The significant new tax legislation (the Act) signed into law July 4, 2025 (formally known as One Big Beautiful Bill or, informally, the OBBB). The Act includes numerous changes affecting individual, business and employer taxation.
Navigating these changes can be complex, and their impact on your specific tax situation will vary. We encourage you to review this overview, which highlights some of the key provisions, and contact us at your earliest convenience to discuss the impact of these changes and develop a plan tailored to your situation.
Individuals
| Reduced Income Tax Rates | The Act makes the lower individual income tax rates and wider tax brackets introduced by the Tax Cuts and Jobs Act “TCJA” permanent, preventing a scheduled tax rate increase after 2025. For example, the top individual rate will remain at 37% (instead of reverting to 39.6%), and the marriage penalty relief for most brackets continues. This means that married couples filing jointly will typically not face higher taxes compared to filing as singles. |
| Increased Standard Deduction | The standard deduction has been permanently increased and enhanced for 2025 and beyond: $30,000 for joint filers, $22,500 for heads of household, and $15,000 for singles in 2025, with further increases to $31,500, $23,625, and $15,750, respectively, for 2026 and after. Because these higher amounts mean fewer taxpayers will benefit from itemizing, consider bunching itemized deductions into a single year to exceed the standard deduction, then take the standard deduction in alternate years. |
| Child Tax Credit | The Child Tax Credit (CTC) has been permanently increased to $2,200 per qualifying child for tax years after 2024, and will be indexed for inflation in future years. Omission of a correct SSN on a return under the Code Sec. 24 child and other dependent credit rules will be treated as a mathematical or clerical error that IRS can summarily assess. To maximize these credits, ensure all dependents have the required identification numbers before year-end, and consider managing your income or accelerating deductions if your AGI is near the phase-out range. |
| E&G-Basic Exclusion Amount | The basic exclusion amount for federal estate and gift tax will increase to $15 million (indexed for inflation) for estates of decedents dying and gifts made after Dec. 31, 2025. Review and update estate plans and consider making large lifetime gifts to tax advantage of this higher exclusion. |
| Pease Limitation | Starting in 2026, the Pease limitation which reduced itemized deductions for high earners is permanently repealed. High-income taxpayers will see a much smaller 2/37 reduction apply to the lesser of their itemized deductions or the amount by which their taxable income exceeds the 37% tax bracket threshold. With this change, bunching deductible expenses into a single year can be effective, since the reduction is generally less severe than under the old Pease rules. |
| Individual Alternative Minimum Tax Exemption Amounts | The AMT exemption amounts are permanently increased for 2026 and beyond, but the phaseout rate for higher-income taxpayers doubles from 25% to 50%. Taxpayers should review their AMT exposure and consider strategies such as timing income or exercising options in lower-income years to avoid unexpected AMT liability. |
| Deduction for Taxpayers Age 65 or Older | For tax years 2025-2028, individuals age 65 or older (and their spouses, if filing jointly) can claim a new $6,000 deduction per qualified person. To maximize this benefit, seniors should aim to keep their adjusted gross income (AGI) below $75,000 (single) or $150,000 (joint), as the deduction is reduced by 6% of any excess. Be sure to include the correct Social Security Number for each qualifying individual to avoid disallowance of the deduction. |
| Car Loan Interest | For tax years 2025-2028, individuals can deduct up to $10,000 per year in interest paid on loans for new personal-use vehicles even if they don’t itemize deductions. The deduction phases out for single filers with MAGI over $100,000 and joint filers over $200,000. To qualify, the loan must be for a new, U.S.-assembled car, SUV, van, pickup, or motorcycle (under 14,000 pounds), secured by a first lien, with the taxpayer as the original owner, and the vehicle’s VIN reported on the tax return. If you’re planning to buy a new vehicle, consider timing your purchase and loan to maximize deductible interest within the eligible years, and manage your income to stay below the phase-out thresholds for the largest benefit. |
| Child and Dependent Care Credit | Starting in 2026, the Child and Dependent Care Credit will be more valuable for many families. The maximum credit rate increases to 50% of eligible expenses, up to $3,000 for one qualifying individual or $6,000 for two or more. The full 50% rate applies to families with AGI up to $15,000 and gradually phases down to 35% for AGI up to $75,000 ($150,000 for joint filers). To maximize your benefit, be sure to keep thorough records of all qualifying expenses and coordinate with any employer-provided dependent care benefits to avoid missing out on the full credit potential. |
| Individuals’ Charitable Deductions | Beginning in 2026, the Act makes permanent the 60% ceiling for cash gifts to 50% charities, and provides that a contribution of cash to a 50% charity is deductible to the extent that the total amount of contributions of cash to 50% charities doesn’t exceed the excess of: (a) 60% of the taxpayer’s contribution base for the tax year, over (b) the total amount of contributions to 50% charities for the tax year. To maximize your deduction, prioritize cash donations to 50% charities. |
