On July 4, President Trump officially signed the One Big Beautiful Bill Act (OBBBA) into law. This expansive 870-page legislation makes significant changes to the U.S. tax code, building on the foundation of the Tax Cuts and Jobs Act (TCJA) and implementing several of the president’s 2024 campaign promises. While it enacts several permanent provisions, many other updates are temporary or phase out over time. The legislation also notably rolls back various clean energy tax incentives introduced in recent years.

The OBBBA introduces broad-reaching updates that affect both individual taxpayers and businesses. Here’s a high-level overview of some of the most impactful changes.

Highlights for Individual Taxpayers

  1. Tax Rates & Deductions: The TCJA’s seven-bracket individual income tax structure (10%, 12%, 22%, 24%, 32%, 35%, and 37%) is now permanent. The standard deduction will also remain significantly increased, with 2025 levels set at $15,750 (single), $23,625 (head of household), and $31,500 (married filing jointly), and adjusted annually for inflation.
  2. Credits & Exemptions: The child tax credit increases permanently to $2,200, with future inflation indexing. The personal exemption remains eliminated, and a new refundable portion of the adoption credit (up to $5,000) is now included.
  3. SALT Deduction: For 2025 through 2029, the deduction cap for state and local taxes (SALT) will temporarily increase to $40,000 (with 1% annual inflation index), before reverting to the $10,000 cap in 2030.  A phaseout for modified AGI over $500,000 (with 1 % annual index) will reduce the increased deduction but not below $10,000.  Also, the PTET SALT deduction remains in place.
  4. Home-Related Deductions and Credits: The mortgage interest deduction cap is permanently set at $750,000, though mortgage insurance premiums are now considered deductible. Interest on home equity loans remains nondeductible.  Energy Efficient Home Improvement Credit and Residential Clean Energy Credit are terminated after December 31, 2025 and New Energy Efficient Home Credit terminates after June 30, 2026.
  5. New Temporary Deductions (2025–2028):
    • Up to $25,000 above-the-line deduction for tipped income in eligible industries
    • Deduction of up to $12,500 (single) or $25,000 (married) for qualifying overtime income
    • Deduction for interest on loans for certain American-made vehicles (up to $10,000)
    • A bonus deduction of $6,000 for taxpayers age 65 and older
  6. Charitable Contributions: Starting in 2026, non-itemizers may deduct up to $1,000 ($2,000 for joint filers) for charitable giving. Itemizers will be subject to a new 0.5% minimum floor on charitable deductions.
  7. Other Notable Changes:
    • Estate and Gift tax exemption increases to $15 million (indexed for inflation) in 2026.  The increased limit is permanent.
    • Creation of “Trump Accounts” to provide newborns with $1,000 at birth
    • Expansion of 529 plan eligible expenses
    • Elimination of several clean energy-related vehicle credits after December 31, 2025
    • Reduction in itemized deductions for top-bracket taxpayers beginning in 2026

Key Business Provisions

  1. Depreciation & Expensing:
    • 100% bonus depreciation is permanently restored for qualified property acquired after January 19, 2025.
    • For tax years beginning after 2024, the Section 179 expense limit increases to $2.5 million (with a $4 million phaseout threshold), indexed for inflation.
    • A new deduction for “qualified production property” is introduced for assets constructed after January 19, 2025, and before January 1, 2029, and placed in service prior to 2031.
  2. Pass-Throughs & R&D:
    • The 20% Qualified Business Income (QBI) deduction for qualifying domestic trade or business income from passthrough entities is made permanent and expanded.
    • Taxpayers are allowed to immediately deduct domestic R&D expenditures incurred after December 31, 2024. For qualifying small businesses, this change from the TCJA mandated capitalization and amortization may be applied retroactively to 2022-2024. Foreign R&D must continue to be capitalized and amortized over 15 years.
  3. Employer Credits & Deductions:
    • Higher employer-provided child care credit (up to $500,000 or $600,000 for small businesses)
    • Certain employer student loan repayment benefits are permanently excluded from employee taxable income
    • Employer credit for paid FMLA leave is made permanent
  4. Opportunity Zones & Markets:
    • The Qualified Opportunity Zone program is enhanced and made permanent.
    • The New Markets Tax Credit is extended indefinitely.
  5. International & Other Provisions:
    • FDII, GILTI, and BEAT provisions are extended permanently.
    • The qualified small business stock gain exclusion is expanded.
    • Clean energy tax incentives, such as the commercial clean vehicle credit and Section 179D, are repealed.
    • Refunds will be denied for certain late-filed Employee Retention Credit claims submitted after January 31, 2024.

Join Us for Our Upcoming Webinar

To help you navigate the tax changes introduced by the OBBBA, Maxwell Locke & Ritter will host a live webinar on August 5th. Our in-house tax professionals will walk through the most significant updates, share practical planning tips, and answer your questions about how these changes may impact both individuals and businesses. Register for the webinar here.

Stay Informed, Stay Ahead

With many OBBBA provisions taking effect in 2025 and others phasing in or out over the coming years, proactive planning is more important than ever. Reach out to your ML&R team to discuss how these changes could impact your specific tax situation.