Trump to Sign Historic One Big Beautiful Bill Tax Cuts Into Law
“The One, Big, Beautiful Bill" (OBBB) successfully navigated both the House and Senate with narrow, party-line votes in both chambers. The legislation was sent to President Trump's desk July 3, meeting the party's self-imposed Independence Day deadline, and signed into law by President Trump on July 4, 2025.
The Congressional Budget Office projects the legislation will expand federal deficits by $3.4 trillion through 2034. The bill permanently extends most Tax Cuts and Jobs Act provisions, including reduced individual rates, expanded standard deductions, enhanced child tax credits, and increased estate tax exclusions.
Business-friendly provisions receiving permanent status include full 100% expensing, complete bonus depreciation, and the 20% passthrough deduction. The state and local tax deduction cap rises to $40,000 through 2029 before reverting to $10,000. Although initially eliminated in the House version, the SALT cap workaround has been preserved.
The legislation also provides enhanced disaster relief for 2025 federal disaster victims, including Los Angeles wildfire survivors, allowing casualty loss deductions without itemizing while eliminating the 10% AGI threshold and raising per-casualty limits to $500.
The package incorporates several signature Trump initiatives: tax relief for tip income, overtime compensation, and automotive loan interest. Despite widespread concerns over Senate modifications, the House ultimately embraced the legislation following the upper chamber's July 1 approval.
Summary Tax Policy Framework
We are actively monitoring this legislation and analyzing how these provisions will impact our clients' tax situations. While final enactment requires presidential signature, we don't anticipate changes to the legislation at this point.
We're staying ahead of implementation details and will proactively identify opportunities where these new rules could provide more favorable tax treatment for your specific circumstances. We encourage you to reach out to discuss how these changes may affect your particular situation.
Key Tax Provisions
State and Local Tax (SALT) Deduction
Current Framework: Limits deductibility of state and local income, sales, and property taxes to applicable limitation amounts (generally $10,000), expiring at year-end 2025.
OBBB Approach: Raises the SALT cap to $40,000 through 2029, implementing phase-out provisions for high-income earners above $500,000 ($250,000 for married filing separately). The cap reverts to $10,000 after 2029.
SALT Workaround Provisions
Current Framework: IRS guidance permits passthrough entities (partnerships and S corporations) to elect state tax payments at the entity level, providing owners with state tax credits that effectively circumvent SALT limitations.
OBBB Approach: While the House’s original version of the legislation eliminated the SALT workarounds, the final legislation omits any provision concerning the SALT workaround, thereby preserving existing workaround mechanisms, subject to future IRS guidance.
Bonus Depreciation and Expensing
Current Law: Provides bonus depreciation for qualifying property acquired after September 27, 2017, with expiration at year-end 2026.
OBBB Provision: Permanently allows 100% bonus depreciation for property acquired and placed in service on or after January19, 2025.
Business Asset Depreciation Enhancement
Current Law: Up to $1 million in qualifying property costs may be expensed.
OBBB Framework: Establishes $2.5 million maximum expensing, reduced proportionally when qualifying property costs exceed $4 million. Both thresholds receive inflation adjustments for taxable years beginning after 2025, applicable to property placed in service after December31, 2024.
Entertainment Industry Expensing
Current Law: Allows deduction of up to $15 million in production costs, requiring cost capitalization over time.
OBBB Enhancement: Expands special expensing rules to encompass sound recording costs up to $150,000 annually, qualifying sound recordings for bonus depreciation.
Production Property Depreciation
Current Framework: Requires most real property depreciation over 39 years.
OBBB Framework: Allows elective 100% depreciation for newly constructed qualified production property, encompassing nonresidential real property integral to qualified manufacturing, agricultural, chemical production, or refining operations. Effective for property with construction commencing after January 19, 2025, and before 2029, requiring service placement before 2033.
Estate and Gift Tax Modifications
Current Law: $13.99 million exclusion for decedents in 2025, expiring at year-end 2025.
OBBB Framework: Establishes $15 million exclusion beginning in 2026, with inflation indexing.
