On July 4, 2025, President Donald J. Trump signed into law the so called ‘One Big Beautiful Bill.’ The law effectively extends many of the provisions of the Tax Cuts and Jobs Act of 2017, which would otherwise have expired on December 31, 2025, resulting in increased taxes for most taxpayers. This law also follows up on several of President Trump’s election year promises and cuts back on ‘Green Energy’ provisions.
The Bill permanently extends the TCJA individual tax rates, with the highest tax rate being 37% (as opposed to pre-TCJA 39.6%).
The increased deduction amounts under the Tax Cuts and Jobs Act (TCJA) are made permanent and increased. Beginning in 2025, these amounts will increase to $15,750 for single filers, $31,500 for married couples filing jointly, and $23,625 for heads of household.
The Bill permanently extends and increases the Child Tax Credit to $2,200 per child. It also makes the refundable portion of the credit permanent.
The Bill includes a permanent extension of the 20% Qualified Business Income (QBI) deduction. It also increases the phase-in range for the QBI deduction limitation from $100,000 for joint filers and $50,000 for all other filers to $150,000 and $75,000, respectively.
The Bill permanently increases the estate and gift tax exemption amount to $15M beginning in 2026, indexed annually for inflation.
The Bill permanently extends and modifies the additional first-year depreciation deduction.
It increases the allowance to 100% for property acquired and placed in service on or after January 19, 2025.
This provision raises the maximum Section 179 expensing limit to $2.5 million, with the deduction reduced by the amount that the cost of qualifying property exceeds $4 million.
Both the $2.5 million and $4 million thresholds are indexed for inflation for tax years beginning after 2025. The Bill applies to property placed in service in tax years beginning after
December 31, 2024.
The Bill provides a temporary deduction for cash tips, limited to $25,000. The deduction is subject to phaseouts for taxpayers with modified adjusted gross income (MAGI) over $300,000 for joint filers and $150,000 for all other filers.
The Bill includes a temporary deduction capped at $12,500 for individual filers and $25,000 for joint filers. The deduction is subject to a phaseout for taxpayers with modified adjusted gross income (MAGI) over $300,000 for joint filers and $150,000 for all other filers.
The Bill makes the current additional contribution limit permanent and provides one additional year of inflation adjustment to the base amount.
The Bill allows for a deduction of certain auto loan interest by excluding qualified passenger vehicle loan interest from the definition of “personal interest” for auto loan indebtedness. The deduction is allowed for debt incurred after 12/31/24 for interest payments made after 2024, and before 2029. The deduction is limited to $10,000 and is phased out based on income levels. Final assembly of the vehicle must occur in the U.S.
The Bill increases the amount of employer-provided childcare credit from 25% to 40% (50% for eligible small businesses) and indexes the maximum credit amounts for inflation.
The Bill permanently extends the paid family and medical leave credit.
The Bill makes the adoption tax credit to be partially refundable up to $5,000 (indexed for inflation) beginning in taxable years starting after December 31, 2024. The refundable portion of the credit cannot be carried forward.
The Bill expands the qualified use of tax-exempt distributions from 529 savings plans to include a broader range of educational expenses related to enrollment or attendance at an elementary or secondary school. These expenses include curriculum and curricular materials, books and other instructional resources, online educational materials, tutoring or classes outside the home, certain testing fees, dual enrollment fees for higher education institutions, and specific educational therapies for students with disabilities.
The Bill temporarily increases the SALT deduction limit to $40,000 with a reduction of up to 30% as modified AGI exceeds threshold amounts. The $10,000 limit returns in 2030.
The Bill permanently repeals personal exemptions.
The Bill permanently suspends miscellaneous itemized deductions, but allows deductions for educator expenses.
The Bill imposes a 0.5% floor on charitable contributions for taxpayers who itemize and allows a deduction of up to $1,000 for single filers and $2,000 for married couples filing jointly who do not itemize.
The provision permanently reinstates the EBITDA limitation under Section 163(j), with adjusted taxable income (ATI) calculated without regard to deductions for depreciation, amortization, or depletion.
The provision permanently extends the excess business loss rule and treats any disallowed loss as a net operating loss in the following year.
The provision provides a temporary $6,000 deduction, which phases out for taxpayers with income exceeding $150,000 for those filing jointly and $75,000 for all other filers.
The provision ends the payment of Employee Retention Credit (ERC) claims filed after January 31, 2024. It defines the term “COVID-ERTC promoter” and imposes increased penalties on such promoters. Additionally, it extends the statute of limitations for corrective actions by the IRS.
Offsetting Provisions and Revenue Measures
The Bill also includes “revenue raisers” as a means to “pay for” the tax reductions. Many of these revenue raisers were part of the TCJA. Below are a few of those revenue raisers
The mortgage interest deduction is being permanently limited to acquisition debt up to $750,000.
The provision permanently extends the suspension of personal casualty loss deductions, except in cases where the loss is attributable to a federally or state-declared disaster.
This provision permanently repeals the exclusion for qualified moving expenses reimbursement and the deduction for moving expenses, except for active-duty members of the Armed Forces and members of the Intelligence Community.
The provision permanently clarifies that “losses from wagering transactions” include any otherwise allowable deduction under Chapter 1 of the Code that is incurred in carrying out such transactions. It also limits these losses to 90 percent of their total amount and only to the extent of gains from the same transactions.
Energy Tax Credit Reductions and Repeals
Several clean energy tax incentives that were originally part of the Inflation Reduction Act are being repealed, including, but not limited to:
CLEAN ENERGY REPEALS
- Credits for new and previously owned clean vehicles
- Commercial clean vehicle credit
- Energy-efficient home improvement credit
- Residential clean energy credit
- Credit for new energy-efficient homes
- Energy efficient commercial buildings deduction
Next Steps
Our LaPorte tax professionals are monitoring developments closely and are available to discuss with you as requested.