Tax Alert: The One Big Beautiful Bill Act (OBBB) – Key Tax Provisions
Senate Version of Reconciliation Bill Becomes Law
On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act (OBBB). The Senate passed the legislation with a 51-50 vote on July 2 and the House passed the Senate’s version of the legislation on July 3 with a 218-214 vote. No Democrats voted for the legislation.
The final version of the OBBA extends the expiring individual and corporate tax cuts from the 2017 Tax Cuts and Jobs Act (TCJA), provides new temporary tax provisions that Trump promised during the campaign, makes changes to business and international taxes, and reduces energy tax credits.
Key provisions in the OBBA include:
Individual Tax Provisions
Makes TCJA rates permanent: The OBBA makes the TCJA rate and bracket changes permanent. The rate reductions were scheduled to expire at the end of 2025.
Maintains limits on itemized deductions: The law maintains the limits on itemized deductions for high earners.
Increases standard deduction: The law permanently increases the standard deduction by $750 to $15,750 for individuals, by $1,125 to $23,625 for heads of household, and by $1,500 to $31,500 for joint filers, all beginning in 2025. Amounts are then indexed for inflation.
Eliminates personal exemption: The law makes permanent the personal exemption elimination enacted by the TCJA.
Increases SALT deduction limit for five years: The law increases the limit on state and local tax deductions (SALT) from $10,000 to $40,000 for taxpayers earning up to $500,000. After five years, the limit returns to $10,000.
Pass-Through Entity Tax (PTET) deduction: The OBBA did not include any changes to the PTET deduction.
Increases and makes permanent the child tax credit: The law permanently increases the child tax credit by $200 to $2,200 per child, with the refundable portion remaining at $1,700.
Temporarily makes overtime pay deductible: The law allows a deduction of up to $12,500 for overtime pay for taxpayers with incomes of less than $150,000 for tax years 2025 through 2028. Base pay would remain taxable.
Temporarily makes tips deductible: The OBBA allows a deduction for tipped wages of up to $25,000 per taxpayer for tax years 2025 through 2028. An income phase out begins at $150,000. This applies to taxpayers in customarily tipped industries.
Increases standard deduction for seniors: The law increases the standard deduction for seniors by $6,000 subject to an income limitation for tax years 2025 through 2028. An income phase out begins at $75,000.
Temporarily makes auto loan interest deductible: The law makes the interest from auto loans fully deductible for tax years 2025 through 2028 for autos with final assembly in the United States. The deduction would be limited to $10,000 with an income phase out beginning at $75,000.
Repeals individual energy credits: The law repeals energy tax credits for individuals, including the electric vehicle tax credit and the residential energy efficiency credits in the Inflation Reduction Act (IRA).
Increases passthrough deduction: The law permanently extends the Section 199A passthrough deduction at 20%. It also increases the phase-in range for the limit to $75,000 for individuals and $150,000 for joint filers. There is a new $400 deduction for taxpayers with qualifying income of at least $1,000.
Permanently extends alternative minimum tax thresholds: The law extends the TCJA exemption and phaseout threshold for the alternative minimum tax (AMT). The phaseout is set at $1 million in 2026 and adjusted for inflation thereafter with a phase out rate of 50%.
Estate Tax Provisions
Increases estate tax exemption: The OBBA increases the estate tax exemption to $15 million beginning in 2026 and make it adjusted for inflation for subsequent years.
Business Tax Provisions
Permanently allows immediate R&E expensing: The law permanently allows business taxpayers to fully expense Section 174 domestic research and experimental (R&E) expenditures in 2025 or later. This reverses the requirement to capitalize and amortize them over five years.
Increases small business expensing: The law increases the Section 179 Small Business Expensing Cap from $1.25 million to $2.5 million per year. It also increases the phase-out threshold from $3.1 million to $4 million.
Allows bonus depreciation permanently: The law permanently allows 100% bonus depreciation for short-lived investments in 2025 or later. Bonus depreciation has been subject to a phase-down since 2022.
Reinstates EBITDA interest deduction limit: The bill would restore EBITDA-based limitation on business interest deductions under Section 163(j) for 2025 and later.
Reduces corporate charitable deduction: The law allows deductions for corporate charitable contributions only to the extent that contributions exceed 1% of a corporation’s taxable income. This begins in 2026.
Increases 1099-MISC reporting threshold for payments: The law increases the reporting threshold for Form 1099-MISC from $600 to $2,000 for payments in 2025 and after. The law also increases the threshold for Form 1099-K at $20,000 and 200 transactions.
New Bonus Depreciation for Qualified Production Property: The law implements a new Section 168(n), which allows an elective 100% depreciation deduction for qualified production property (QPP) acquired between January 20, 2025 and the end of 2028 and placed in service by the end of 2030.
Expands Qualified Small Business Stock (QSBS): The law expands Section 1202 QSBS stock acquired after July 4, 2025 through a tiered system of requirements to hold the stock.
Energy Tax Credits
Phases out major clean energy tax credits: The law phases out clean energy tax credits.
International Tax Provisions
Permanently increases GILTI deduction: The law increases the global intangible low taxed income (GILTI) deduction to 40%, replacing the scheduled post-2025 reduction to 37.5%. The law also modifies the GILTI calculation.
Increases FDII deduction: The law increases the foreign-derived intangible income (FDII) deduction to 33.34%, replacing the scheduled post-2025 reduction to 21.875%. The bill would also rename the FDII “foreign-derived deduction eligible income” (FDDEI). The law also modifies the FDII calculation.
Increases BEAT rate: The law also increases the base erosion and anti-abuse tax (BEAT) rate from the current 10% to 10.5%, avoiding the scheduled increase to 12.5% after 2025. It also makes permanent the treatment of research and other credits in calculating BEAT.
New 1% tax on remittances: The law imposes a new 1% excise tax on certain remittance transfers, effective January 1, 2026.