| American Opportunity and Lifetime Learning Credits | Starting in 2026, you must include the Social Security Number (SSN) of the student (or yourself or your spouse, if applicable) and the Employer Identification Number (EIN) of each college or university when claiming the American Opportunity Tax Credit (AOTC). To avoid losing this valuable credit due to a clerical error, make sure all SSNs are issued before the tax return deadline and that you have the EIN for each institution. Doublecheck that these numbers are entered correctly on your return, as missing or incorrect information will result in the IRS denying the credit. |
| Deduction for Qualified Residence Interest | The deduction for mortgage interest on home acquisition debt is now permanently capped at $750,000 ($375,000 if married filing separately), rather than increasing to $1 million in 2026 as previously scheduled. If you are considering buying a home, refinancing, or taking out a new mortgage, be aware that interest on debt above $750,000 will not be deductible. |
| Miscellaneous Itemized Deductions | The Act permanently eliminates miscellaneous itemized deductions for individual taxpayers. This doesn’t apply however to itemized deductions under Code Sec. 67(b) . And the Act adds a new deduction thereunder for educators, allowing K-12 teachers, counselors, coaches, and aides working at least 900 hours per year to deduct unreimbursed classroom expenses (like books, supplies, and equipment) starting in 2026. |
| New Tax-Deferred Investment Accounts for Children | Taxpayers can open a new tax-deferred investment account for children, called a “Trump account” for each eligible child. Taxpayers can contribute up to $5,000 per year in after-tax dollars for each child, and funds must be invested in a diversified U.S. equity index fund. For children born between Jan. 1, 2025, and Dec. 31, 2028, the federal government will automatically contribute $1,000 to each account. Taxpayers should open the account before their child turns 18 to maximize contributions and secure the government benefit if eligible. |
| Adoption Credit | Starting in 2025, the adoption credit is enhanced to include a refundable portion of up to $5,000 per child (indexed for inflation). This means eligible taxpayers can receive up to $5,000 as a refund even if they owe no tax, making the credit more valuable for lower-income families. To maximize this benefit, keep detailed records of all qualified adoption expenses, ensure you have a taxpayer identification number for the child, and file Form 8839 in the year the adoption is finalized. |
| Qualified Higher Education Expenses | Changes to 529 savings plans allow families to use tax-free distributions for a much broader range of K-12 education expenses including not just tuition, but also curriculum, books, online materials, tutoring, standardized test fees, dual enrollment, and educational therapies for students with disabilities. Starting in 2026, the annual limit for K-12 distributions doubles from $10,000 to $20,000 per beneficiary. To maximize tax savings, consider timing 529 withdrawals to match qualified expenses within the same tax year, and coordinate with other education tax credits to avoid overlap. |
| Higher Education Expenses for 529 Accounts | 529 plan distributions can now be used tax-free for a wider range of education expenses, including not only college costs but also “qualified postsecondary credentialing expenses.” This means you can use 529 funds for tuition, fees, books, supplies, and equipment required for enrollment in recognized certificate, licensing, or apprenticeship programs even if they are not traditional degree programs. |
| Wagering Losses | Starting in 2026, only 90% of your wagering losses can be deducted against your winnings, even if your losses equal or exceed your winnings. To maximize your deductions, consider realizing wagering losses in 2025 before the new rule takes effect, and keep detailed records of all activity. |
| State and Local Tax (SALT) Deduction Cap | The SALT deduction limit increases from $10,000 to $40,000 for 2025, $40,400 in 2026, and then rises 1% each year through 2029. In 2030, the cap returns to $10,000. The full deduction begins to phase out for income over $500,000 in 2025 ($505,000 in 2026, increasing 1% per year). The deduction drops by 30% of the amount over the limit but won’t go below $10,000. Taxpayers in high-tax states may benefit from the higher cap. Those near the income phaseout range should plan ahead to manage deductions and avoid unexpected tax increases. |
Businesses
| Qualified Business Income (QBI) deduction | The Act makes this deduction permanent. It also sets a minimum deduction for active QBI for “applicable taxpayers” at $400; defines an applicable taxpayer as one whose aggregate QBI for all active qualified trades or businesses for the tax year is at least $1,000; and establishes inflation adjustments for the new minimums starting in post-2026 tax years. Also, the phase-in amounts are increased from $50,000 to $75,000 for single filers and from $100,000 to $150,000 for joint filers. |
| Bonus depreciation | The Act makes additional first-year (bonus) depreciation for certain qualified property permanent at 100% (under prior law, it was to phase out to zero ). This provision is effective for property acquired after Jan. 19, 2025. There is also a new 100% bonus depreciation provision for “qualified production property” (QPP, which is certain non-residential real property used in the manufacturing, production or refining of certain tangible personal property). This QPP provision is effective for property placed in service after July 4, 2025. |
