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SuraLinkWritten by Todd Martin, IV, Senior Manager and Jan Lewis, Member
So, Was It a Beautiful Day for Taxpayers?
On July 4, while most of us were busy flipping burgers and lighting sparklers, Congress and President Trump gave the ultimate birthday present to America — signing the sweeping One Big Beautiful Bill Act (OBBBA) into law. The bill locks in many of the TCJA’s key provisions and adds fresh deductions and incentives that will keep businesses, individuals, and advisors busy, while including many non-tax provisions as well.
If you caught our recent article on the Senate’s version of this bill, you’ll recognize some familiar highlights, along with a handful of final tweaks. Below, we’ve broken it all down for businesses and individuals, showing what’s genuinely helpful and what might cause a little post-birthday heartburn.
For Businesses
Beautiful Provisions:
- 100% Bonus Depreciation Made Permanent
Businesses can permanently deduct the entire cost of qualified property – now including nonresidential buildings used in manufacturing, refining, or similar activities. This provision is effective for assets placed in service after 1/19/25. - Section 179 Expensing Boosted
Expensing limit jumps to $2.5 million for 2025, phasing out at $4 million, both indexed for inflation - Research & Development (R&D) Expensing Restored
The TCJA’s unpopular rule forcing businesses to amortize domestic R&D over five years is gone. OBBBA permanently restores immediate deductions for U.S.-based research costs. However, foreign-based research costs will continue to be amortized over fifteen years. - Interest Deductions Loosened (Section 163(j))
Amortization, depreciation, and depletion are once again excluded from Adjusted Taxable Income (ATI) calculations, allowing more generous interest deductions. - Section 199A Deduction for Qualified Business Income Made Permanent
The 20% deduction for qualified business income is locked in, with a new minimum $400 deduction for taxpayers with at least $1,000 in qualifying income. - Opportunity Zones Extended & Enhanced
Program becomes permanent, with special incentives for rural zones and increased basis step-ups for long-held property.
Ugly Provisions:
- ERC Refunds Cut Off & Enforcement Increased
No new Employee Retention Credit refunds are allowed for claims filed after January 31, 2024. Also watch for extended six-year lookbacks and steeper penalties on preparers and promoters. - Early Phaseout of Energy Credits
Many clean energy incentives from the Inflation Reduction Act will sunset earlier than planned, with stricter domestic content rules. Businesses (and Individuals too) who are banking on these credits may find projects no longer viable or may need to rush to meet deadlines before they expire. - New Floor on Corporate Charitable Deductions
The OBBBA imposes a 1% floor on corporate charitable contributions, meaning a C corporation can only deduct donations to the extent they exceed 1% of taxable income, capped at the usual 10%.
For Individuals
Beautiful Provisions:
- Temporary SALT Cap Lifted
The cap on state and local tax (SALT) deductions rises to $40,000 for 2025, then slowly phases down. Further, the law preserves state passthrough entity tax (PTE) workarounds, meaning S corporation and partnership owners can still bypass the federal SALT cap by paying state income taxes at the entity level. The $40,000 cap is phased out for any taxpayer with more than $500,000 of gross income, so high income taxpayers will still have to live with a $10,000 cap. - Deduction for Overtime & Tips
Up to $25,000 in tips and $12,500 in overtime pay (doubled for joint filers) is deductible through 2028, giving workers in hospitality, retail, and related industries a direct break. This is effective for 2025 and could create refunds for taxpayers when 2025 tax returns are filed next spring. These special deductions from income are phased out for individual taxpayers with adjusted gross income starting at $150,000 ($300,000 for joint filers.) - Deduction for Auto Loan Interest
Up to $10,000 in interest on “qualified” personal vehicle loans is deductible starting in 2025 (if the vehicle is assembled in the U.S.), with phaseouts starting at $100,000/$200,000 gross income. - Extra $6,000 Deduction for Seniors
A new deduction of $6,000 for individuals over 65 is effective for tax years 2025-2028, phasing out for taxpayers with income above $75,000 ($150,000 for joint filers.)
- Above-the-Line Charitable Deduction Returns
The OBBBA introduces a new above-the-line charitable deduction, allowing taxpayers who don’t itemize to deduct up to $2,000 (married) or $1,000 (single) in charitable contributions each year. - Estate & Gift Exemption set at $15 Million per person with portability for spouse
The lifetime exemption is modestly increased and locked in but remains largely the same structure as the TCJA. - Increased deduction for Dependent Care expenses, Increased Dependent Care Tax Credit for some, new Trump Accounts and Increased Child Tax Credit
These provisions primarily take effect in 2026, but parents could get extra benefits from these modifications to current tax provisions.
Ugly Provisions:
- SALT Cap Reversion
While taxpayers will enjoy the temporary bump in 2025, the cap phases down and returns to $10,000 by 2030 — potentially catching many off guard without careful long-term planning. - Itemized Deductions
The bill repeals the old “Pease limitation” but installs a new (just as confusing) limit on itemized deductions for high income taxpayers, permanently suspends miscellaneous itemized deductions (except for educator expenses), changes the rules regarding the deductibility of gambling losses, and requires that (itemized) charitable contributions must exceed 0.5% of your AGI before you get a deduction.
Okay… Now What?
Of course, this is just the tip of the iceberg. The OBBBA also includes new credits for contributions to scholarship granting organizations, enhanced opportunity zones, changes to charitable giving, and a host of complex international provisions and rules affecting large tax-exempt institutions.
Frankly, we’d need a lot more caffeine (and an unreasonable amount of your attention span) to break down every new nuance. That’s why it’s more important than ever to start the conversation now with your BMSS tax professional or call (833) CPA-BMSS, so we can tailor strategies to your unique business or personal situation before year-end deadlines may limit your options.
If you’re one of the dozens of individuals wanting more, we’ve got some great news for you! We’re kicking off our webinar series with a comprehensive session on the OBBBA, covering the law’s major impacts on individuals, businesses, estates, and more, beginning this Thursday, July 10. Register here now!