Last week, Congress passed a landmark piece of tax legislation referred to as the “One Big Beautiful Bill” (H.R.1). This bill includes sweeping budget and tax changes that will have a significant impact on many Americans, likely including you. We’ve broken down a number of key elements of the bill below to help you understand what effect this will have on you and your 2025 taxes.
Notable Tax Cuts and Updates
Many of the tax elements of the bill renew, make permanent, or modify components of the 2017 Tax Cuts and Jobs Act. In particular, the following pieces are particularly relevant:
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Tax brackets from 10% to 37% which were set to expire were made permanent.
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The 2025 standard deduction will go up to $31,500 for married and joint filers, $23,625 for heads of household, and $15,750 for single or separate filers, all indexed to inflation.
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A $6,000 deduction for those over 65 years old for 2025-2028, with phaseouts for those with income over $150,000 for joint filers and $75,000 for singles.
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The deduction for classroom expenses for educators was expanded to include coaches, however all other miscellaneous deductions for employment or investment expenses were permanently eliminated.
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Mortgage insurance premium deductions are now permanent, subject to income level phaseout.
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The cap on deducting state and local taxes (SALT) will increase to $40,000 this year, with annual increases of 1% through 2029. This will then fall to $10,000 in 2030. The cap will be reduced by 30% of excess income over $500,000 of Adjusted Gross Income (AGI) which also indexes by 1% each year.
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NO reductions or changes in the current State PTET SALT workaround options.
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The child tax credit will increase by $200, to $2,200 per child, indexed for inflation.
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The estate and gift tax exclusion will increase to $15.0 million for decedents ($30.0 million for married couples) in 2026.
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Employees under $150,000 of AGI will have the option to deduct up to $25,000 of eligible tip income, and employees under $100,000 of AGI can deduct up to $12,500 of overtime pay (the amount in excess of the hourly rate) for 2025 through 2028, even if not itemizing deductions. These amounts remain subject to Social Security and Medicare tax.
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Beauty industry employers can now claim social security tax credits on employee tips similar to restaurants.
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Taxpayers purchasing a new car after 2024 can now deduct up to $10,000 of their loan interest, even if not itemizing, with phaseouts for those with income over $200,000 for joint filers and $100,000 for singles. There are various limitations such as type and weight of vehicles and final assembly of the vehicle occurring in the US, among others.
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Newborns now receive a $1,000 tax advantaged account at birth, which functions similarly to an IRA, but with its own set of benefits and rules.
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529 Plans expand to cover elementary, secondary, and homeschool expenses.
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“Above the line” tax deduction for charitable donations to taxpayers who do not itemize, of as much as $2,000 for joint filers and $1,000 for singles.
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Cap on wagering/gambling loss deductions; now limited to 90% of wagering/gambling income.
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Taxpayers in the 37% (or higher) marginal bracket will see the tax-rate benefit of itemized deductions limited to 35%.
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Changes for Small Businesses and Corporations
There are also pieces of the One Big Beautiful Bill that are relevant to businesses and corporations rather than individuals. Some highlights:
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International provisions introduced in the Tax Cuts and Jobs Act were made permanent with adjusted rates of 33.34% for FDII and 40% for GILTI.
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Base Erosion Minimum Tax reduces from 12.5% to 10.5% after 2025.
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Section 179 deductions for small businesses purchasing equipment will increase.
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Qualifying capital investments in property made after January 19th, 2025 can be fully expensed (return of the 100% tax bonus depreciation).
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The 20% QBI deduction for S-corps, sole proprietorships, and partnerships has been made permanent and expanded.
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R&D expenses can once again be fully deducted; small businesses can elect to currently claim previously capitalized expenses going back to 2022.
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The business interest expense deduction limitations have been eased, restoring the addback of depreciation and amortization in determining the threshold.
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Reductions in Green Energy Credits
Most “green” energy tax credits have been reduced/eliminated to help cover the bill’s $5 trillion cost, including clean vehicle credits, alternative fuel property credits, and energy efficient home improvement/residential credits.
What Should I Do?
The One Big Beautiful Bill makes permanent many elements of the Tax Cuts and Jobs Act while adding new deductions, expanding existing programs, and cutting green energy credits.
Don’t wait until next year to get educated on how these enormous changes might affect your family business. Please contact your advisor at Sweeney Conrad today to see what we can do to help you take advantage of the bill and address any questions you may have.