| Exclusion of gain on the sale or exchange of qualified small business stock (QSBS) | The Act provides that gain on the “applicable percentage” (50% for stock held for 3 years, 75% for stock held for 4 years, 100% for stock held for 5 years) is eliminated for QSBS acquired after July 4, 2025. Also, the gain exclusion threshold is increased from $10 million to $15 million and the $50 million aggregate gross asset limit is increased to $75 million (subject to inflation adjustments). |
| Corporate charitable contributions | The Act imposes a new 1% floor (in addition to the 10% ceiling) on corporate charitable deductions for post-2025 tax years. |
| Energy efficient commercial buildings deduction | Under the Act, the energy efficient commercial building deduction terminates for the cost of energy efficient commercial building property whose construction begins after June 30, 2026. |
| 179 Expensing limits | For property placed in service after 2024, the Code Sec. 179 expensing limits are increased to $2,500,000 and the phasedown threshold is increased to $4,000,000 (both subject to inflation adjustments). |
| Business interest | For post-2025 tax years, the Act modifies the definition of adjusted taxable income for purposes of the Code Sec. 163(j) limitation on business interest. |
| Information reporting, Forms 1099-NEC, 1099-MISC | For payments made after 2025, the reporting thresholds for Forms 1099-NEC and 1099-MISC are increased from $600 to $2,000 (adjusted for inflation after 2026). |
| Information reporting, Form 1099-K | The Act retroactively reverts the Form 1099-K reporting threshold back to the pre-ARPA $20,000 and 200 transactions threshold. |
| Excess business losses | The Act makes the Code Sec. 461(l) limit on excess business losses permanent. |
| Tips | The Act adds a new deduction of up to $25,000 for “qualified tips,” subject to phaseout for a taxpayer with MAGI exceeding $150,000 ($300,000 for joint filers). However, tips from certain specified service trades or businesses don’t qualify; no deduction is allowed unless the taxpayer includes a SSN on the applicable return; and other rules apply. Also, IRS is required to publish a list of occupations that customarily receive tips (including occupations that customarily and regularly received tips before 2025). IRS is also required to adjust withholding procedures to reflect the new deduction starting in 2026 (reporting entities may use reasonable methods to approximate designated tip amounts during the transition period). The deduction is set to expire after 2028. |
| Overtime | The Act also adds a new deduction of up to $12,500 ($25,000 for joint filers) for “qualified overtime compensation,” subject to phaseout for a taxpayer with MAGI exceeding $150,000 ($300,000 for joint filers). Qualified overtime compensation is defined by reference to the Fair Labor Standards Act (and doesn’t include qualified tips). Similar to the new tips deduction, no overtime deduction is allowed unless the taxpayer includes a SSN on the applicable return and the deduction is set to expire after 2028. Also, IRS is required to update withholding procedures beginning in 2026 to reflect the new deduction. |
| Employer-Provided Child Care Credit | Effective 2026, the Act enhances the employer-provided child care credit by increasing the credit percentage for “qualified child care expenditures” from 25% to 40% for regular businesses, 50% for eligible small businesses. The maximum credit is $500,000 ($600,000 for eligible small businesses), subject to annual inflation adjustments beginning in 2027. |
| Dependent Care Assistance Programs | The Act increases the annual tax-free limit for amounts paid or incurred by an employer pursuant to a dependent care assistance program to $7,500 ($3,750 for a married individual filing separately). This provision is effective for tax years beginning after 2025. |
| 529 plans-Postsecondary Credentialing Expenses | The Act allows 529 savings plan distributions to apply to “qualified postsecondary credentialing expenses.” Recognized postsecondary credentials include occupational or professional licenses issued or recognized at the state or federal government level. They also include certificates of completion of an apprenticeship registered and certified with the Secretary of Labor and credentials as defined in Section 3(52) of the Workforce Innovation and Opportunity Act. This provision applies to distributions made after July 4, 2025. |
| Employee Exclusion for Employer Payments of Student Loans | The Act makes permanent the employee exclusion for qualifying employer payments of student loans. Also, the Act provides an inflation adjustment to the statutory maximum exclusion amount ($5,250) for tax years beginning after 2026. |
| Research & Experimental (R&E) Expensing | The Act allows for permanent immediate expensing of domestic research and experimental (R&E) costs beginning in 2025. For small businesses-those with average gross receipts of $31 million or less-there is an added opportunity: the option to amend 2022–2024 returns and apply the new expensing rules retroactively. This may open the door to cash refunds for eligible companies. Taxpayers can also elect to accelerate any remaining amortization of prior domestic R&E expenses over one or two years. Foreign R&E costs continue to be amortized over 15 years. Guidance from the IRS is expected to clarify how elections must be made. |