One Big Beautiful Bill Act – Key Tax Provisions

The One Big Beautiful Bill Act was signed into law on July 4th by President Donald Trump. It focuses on making several Tax Cuts and Jobs Act (TCJA) provisions permanent, including bonus depreciation, R&E expensing, and pass-through deductions. It also expands child and dependent credits, increases the state and local tax (SALT) deduction, raises the estate tax exemption, and phases down energy credits. Below is a summary of key tax provisions: 

Income Tax Planning 

• The bill makes TCJA tax rates permanent, with brackets continuing to be indexed for inflation. 
• The standard deduction is permanently increased and indexed thereafter. 
• SALT deduction is temporarily increased from $10,000 to $40,000. The deduction phases down for modified adjusted gross income (MAGI) over $500,000 for joint filers in 2025 (adjusted for inflation through 2029). Under this phase down, the $40k limitation is reduced by 30% of the excess of MAGI over the threshold amount, maintaining a minimum allowable deduction of $10,000. The limitation returns to the $10,000 maximum deduction after tax years 2029. 
• Miscellaneous itemized deductions (investment management fees, etc.) are permanently disallowed. 
• Itemized deduction phaseouts (known as the Pease limitation) that was previously suspended from the TCJA is now replaced with a simpler, uniform cap for taxpayers in the top tax bracket. The overall cap now limits the value of deductions for high-income filers to effectively 35% of the deduction. 
• Personal exemptions are permanently terminated. 
• Alternative Minimum Tax (AMT) higher exemption is made permanent; phase-out rate increases from 25% to 50%. 
• No tax on tips or overtime for tax years 2025-2028 – the bill allows a temporary deduction of up to $25,000 of tips and $12,500 for overtime work received by an individual. The deduction phases out when the taxpayer’s MAGI exceeds $150,000 ($300,000 for joint filers). 
• Car loan interest is now deductible up to $10k for loans between 2025-2028, with restrictions on the type of passenger vehicles and phaseouts based on AGI. 
• Mortgage interest deduction – $750k acquisition indebtedness limit is made permanent. 
• Home equity debt – disallowance of interest expense is made permanent. 

Estate Planning 

• Estate and gift tax exemption is permanently increased to $15 million starting in 2026 and indexed for inflation thereafter.

Charitable Planning and Exempt Organizations 

• Charitable deduction for individuals who itemize: the bill provides a deduction only for charitable contributions to the extent that they exceed 0.5% of the taxpayer’s contribution base (AGI calculated without regard to net operating loss (NOL) carrybacks).  
• Charitable deduction for non-itemizers: the bill creates a charitable contribution deduction of $1,000 for single filers and $2,000 for married filing jointly taxpayers. 
• There is no change to private foundation excise taxes on net investment income, excess business holdings, or unrelated business income. 
• Excise tax on private college and university endowments increased from 1.4% to as much as 8% for large endowments. The school must have at least 3,000 tuition-paying students (up from 500 under current law) to be subject to the excise tax. 

Retirement Planning 

• The bill introduces an additional $6k standard deduction for seniors, phased out at higher incomes. 
• Health Savings Accounts (HSAs) are enhanced: increased contribution amounts, expanded HSA availability, and expanded HSA eligible uses (such as gym memberships). 

Education Planning / Credits for Children and Dependents 

• Child Tax Credit is permanently increased to $2,200 per child. 
• “Trump Accounts” are introduced – the bill creates a new type of tax-preferred IRA accounts for minors under 18, including a pilot program where the federal government pays a one-time $1,000 credit to an account for each qualifying child born between Jan. 1, 2025, and Dec. 31, 2028. 
• 529 plan qualified expenses previously limited to higher education and $10K K-12 tuition is now expanded to include more K-12 and homeschool expenses, as well as qualified postsecondary credentialing expenses. 

Business Planning 

• Excess business loss limitation is made permanent. 
• Qualified business income (Sec 199A) deduction remains at 20% and made permanent with increased phase-out amounts and expanded range for service businesses. The bill also introduces a new minimum $400 deduction for taxpayers with at least $1,000 of QBI. 
• Charitable deductions for corporations were previously allowed up to 10% of taxable income – bill adds new 1% floor. 
• Limitation on business interest is reinstated with EBITDA limitation. For purposes of the calculation, adjusted taxable income would be computed without regard to the deduction for depreciation, amortization, or depletion.
• 100% bonus depreciation is made permanent for assets acquired and placed in service after January 19, 2025.
• Sec 179 expense limitation is increased to $2.5 million. 
• Domestic R&E expenses are fully allowed, while foreign R&E remains at 15-year amortization. Retroactive application to 2022 will also become available. 
• Form 1099 reporting threshold is increased from $600 to $2,000, indexed for inflation. 
• There is no limitation on the pass-through entity tax (PTET) SALT deduction. 
• Bill establishes a permanent opportunity zone policy. 
• The bill expands the Sec. 1202 benefit for gain from qualified small business stock (QSBS) by introducing a tiered exclusion for stock held less than 5 years and increasing both the taxpayer exclusion ceiling and the corporate-level gross assets ceiling. 

International Taxation 

• The OBBBA introduces substantial changes to the international tax framework, including but not limited to changes to foreign tax credits, GILTI and FDII, and base erosion and anti-abuse tax (BEAT). 

Energy Provisions 

• Several energy credits, such as the Residential Clean Energy Credit and credits for electric vehicles or solar energy, are permanently phased out. 

Overall, the tax provisions within the One Big Beautiful Bill Act could have substantial effects on businesses and individual taxpayers. The bill provides for both immediate tax planning opportunities, as well as long-term impacts to cash flow and estate plans. To discuss the impacts that may affect you, please contact your advisor.

 

 

This presentation has been compiled by Tolleson Wealth Management (“TWM”). This material has been prepared and is distributed solely for informational purposes only and is not a solicitation or an offer to buy a security or instrument or to participate in any trading strategy. This report may not be reproduced, distributed or transmitted, in whole or part, by any means, without written permission from TWM. Please consult your tax professional for any tax advice. Tolleson is not a CPA firm. If you have any questions regarding this presentation, please contact your TWM representative.