Individual Income Tax Rate Structure
Current Brackets: Seven-tier system ranging from 10% to 37%, with specific thresholds for married joint filers, expiring at year-end 2025.
OBBB Framework: Preserves seven-bracket structure (10%, 12%, 22%, 24%, 32%, 35%, 37%) with annual chained CPI indexing. Brackets under 24 percent get an additional year of inflation adjustment. Effective January 1, 2026.
Standard Deduction Enhancements
Current Levels: $29,200 (married filing joint), $21,900 (head of household), $14,600 (single), expiring at year-end 2025.
OBBB Framework: Permanently establishes $30,000 (married filing joint), $23,625 (head of household), $15,750 (single), with inflation adjustments effective January 1, 2025
Business Interest Expense Limitations
Current Framework: Net interest expenses limited to 30% of adjusted taxable income.
OBBB Provision: Permanently reinstates EBITDA cap for taxable years beginning after December 31, 2024, with motor vehicle definition modifications and capitalization ordering rule adjustments. Excludes Subpart F and GILTI from taxable income calculations for Section 163(j) purposes.
Research and Development Expensing
Current Requirements: Taxpayers must capitalize and amortize most specified R&D expenditures over five years (fifteen years for foreign research), effective after 2021.
OBBB Permanency: Permanently allows immediate deduction of domestic research expenditures paid or incurred in taxable years beginning after December 31, 2024. Small business taxpayers with annual gross revenues of $31 million or less may apply changes retroactively to 2022. Foreign R&D expenditures remain subject to 15-year capitalization.
Qualified Business Income Deduction
Current Framework: 20% deduction for qualified business income from partnerships, S-corporations, or sole proprietorships, plus 20% of aggregate qualified REIT dividends, cooperative dividends, and publicly traded partnership income. Expires at year-end 2025.
OBBB Preservation: Permanently extends 20% deduction, expanding phase-in range by increasing $50,000 (non-joint) and $100,000 (joint) amounts to $75,000 and $150,000, respectively.
Opportunity Zones Program
Current Structure: Allows elections for deferral, basis adjustments, or capital gains exclusions, expiring at year-end 2026.
OBBB Framework: Establishes permanent OZ policy maintaining TCJA designation processes with modified eligibility requirements. Requires gain to be recognized in earlier of year of disposition or 5 years after investment. Increases investment basis by 10% (30% for qualified rural opportunity funds) of deferred gain when held for 5 years.
Executive Compensation Limitations
Current Framework: Deduction for compensation with respect to covered employees of publicly held corporations limited to $1 million annually.
OBBB Modification: Adds entity aggregation rules for purposes of the deduction disallowance.
Private Foundation Taxation
Current Structure: Tax-exempt private foundations are subject to 1.39% excise tax on net investment income, plus taxes on excess business holdings.
OBBB Position: No changes to current structure. The House's original graduated excise tax proposal based on foundation assets was omitted from the final legislation.
Alternative Minimum Tax (AMT) Modifications
Current Framework: Exemption amounts of $133,300 (joint filers) and $85,700 (individuals), with phase-out thresholds of $1,218,700 (joint) and $609,350 (individuals), adjusted for inflation using chained CPI. Expires at year-end 2025.
OBBB Framework: Repeals TCJA expiration while reverting inflation adjustment phase-outs to 2018 levels of $500,000 ($1 million for joint filers) with inflation indexing.
Itemized Deduction Modifications
Miscellaneous Expenses: Current law eliminates deductions for miscellaneous expenses while allowing educator expense deductions, expiring at year-end 2025. OBBB maintains the prohibition on miscellaneous expense deductions.
Overall Limitations: Current law imposes no limitation on overall itemized deductions, expiring at year-end 2025. OBBB caps overall itemized deductions at $0.35 per dollar for individuals in the top tax bracket, effective after December 31, 2025.
Mortgage Interest Deduction
Current Framework: $750,000 principal limit on new mortgages with no home equity loan interest deduction, expiring at year-end 2025.
