On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was signed into law, introducing extensive changes to the U.S. tax code. Most taxpayers want to know how this will affect their business and personal returns. A large portion of this bill made permanent the tax changes we saw with the 2017 TCJA, which was set to expire at the end of 2025. While the legislation spans a wide range of policy areas, we want to present a summary of aspects of the bill that focus on the tax provisions most relevant to businesses and individuals. These changes will mostly affect 2025 and subsequent years:

Research & Development (R&D) Expenses

Domestic research and development expenses, including those related to software and product development, are permanently deductible in the year incurred. In contrast, foreign R&D expenses remain subject to a 15-year amortization period beginning in 2025.

Bonus Depreciation Reinstated

The 100 percent bonus depreciation rule is made permanent for qualifying property placed in service on or after January 20, 2025. Businesses may fully deduct the cost of eligible machinery, equipment, and other qualifying assets in the year of acquisition rather than depreciating them over their useful lives.

Section 179 Expensing of Depreciation

The annual deduction limit under Section 179 increases to $2.5 million, with a phase-out beginning when the cost of qualifying property exceeds $4 million. This expansion applies to assets placed in service after December 31, 2024, allowing small and mid-sized businesses to immediately expense a greater amount of capital purchases.

Qualified Production Property Deduction

A new provision permits an immediate 100 percent expense of qualified production property used in manufacturing, refining, and similar activities provided construction begins between January 20, 2025, and December 31, 2029, and the property is placed in service before January 1, 2031.

Qualified Business Income (Section 199A) Deduction

The 20 percent deduction for qualified business income from sole proprietorships, partnerships, and S corporations is made permanent. Furthermore, any taxpayer with at least $1,000 of QBI qualifies for a minimum deduction of $400.

Pass-Through Entity State and Local Tax (SALT) Workarounds

Although there were increases in the limits, there still is a cap on individual state and local tax deductions. Partnerships and S corporations that elect to pay these taxes under a pass-through entity tax (PTET) regime, can still preserve this workaround, which is very helpful for higher-tax states.

Excess Business Loss Limitations

The excess business loss limitation is also made permanent, with 2025 thresholds set at $626,000 for joint filers and $313,000 for other filers; losses above those amounts are carried forward as net operating losses, subject to an 80 percent income cap.

Employee Retention Credit Modifications

All refund claims for the Q3 and Q4 2021 Employee Retention Credit filed after January 31, 2024, are denied, and the IRS’s audit period for ERC claims is extended to a six-year statute of limitations.

     Tax Rates, Brackets & Standard Deduction

The individual tax rates and bracket structure enacted by the 2017 TCJA were set to expire after 2025. The OBBBA made these permanent and will remain at 10%, 12%, 22%, 24%, 32%, 35% and cap out at 37%. The top rate on long-term capital gains and qualified dividends remains at 20%, plus a 3.8% surtax. For tax year 2025, the standard deduction amounts are set at $15,750 for single filers, $23,625 for head- of-household filers, and $31,500 for married filing jointly.

Personal Exemption Repeal

The repeal of personal exemptions under the TCJA remains in effect indefinitely, with no reinstatement of pre-2017 exemption amounts.

    State and Local Tax (SALT) Deduction Cap

The SALT deduction cap rises from $10,000 to $40,000, with annual inflation adjustments through 2029. A phase-out begins at $500,000 of Adjusted Gross Income (AGI). The cap reverts to $10,000 in 2030.

Charitable Contributions

Starting in 2026, non-itemizing taxpayers may claim an above-the-line deduction of up to $1,000 for single filers and $2,000 for joint filers. Itemizing taxpayers must meet a floor of 0.5 percent of AGI. This means that a taxpayer with a $300,000 AGI would get no deduction for the first $1,500 of charitable donations on Schedule A. Also, the increased 60 percent contribution limit for cash-gift is permanently reinstated.

Child Tax Credit (CTC)

For 2025, the child tax credit increases to $2,200 per qualifying child and is indexed annually for inflation, thereafter. Income phase-out thresholds for the CTC are locked at $200,000 AGI for single filers and $400,000 AGI for joint filers.

   Senior Deduction for Age 65+

Taxpayers aged 65 and older qualify for an extra standard deduction of up to $6,000 for single filers and $12,000 for joint filers. This “senior deduction” phases out once AGI exceeds $75,000 for singles or $150,000 for joint filers and applies to tax years 2025 through 2028.

    Tip and Overtime Income Deductions

From 2025 through 2028, taxpayers earning tips may deduct up to $25,000 of tip income above the line, phasing out at Modified Adjusted Gross Income (MAGI) of $150,000 for singles and $300,000 for joint filers. A parallel above-the-line deduction allows up to $12,500 for overtime compensation for singles and $25,000 for joint filers, subject to the same phase-out thresholds. More guidance will be issued for employers responsibility for reporting.

   Auto-Loan Interest Deduction

Owners of new passenger vehicles assembled in the United States may deduct up to $10,000 of loan interest above the line for tax years 2025 through 2028. The deduction, which phases out at AGI above $100,000 for single filers and $200,000 for joint filers, requires a valid VIN, and excludes campers and RVs.

  1099 Reporting Thresholds

Beginning in 2026, the reporting threshold for Forms 1099-NEC and 1099-MISC rises to $2,000, with annual inflation adjustments thereafter. The reporting threshold for Form 1099-K reverts to $20,000 or 200 transactions, effective 2026.

  Green-Energy Credit Phase-Out

Electric vehicle credits for new and used vehicles will expire on September 30, 2025. EVs must be placed in service by the end of September 2025, not the end of 2032, as was the law previously. In addition, residential energy-efficiency credits expire on December 31, 2025.

Estate and Gift Tax Exemptions

The increased lifetime exemption created with the TCJA is made permanent. This was set to drop to about $7,000,000 in 2026. Effective in 2026, the unified estate and gift tax exemption increases to $15 million per person and will be indexed for inflation going forward. The generation-skipping transfer tax exemption rises in parallel.