INSIGHT

What the new tax law means for you: Summary of the One Big Beautiful Bill Act (OBBBA)

July 21, 2025

Services: Tax

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The recently passed One Big Beautiful Bill Act (OBBBA) brings several important changes to the US tax code. Many of the temporary provisions from the 2017 Tax Cuts and Jobs Act (TCJA) have now been made permanent, providing greater clarity and planning opportunities for both individuals and businesses.

Below is a summary of some of the most notable changes that may impact you:

For individuals and families:

Tax Rates Stay Low: The individual income tax rates introduced by the TCJA are now permanent, with brackets adjusted annually for inflation.

Higher Standard Deduction: Starting in tax year 2025, the increased standard deduction is here to stay—$31,500 for married couples filing jointly and $15,750 for single filers—reducing taxable income for many. These amounts will be adjusted annually for inflation.

Expanded Child Tax Credit: Starting in tax year 2025, the credit increases to $2,200 per child, with up to $1,700 refundable. Eligibility is also expanded for married couples. These thresholds will be indexed for inflation going forward.

Estate & Gift Tax Exemption: The lifetime exemption increases to $15 million beginning in 2026 and will be indexed for inflation, creating a long-term planning opportunity for wealth transfer.

Earned Income Tax Credit (EITC): Expanded access and higher thresholds for low- and moderate-income earners, including workers without children.

State and Local Tax (SALT) Deduction Cap: Beginning in tax year 2025, the SALT deduction cap increases from $10,000 to $40,000. However, the full cap is available only to taxpayers with modified adjusted gross income (MAGI) of $500,000 or less (for joint filers). For incomes between $500,000 and $600,000, the cap is gradually phased out. Taxpayers with MAGI above $600,000 remain subject to the original $10,000 cap. The increased cap is indexed for inflation and is currently set to sunset after 2029, unless extended.

For business owners and employers:

Pass-Through Deduction Made Permanent: The 20% deduction on qualified business income (Section 199A) is now permanent, with expanded eligibility and phaseout relief.

State Tax Deduction Workaround Expanded: For those using the Pass-Through Entity Tax (PTET) elections, the full deduction at the entity level is now codified, helping high-income taxpayers in high-tax states.

Bonus Depreciation Returns to 100%: Beginning in tax year 2025, businesses can once again fully deduct the cost of qualifying property in the year it’s placed in service—no phaseouts. The retroactive increase from the scheduled 60% reinstates a powerful incentive for capital investment and equipment purchases.

Research & Development Costs: For tax years starting after December 31, 2024, domestic R&D expenses can be fully deducted when incurred. For certain Eligible Small Businesses, the change can be applied retroactively to tax years beginning after December 31, 2021. This means Eligible Small Businesses may be eligible to amend affected returns to immediately expense their domestic R&D costs. All taxpayers may choose to accelerate their unamortized domestic R&D expenses in the first taxable period that begins after December 31, 2024. Foreign research must still be amortized over 15 years.

Business Loss Limitations: The cap on excess business losses is made permanent but allows indefinite carryforward as a net operating loss.

Interest Expense Deductions Modified: While some provisions related to interest deductibility have been streamlined (including expanded clarity for auto and mortgage loan interest), Section 163(j) limitations have been tightened. Starting in 2025, deductions are calculated based on EBIT rather than EBITDA, increasing allowable interest deductions for many leveraged or capital-intensive businesses.

New Floor for Charitable Contributions (C Corps): A new 1% floor on corporate charitable deductions means C corporations can only deduct the portion of charitable giving that exceeds 1% of taxable income. This change may require more deliberate charitable planning to preserve both impact and deductibility.

Qualified Small Business Stock (QSBS) Changes: While QSBS benefits remain in place for now, some limitations and clarifications have been introduced. Business owners planning liquidity events should consult a tax advisor.

Tax-Exempt Organization Provisions Updated: The bill also includes provisions impacting tax-exempt organizations, including adjustments to excise taxes and expanded definitions for qualifying activities.

Other key updates:

Employer-Provided Childcare Credit: Significantly expanded—up to 50% of qualifying expenses for small businesses with higher credit caps.

Education Credits Simplified: Access to tax credits for college expenses is expanded, and the rules have been streamlined.

Energy Incentives Adjusted by Credit Type: Energy-related credits have been extended or modified, depending on the category and taxpayer type:

• Residential Solar Credit: Remains in place through December 31, 2025, before expiring unless renewed.
• Electric Vehicle (EV) Credit: Available through September 2025, with updated eligibility and sourcing requirements.
• Commercial Clean Energy & Efficiency Credits: Extended through 2032, including credits for energy-efficient buildings, commercial solar, and battery storage.

Taxpayers should review eligibility and phaseout rules closely, as credits vary based on income, property type, and type of installation or vehicle.

IRS Modernization: While some funding was reduced, investment remains in place to improve IRS systems and taxpayer service.

International Tax Highlights:

GILTI Simplification and Relief: The Global Intangible Low-Taxed Income (GILTI) regime is streamlined, with a higher effective exemption and more favorable treatment for US shareholders of controlled foreign corporations. This may reduce exposure to double taxation and make US ownership of foreign subsidiaries more attractive.

Repeal of Downward Attribution Rule: The complex rule that previously triggered unintended Subpart F or GILTI consequences due to indirect ownership structures has been repealed, simplifying compliance for multinational businesses with complex ownership chains.

How BPM can help:

These changes offer new tax planning opportunities—and some complexities. Whether you’re a business owner, high-net-worth individual, or somewhere in between, BPM’s team is here to help you:

• Understand how these updates affect your 2025 return and long-term strategy
• Revaluate estate and gifting plans before the new exemption kicks in
• Optimize business deductions and tax credits
• Leverage expanded credits and incentives in your industry
• Streamline payroll operations and compliance requirements