OBBB Permanency: Makes the $750,000 principal limit and home equity loan interest prohibition permanent, and treats some mortgage insurance premiums on acquisition indebtedness as qualified residence interest.
Charitable Contributions
Current Framework: 60% AGI cash contribution deduction limit for qualifying charities, expiring at year-end 2025.
OBBB Provision: Creates permanent non-itemizer deduction of up to $1,000 for single filers ($2,000 for married filing jointly), effective after 2025.
Specialized Industry Provisions
Professional Sports: No changes to current law. The House's original franchise amortization limitation was excluded from the final legislation.
Energy Credits: OBBB generally repeals energy-efficient home credits and residential clean energy credits for property placed in service after 2025.
Clean Vehicle Credits: OBBB generally repeals credits for vehicles after September 30, 2025.
Litigation Funding: OBBB subjects third-party litigation proceeds to 31.8% taxation.
Business Loss Limitations
Excess Business Losses: Current law treats unallowed excess business losses as net operating losses carried over to subsequent years under applicable carryover rules. OBBB makes permanent the limitation on excess business losses and increases the value of allowable loss carryovers or carrybacks.
Noncorporate Taxpayer Limitations: Current law prohibits noncorporate taxpayers from claiming excess business losses but allows future use as net operating loss carryforwards, expiring at year-end 2028. OBBB makes the limitation permanent and provides that losses disallowed after 2024 are considered in determining excess business losses in subsequent years.
Information Reporting and Compliance
Third-Party Reporting: Current law requires reports from third-party payors when seller income exceeds $600 annually. OBBB reinstates pre-2021 thresholds requiring reporting when transactions exceed $20,000 or surpass 200 transactions.
Wagering Loss Computations: Current law clarifies that wagering transaction losses may be deducted only to the extent of gains from such transactions, expiring at year-end 2025. OBBB makes this permanent, and limits "losses from wagering transactions" to 90% of such losses.
Personal Tax Relief Provisions
Personal Exemptions: Eliminates personal exemptions (none exist until 2026 under current law).
Personal Casualty and Theft Losses: Current law suspends deductions for personal casualty and theft losses except for federally declared disasters, expiring December 31, 2025. OBBB makes permanent that personal casualty losses from federally declared disaster areas are offset by individual personal casualty gains, and expands coverage to certain state-declared disaster areas.
Enhanced Disaster Relief for 2025
The legislation establishes enhanced disaster relief provisions for victims of federally declared disasters occurring in 2025 and within 60 days preceding OBBB enactment, provided the disaster incident period concludes within 30 days of the bill's effective date.
This expanded relief directly benefits victims of the Los Angeles and Kentucky wildfires, as well as storm-affected communities across states experiencing federally declared disasters in 2025. Qualifying taxpayers may claim personal casualty losses regardless of whether they itemize deductions, while eliminating the traditional 10% adjusted gross income threshold and increasing the per-casualty limit from $100 to $500.
Novel Tax Relief Provisions
Tip Income Relief: OBBB provides up to $25,000 deduction for qualified tips received by itemizers and non-itemizers, phasing out for incomes above $150,000, allowed from 2025-2028.
Overtime Compensation: OBBB provides up to $12,500 deduction for qualified overtime compensation, phasing out for incomes above $150,000, allowed from 2025-2028.
"Trump" Savings Accounts: Allows $5,000 annual deposits into tax-exempt accounts, providing one-time $1,000 credits for qualifying children born between 2024-2029.
Automotive Interest Deduction: Creates up to $10,000 annual deduction for qualified car loan interest on U.S.-assembled vehicles for personal use (excludes campers and motorhomes), phasing out for married couples with income exceeding $200,000 ($100,000 for single individuals), expiring at year-end 2028.
This summary encompasses the major OBBB tax policy initiatives most relevant to our clients. All provisions remain subject to presidential action and potential future legislative modification.
This Toplitzky&Co publication provides information and comments on tax issues and developments of interest to our clients and friends. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide tax advice. Readers should seek specific tax advice before taking any action with respect to the matters discussed herein.
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