In July, Congress passed a massive reconciliation bill unofficially dubbed the “One Big Beautiful Bill Act.” While the official name was removed to comply with Senate rules, this legislation is poised to reshape the U.S. tax code, permanently extending key provisions of the Tax Cuts and Jobs Act (TCJA), introducing new tax breaks, and rolling back green energy incentives.
Here’s a breakdown of what’s inside and how it could impact individuals and businesses across the country:
Key Wins for Individual Taxpayers
1. TCJA Provisions Made Permanent
Originally set to expire in 2025, the bill locks in many TCJA-era benefits including lower tax brackets, the increased standard deduction, and higher AMT exemptions. Notably, mortgage insurance premiums are now permanently deductible, and teachers can deduct more for classroom supplies.
2. Higher Standard Deduction
Starting in 2025, the standard deduction will increase again to $31,500 for joint filers, $23,625 for heads of household, and $15,750 for single filers indexed for inflation going forward.
3. Bigger SALT Deduction (Temporarily)
The $10,000 cap on state and local tax (SALT) deductions will rise to $40,000 for 2025, increasing slightly each year through 2029, before snapping back to $10,000 in 2030.
4. Child Tax Credit Increase
The child tax credit will be permanently increased to $2,200 per child, with inflation indexing. However, the refundable portion remains capped at $1,400.
Both deductions phase out at higher income levels and require Social Security numbers for eligibility.
New Breaks and Benefits
- Auto Loan Interest: Up to $10,000 in car loan interest is deductible between 2025 and 2028, as long as the car was purchased after 2024.
“Trump Accounts” for Newborns: Tax-favored savings accounts seeded with $1,000 for each newborn will function similarly to IRAs, offering parents a head start on saving for their child’s future.
Business Owners: Big News
- Bonus Depreciation Is Back for Good: 100% expensing is now permanent for qualifying assets purchased after January 19, 2025.
- R&D Deductions Reinstated: Businesses can once again fully deduct domestic research and experimental expenses.
- Pass-Through Deduction Made Permanent: The popular 20% qualified business income (QBI) deduction is no longer set to expire.
International provisions such as FDII and GILTI are also preserved, although at slightly higher tax rates than originally projected for 2026 and beyond.
Green Energy Credits: Winding Down
To offset the cost of these tax cuts, estimated at $5 trillion over 10 years, many of the green energy incentives from the Inflation Reduction Act of 2022 are being terminated. This includes credits for clean vehicles, home energy improvements, and alternative fueling stations. While some phaseouts are delayed to accommodate ongoing projects, most will sunset after 2025.
Other Notable Changes
- IRS Direct File Terminated: The IRS must end its Direct File program within 30 days of the bill’s passage, signaling a shift back to private-sector filing options.
New Penalties for ERC Fraud: A $1,000 per-instance penalty is now in place for promoters of fraudulent Employee Retention Credit claims.
Final Thoughts
With its sweeping scope and political firepower, the One Big Beautiful Bill Act marks one of the most comprehensive tax overhauls since 2017. While many provisions bring welcome relief to individuals and businesses, others, particularly the rollback of green energy incentives, highlight the trade-offs made to get this over the finish line.
Stay tuned as we break down specific implications in upcoming posts. Contact our tax team here to learn more about the breakdown of this developing legislation.
