We wanted to provide you with a summary of the most significant tax-related provisions from the recently passed One Big Beautiful Bill Act (OBBBA). This legislation introduces a wide range of changes across the Internal Revenue Code, impacting individuals, businesses, and international tax matters. We will be sending updates focused on specific areas of interest as we complete our analysis of the Act but wanted to provide a quick overview right away.
Below are the key highlights most relevant to your planning:
Individual Income Tax Provisions
- The lower individual tax rates from the Tax Cuts and Jobs Act are made permanent, avoiding a scheduled increase after 2025.
- The standard deduction is further increased and made permanent.
- Personal exemptions remain suspended, but a new $6,000 deduction is available for seniors (age 65+), subject to income phaseouts through 2028.
- The state and local tax (SALT) deduction cap is raised to $40,000 ($20,000 for married filing separately) for 2025-2029, indexed for inflation, with a phase-down for higher incomes.
- Itemized deductions are subject to a new limitation for higher-income taxpayers.
- The suspension of most miscellaneous itemized deductions is made permanent, except for expanded educator expenses.
Business and Investment Provisions
- The Qualified Business Income (QBI) deduction phase-in threshold is increased, and a minimum deduction is established for active business income, both indexed for inflation.
- 100% bonus depreciation for qualified business property is made permanent.
- Section 179 expensing limits are increased and indexed for inflation.
- Domestic R&D expenditures can be fully expensed immediately; foreign R&D remains amortized over 15 years.
- The business interest deduction limitation is permanently based on EBITDA.
- Qualified small business stock exclusion is phased in over time for new stock, with increased per-issuer and gross asset limits.
Family and Education Incentives
- The child and dependent care tax credit is enhanced, with higher applicable percentages and expanded phaseouts.
- Up to $5,000 of the adoption credit is now refundable.
- Employer-provided child care credit is increased, with higher limits for small businesses.
- 529 accounts are expanded to cover more K-12 and postsecondary expenses, with higher annual contribution limits.
- Employer payments of student loans are permanently excluded from income.
- A new federal tax credit is available for contributions to state-approved K-12 scholarship organizations.
Charitable and Community Development Incentives
- The above-the-line charitable deduction is increased and made permanent.
- New floors are imposed on the deductibility of charitable contributions for both individuals and corporations.
- The Opportunity Zones program is renewed and expanded, with new reporting and rural investment features.
- The Low-Income Housing Tax Credit and New Markets Tax Credit are both made permanent, with expanded benefits.
Energy and Environmental Provisions
- Many green energy credits (e.g., for clean vehicles, solar, wind) are terminated or restricted, with new limitations on foreign content and ownership.
- The advanced manufacturing investment credit is increased.
- 100% expensing is allowed for certain nonresidential real property used in qualified production activities.
Other Notable Provisions
- Temporary deductions are available for tips, overtime, and car loan interest, subject to income phaseouts (2025-2028).
- New tax-advantaged “Trump Accounts” for children under 18, with government-funded pilot contributions for newborns (2025-2028).
- The tax on excess compensation in tax-exempt organizations is expanded.
- Installment payment of capital gains tax is allowed for certain farmland sales to qualified farmers.
- The 1099 reporting threshold is raised and indexed for inflation.
- The de minimis rule for third-party network transactions is reinstated.
- A 3.5% excise tax is imposed on certain remittance transfers from U.S. accounts to foreign persons, with exceptions for verified U.S. senders and certain noncash transfers.
Please let us know if you would like to discuss how any of these provisions may impact your specific situation or if you need more detailed analysis on any particular area.
