Congress has officially passed the “One Big Beautiful Bill,” a wide-ranging tax and spending package that will take effect beginning in 2025. The legislation—approved by both the House and Senate on July 3—makes significant changes to individual and business tax policy, modifies existing credits and deductions, and includes several healthcare and energy-related provisions.
The bill is expected to be signed into law by the President on July 4, 2025. Here’s what taxpayers and business owners need to know about the final version.
Highlights for Individual Taxpayers
The bill extends and modifies several provisions originally enacted under the Tax Cuts and Jobs Act, while introducing new deductions and credits.
- Existing tax rates and brackets would be made permanent
- Standard Deduction Increase
Beginning in 2025:- $15,750 for single filers
- $23,625 for heads of household
- $31,500 for married joint filers
All amounts will be indexed for inflation annually.
- No Tax on Tips and Overtime
Provides temporary above-the-line deductions for tips ($25,000) and overtime pay ($12,500); phases down based income levels. - Deduction for Car Loans
Provides temporary deduction – up to $10,000 – for car loan interest associated with vehicles, the final assembly of which occurred in the U.S.; phases down based on income levels - Senior Deduction
A new $6,000 “bonus” standard deduction for taxpayers age 65 and older applies for 2025–2028. The deduction phases out for higher‑income filers; detailed phase‑out thresholds will be set by Treasury regulations. - Child Tax Credit
The Child Tax Credit is set at $2,200 per qualifying child, with up to $1,700 refundable. The credit is indexed for inflation in future years. Only one spouse in a married filing joint return must provide a valid SSN. - SALT Deduction
The cap on the state and local tax deduction increases to:- $40,000 for 2025
- $40,400 for 2026
- Increased 1% annually through 2029 It reverts to $10,000 in 2030. A phase out begins at $500,000 of MAGI in 2025 (indexed thereafter).
- Passthrough entity tax (PTET)
Is exempt from the SALT cap. - Itemized Deductions
The overall cap on itemized deductions (Pease limitation) would return but modified, limiting the benefit of deductions for higher earners. - Excess Business Loss Limitation
The cap on using business losses to offset other income would be made permanent. - Estate and Gift Tax Exemption
The exemption would be locked in at $15 million per individual starting in 2026, adjusted for inflation going forward. - Qualified Small Business Stock (QSBS)
The exclusion of gain is phased in based on holding period: 50% for stock held at least 3 years, 75% for 4 years, and 100% for 5 years or more. For stock acquired on or before the date of enactment, the prior rule of a 50% exclusion (if held over 5 years) still applies, unless other exceptions are met. These amendments generally take effect for taxable years beginning after the enactment date of the Act - Reporting Requirements for Third-Party Network Transactions
This change restores the previous threshold, requiring third-party settlement organizations (such as Venmo, PayPal, and others) to issue Form 1099-K only when a payee receives over $20,000 in gross payments and engages in more than 200 transactions in a calendar year. The repeal reverses the lower threshold of $600, providing relief to casual sellers and individuals who use payment platforms for non-business purposes, and reducing the reporting burden on both taxpayers and the IRS. - Other TCJA items made permanent — Many other changes made by TCJA would also be made permanent without significant modifications, including:
- Alternative minimum tax (AMT) — The increased AMT exemption and phase-out thresholds
- Mortgage interest deduction — The cap on mortgage interest to loans of up to $750,000 of acquisition indebtedness
- Casualty loss deductions — Limitations on personal casualty losses attributable to federally declared disasters
- Miscellaneous itemized deductions — Repeal of miscellaneous itemized deductions
- Wagering losses — Losses from wagering transactions would be limited to 90% of the amount of such losses, only to the extent of winnings.
- Charitable deduction for non-itemizers — Non-itemizers can claim a $1,000 for single filers or $2,000 for MFJ for certain cash charitable contributions starting in 2026.
Key Business Provisions
- Qualified Business Income (QBI) Deduction
The 20% deduction for pass‑through income is made permanent, increases the phase‑out thresholds to $150,000 (married joint) and $75,000 (single), indexed for inflation, and a new minimum $400 deduction is added for taxpayers with at least $1,000 of QBI. - Bonus Depreciation
Restored to 100% for property placed in service on or after January 19, 2025; permanently extended and broadly applicable. - Section 179 Expensing
The maximum Sec. 179 expensing amount increases to $2.5 million, with a $4 million phase‑out threshold; both indexed for inflation. - Business Interest Limitation (Section 163(j))
Reverts to an EBITDA-based calculation beginning in 2025, with no sunset provision. - Qualified Opportunity Zones
Permanently renews and enhances the Opportunity Zones program under Section 70421. This provision is part of a broader set of community development tax incentives designed to spur investment in underserved areas. - Employee Retention Credit (ERC)
Claims for Q3 and Q4 of 2021 are disallowed if they are filed after January 31, 2024; enforcement and penalty provisions are strengthened. - Form 1099 Reporting
The information‑reporting threshold rises from $600 to $2,000 with respect to payments made after December 31, 2025. The $2,000 threshold is indexed for inflation beginning in 2027.
Energy and Tax Credit Provisions
- Clean Energy Credit Phaseouts
Multiple clean energy incentives are terminated or scaled back:- Clean Vehicle Credit (Sec. 30D): Terminates for vehicles acquired after September 30, 2025
- Alt. Fuel Refueling Property (Sec. 30C): Ends for property acquired after June 30, 2026
- Residential Clean Energy (Sec. 25D): Ends after December 31, 2025
- Commercial Clean Vehicles (Sec. 45W): Ends for vehicles acquired after September 30, 2025
- Clean Electricity Credits (Secs. 45Y & 48E): Wind/solar facilities placed in service after 2027 lose credits; other facilities after 2032
- New Energy Efficient Home Credit (Sec. 45L): Ends for homes acquired after June 30, 2026
- Energy Efficient Commercial Buildings Deduction (Sec. 179D): Ends for property that begins constructions after June 30, 2026
- New Markets Tax Credit (NMTC)
Permanently extended.
What’s Next?
- Presidential Signature
The President is expected to sign the bill into law on July 4, 2025. - IRS and Treasury Guidance
Implementation guidance will follow, especially for provisions like the SALT cap, QBI deduction, and refundable credits. - Effective Dates
Most provisions take effect for tax years beginning January 1, 2025. Some temporary measures phase out by 2029 or 2030.
Looking Ahead
The “One Big Beautiful Bill” brings major revisions to federal tax law—many permanent, others temporary. While individual taxpayers will see a mix of expanded deductions and new limits, businesses benefit from permanence in depreciation and QBI treatment. Taxpayers should begin working with advisors to evaluate the effects on 2025 planning. ARB will continue to monitor and report on implementation developments as agencies issue guidance.
For background on how the bill developed, see ARB’s previous coverage:
- What Is in the One Big Beautiful Bill? A General Overview of the Proposed Tax Package
- Private Foundation Excise Tax Changes in the One Big Beautiful Bill—What Decision Makers Need to Know
- What’s in the Senate Version of the One Big Beautiful Bill?
- U.S. Senate Passes the One Big Beautiful Bill — What Changed and What’s Next
John Hadwen is a Principal at ARB. He specializes in providing individuals and businesses with comprehensive
tax compliance and consulting services related to closely-held business, manufacturing, construction & real estate, and professional services firm taxation. Prior to joining ARB, John was a Tax Principal at a large, regional CPA firm.
