On July 4, 2025, the One Big Beautiful Bill (OBBB) was signed into law, bringing significant changes to the tax landscape for both businesses and individuals.
Whether you’re a business owner, investor or simply preparing for the upcoming tax year, here’s what you need to know about the bill’s key provisions — and how they might impact you.
What Business Owners Need to Know
Depreciation
- Bonus Depreciation (100%): The bill extends 100% bonus depreciation, allowing businesses to immediately deduct the full cost of qualifying property placed in service through the designated period.
- Bonus Depreciation for Qualified Production Property: A new separate provision allows full expensing of certain nonresidential real property used in qualified production activities. To qualify, the property must be U.S.-based, original-use and meet specific construction and service date requirements.
- Section 179 Limits Increased: The Section 179 expensing threshold increases from $2.5 million to $4 million, enabling businesses to deduct more upfront for qualifying purchases.
Research and Development Expenses
- Immediate Expensing Restored: The law reverts to allowing immediate expensing of domestic research and development (R&D) costs, reversing the prior requirement to amortize these expenses over five years.
- Catch-Up Provision: Businesses that were required to amortize R&D costs under the prior rules can now “catch up” and expense those costs over one or two years.
Opportunity Zone Changes
- The OBBB tightens eligibility requirements and increases reporting obligations for Opportunity Zone investments to improve oversight and ensure that resources are directed to the most economically distressed areas.
Advanced Manufacturing Investment Credit
- The credit for advanced manufacturing is increased from 25% to 30% for qualifying property placed in service after December 31, 2025, on domestic production.
Percentage of Completion Method
- A new exception removes the requirement to use the percentage of completion method for certain residential construction contracts entered into after the bill’s enactment.
Clean Energy Incentives Ending
- Several business-related clean energy tax credits — including those for renewable energy projects and electric vehicles — are being phased out or eliminated earlier than previously scheduled.
Business Interest Deduction Changes
- The calculation of adjusted taxable income for the business interest expense limitation is modified to exclude depreciation, amortization and depletion, potentially increasing the amount of deductible interest for many businesses.
Qualified Business Income (QBI) Deduction – 20%
- The 20% deduction for qualified business income (Section 199A) is extended and made permanent for many entities, such as S corporations, partnerships and sole proprietorships.
1099 Reporting Thresholds Increased
- The thresholds for Form 1099 reporting will be increased, reducing the burden of reporting small transactions for both businesses and contractors.
What’s Changing for Individual Taxpayers
State and Local Tax (SALT) Deduction Cap Increased
- The SALT deduction cap increases to $40,000 for 2025 and will rise by 1% annually through 2029. In 2030, it’s scheduled to revert to the previous $10,000 limit. A phaseout begins for joint filers with modified adjusted gross income (MAGI) over $500,000, though the deduction will not drop below $10,000.
- Note: The initial version of the House bill proposed limiting the deductibility of state pass-through entity (PTE) tax payments. However, that provision was removed in the final legislation.
Temporary Senior Deduction
- Taxpayers age 65 and older can claim a $6,000 deduction from 2025 through 2028, available to both itemizers and non-itemizers. A deduction phases out for joint filers with MAGI above $150,000, or $75,000 for single filers.
Expanded Qualified Business Income (QBI) Deduction for Individuals
- The 20% pass-through income deduction is permanent and is enhanced for individuals, increasing the income thresholds for phase-out to $75,000 for single filers and $150,000 for joint filers.
Estate and Gift Tax Exemption Increased
- The lifetime exemption for estate and gift taxes is permanently increased to $15 million for single filers and $30 million for joint filers, indexed for inflation.
Tax Credit Changes
- Clean Energy Credits Ending Sooner: Many individual clean energy tax credits, including those for electric vehicles and residential energy efficiency, are repealed or phased out, with most expiring after December 31, 2025.
- Child Tax Credit: The child tax credit increases to $2,200 per child for 2025, and the credit is indexed for inflation.
Charitable Contributions
- Non-itemizers: Starting in 2026, a permanent above-the-line deduction for charitable contributions is created up to $1,000 for single filers, and $2,000 for joint filers.
- Itemizers: A new 0.5% floor is implemented for itemized charitable deductions, meaning only contributions in excess of 0.5% of adjusted gross income are deductible for itemizers.
No Tax on Tip and Overtime Income
- Tip Income Deduction: Employees can deduct up to $25,000 in tip income received during the year. This deduction applies for tax years 2025 through 2028 and phases out for higher-income earners.
- Overtime Compensation Deduction: A separate deduction of up to $12,500 in overtime pay ($25,000 for joint filers) is available during the same period, also subject to income-based phaseouts.
Car Loan Interest Deduction
- Interest paid on auto loans for new vehicles assembled in the U.S. is deductible, up to $10,000. This provision applies through 2028 and phases out for higher-income taxpayers.
What’s the Bottom Line?
The OBBB introduces a wide range of temporary relief measures, permanent tax reforms and phased-out incentives that will influence tax planning for years to come. While many taxpayers may benefit from expanded deductions and credits, others — particularly those affected by the rollback of clean energy incentives or new limits on charitable contributions — may need to reevaluate their financial strategies.
This summary highlights some of the most impactful provisions, but additional changes and implementation details are still developing. Stay tuned as we continue to break down specific elements of the bill and provide more in-depth guidance throughout the year.
Need Help?
There’s no better time than now to learn exactly how the new legislation affects you and your tax situation.
Contact us online or call 800.899.4623.