pay is available from 2025 through 2028.
• 529 Plans: Section 529 Funds may now be applied to certain costs associated with enrollment and/or attendance at K-12 schools (including private and religious schools) and post-secondary credentialing programs.
• Trump/MAGA Accounts: Tax-advantaged savings accounts referred to as Trump Accounts or MAGA Accounts, are available for US citizens who are age 18 or younger at the time the account is opened.

New Business Tax Provisions

• ERC Limitations: The Act limits Employee Retention Credit (ERC) refunds and credits not paid as of July 4, 2025, to claims filed prior to January 31, 2024, and extends the audit period to six years (previously five) following the claim or return. The Act also creates additional penalties for tax liability understatements and failure to comply with due diligence and disclosure requirements.
• Threshold Increase for Reporting: The Act reduces the paperwork burden for small businesses by increasing the 1099-MISC threshold from $600 to $2,000.
• Clean Energy Credits: The Act ends clean energy credits for items like solar panels, electric vehicles, and investment in clean electricity. The IRA clean electricity tax credit will phase out from 2028 through 2031.
• Taxable REIT Subsidiary Asset Test: The Act increases the permissible value of taxable Real Estate Investment Trust (REIT) subsidiaries. They may now represent 25% of the REIT’s total assets (previously 20%).
• Charitable Donation Limitation: The Act amends Section 170 to create a 1% floor for deductibility of a C-Corporation’s charitable contributions.

The attorneys at Dvorak Law Group continue to track these developments. If you have questions or concerns about how the Act affects you, please do not hesitate to contact us to schedule a consultation.

This article is for general informational purposes only, which may or may not reflect the most current developments in federal tax law. It is not intended to constitute tax advice or a recommended course of action. Professional tax advice should be sought as the information here is not intended to be, and should not be, relied upon by the recipient in making a decision.