Congress has enacted the One Big Beautiful Bill Act (OBBBA, H.R. 1), a sweeping tax reform law that brings significant changes for businesses and individuals starting in 2025. Below is a summary of the most important provisions.  

Key Provisions for Businesses

• Full Expensing for Business Property:
  100% bonus depreciation for qualified business property is made permanent (a 60% increase for 2025).

• Full Expensing of Domestic R&D:
  Domestic research and experimental expenditures can be fully expensed immediately in the year incurred beginning after December 31, 2024; foreign R&D remains amortized over 15 years.  Special transition rules allow certain small businesses to elect retroactive application of the new expensing rules back to amounts paid or incurred after December 31, 2021, subject to specific requirements.

• Section 179 Expensing:
  The expensing limit is increased to $2.5 million, with a phaseout at $4 million, both indexed for inflation.

• Advanced Manufacturing Investment Credit:
  The credit is increased to 35% of qualified investment.

• New 100% Deduction for Qualified Production Property:
  The OBBB Act adds new Code section 168(n), which allows taxpayers to elect to deduct 100% of the cost of “qualified production property” (QPP) in the year the taxpayer places the QPP in service, which includes non-residential real property.

Key Provisions for Individuals and Families

• Standard Deduction Increased:
  The standard deduction is permanently increased and further enhanced. For 2025, the standard deduction amounts are:

• $32,000 for Married Filing Jointly (MFJ)

• $23,625 for Heads of Household

• $15,750 for Single filers
  These amounts will be indexed for inflation in future years.

• Individual Tax Rates:
  The lower individual tax rates introduced by the 2017 Tax Cuts and Jobs Act (TCJA) are made permanent, with no expiration date.

• Personal Exemptions:
  Personal exemptions remain suspended. However, seniors age 65 and older may claim a new $6,000 deduction per qualifying individual through 2028, subject to income phaseouts and Social Security number requirements.

• State and Local Tax (SALT) Deduction:
  The SALT deduction cap is increased to $40,000 ($20,000 for married filing separately) for 2025, indexed for inflation, subject to certain income limitations. The cap reverts to $10,000 after 2029.

• Child Tax Credit:
  The child tax credit is permanently increased to $2,200 per qualifying child, with annual inflation adjustments and stricter Social Security number requirements for both the taxpayer and the child.

• Estate and Gift Tax Exemption:
  The exemption is permanently increased to $15 million per individual (indexed for inflation), effective for estates and gifts after 2025.

• Alternative Minimum Tax (AMT):
  The increased AMT exemption and phaseout thresholds are made permanent, with modifications to inflation adjustments and phaseout rates.

• Mortgage Interest Deduction:
  The $750,000 cap on mortgage interest deduction is made permanent, and mortgage insurance premiums are now treated as interest.

• Charitable Contributions:
  The above-the-line charitable deduction is increased to $2,000 for joint filers ($1,000 for singles) and made permanent. Only contributions exceeding 0.5% of AGI are deductible, with new carryforward rules.

• Miscellaneous Deductions:
  The suspension of miscellaneous itemized deductions has been made permanent.

New and Temporary Deductions

·       No Tax on Tips:
For 2025–2028, up to $25,000 in qualified tips per year may be deducted, subject to income phaseouts and new reporting requirements.

·        No Tax on Overtime:
For 2025–2028, up to $25,000 in qualified overtime pay per year (joint filers) may be deducted, subject to income phaseouts.

·        Car Loan Interest Deduction:
For 2025–2028, up to $10,000 per year in interest on loans for new U.S.-assembled passenger vehicles is deductible, subject to income phaseouts.

Education and Family Benefits

• 529 Plan Expansion:
  529 accounts can now be used for a broader range of K-12 expenses (up to $20,000/year) and for postsecondary credentialing programs.

• Adoption Credit:
  Up to $5,000 of the adoption credit is now refundable, with inflation adjustments.

• Dependent Care Benefits:
  The exclusion limit for employer-provided dependent care assistance is increased to $7,500 ($3,750 for married filing separately).

Other Notable Changes

• Opportunity Zones:
  Opportunity Zone designations and benefits are extended and enhanced, with new reporting requirements and rural opportunity funds.

• Reporting Thresholds:
  The 1099-MISC/NEC reporting threshold is increased to $2,000, indexed for inflation. The de minimis reporting threshold for third-party network transactions is restored to $20,000/200 transactions.

• Energy Credits:
  Many clean energy credits and deductions are terminated or restricted, with new limitations for foreign ownership and materials.

Please contact our office to discuss how these changes may affect your 2025 tax planning and filing.

This summary is for informational purposes only and does not constitute tax advice. For detailed guidance, please consult with your tax advisor or our office.