On July 4th, President Trump signed into law H.R. 1 – the “One Big Beautiful Bill Act” (BBB), a sweeping piece of tax legislation that reshapes key provisions of the Internal Revenue Code. The BBB extends, modifies, or makes permanent several tax changes introduced initially under the Tax Cuts and Jobs Act (TCJA), while also introducing a number of new measures.
Below is a summary of the most significant changes likely to impact individuals, families, and businesses.
Individual Key Provisions
- Tax Rates – The BBB made the current income tax rates permanent.
- Increased Standard Deduction – Starting in 2025: $31,500 for joint filers, $23,625 for heads of household, $15,750 for all others. (Amounts indexed for inflation thereafter.)
- Personal Exemptions – The personal exemption remains eliminated, with one exception: taxpayers age 65 and older may deduct $6,000, phasing out at $75,000 (single) and $150,000 (married filing jointly). This exemption expires after December 31, 2028.
- Child Tax Credit – Made permanent with a maximum of $2,200 (inflation-adjusted starting in 2026).
- Qualified Business Income – The Qualified Business Income deduction (aka Section 199A deduction) is made permanent at the 20% rate.
- Estate Tax Exemption – Permanently increased to $15 million for gifts made after December 31, 2025.
- Mortgage Interest Deduction – Permanently limited to interest on the first $750,000 of acquisition debt ($375,000 MFS); home equity interest is permanently disallowed.
- The State and Local Tax (SALT) Cap – Temporarily increased to $40,000 through 2029 (indexed for inflation). Begins phasing out at MAGI over $500,000 but never falls below $10,000. This provision takes effect for years after December 31, 2024.
- No Tax on Tips – Up to $25,000 of cash tips received by workers in tipping industries can be deducted. The deduction phases out with Modified Adjusted Gross Income of $150,000 ($300,000 MFJ).
- No Tax on Overtime –Deduction of up to $12,500 ($25,000 MFJ) for qualified overtime pay. The deduction phases out with Modified Adjusted Gross Income of $150,000 ($300,000 MFJ). ‘Qualified overtime pay’ means overtime compensation paid to an individual in excess of the regular rate of pay required under Sec. 7 of the Fair Labor Standards Act of 1938.
Business Key Provisions
- Bonus Depreciation – Permanently extended at 100% for property acquired after January 19, 2025.
- Research and Experimental Expenditures – Immediate deduction allowed for domestic R&D expenses after 2024. Small Business Taxpayers (defined as under $31M average gross receipts) can deduct previously capitalized domestic R&D expenses from 2022–2024. Larger businesses may amortize these costs over one to two years.
- Section 179 Expense – The BBB increases the amount a business can expense to $2.5 million and increases the phase out limitation to $4.0 million. These amounts will be adjusted annually for inflation.
- Advance Manufacturing Investment Credit – The BBB increases the credit from 25% to 35%. This is effective for property placed in service after December 31, 2025.
- Qualified Small Business Stock (QSBS) – The BBB modifies the existing 100% exclusion of gain on QSBS stock held at least 5 years and now includes both a 75% exclusion for stock held with at least a 4-year holding period and a 50% exclusion for stock held with at least a 3-year holding period. This provision is effective for QSBS issued after the enactment date. The amount of gain that can be excluded is increased from $10 million to $15 million. The BBB also increases the aggregate gross asset threshold amount a QSBS could hold from $50 million to $75 million. These amounts are increased for inflation annually after December 31, 2026.
- Bonus Depreciation on Qualified Production Property – The BBB allows taxpayers to expense 100% of the cost of Qualified Production Property (this is separate from regular bonus depreciation mentioned above). ‘Qualified Production Property’ is nonresidential real property used as an integral part of a qualified production activity. In order to qualify, the property must be located in the United States or any possession of the United States, original use of it must commence with the taxpayer, construction of the property must begin after January 19, 2025, and before January 1, 2029, and the property must be placed in service before January 1, 2031.
While we’ve summarized many key provisions here, these changes are federal-related only, and we expect additional guidance to be issued by the IRS in the coming months on implementation and reporting.
The Sciarabba Walker team will continue to monitor developments and provide timely updates. Please don’t hesitate to reach out to your personal Sciarabba Walker accountant or email us at info@swcllp.com to discuss any questions you may have. Additionally, follow us on social media for future updates.