Key tax provisions in the One Big Beautiful Bill Act

On July 4, 2025, President Trump signed the One Big Beautiful Act into law. This followed July 1 passage in the Senate and July 3 passage in the House. H.R. 1, the “One Big Beautiful Bill Act,” is a sweeping $3.8 trillion reconciliation package that includes a broad array of tax provisions affecting individuals, businesses, and international taxpayers.

Here are the key highlights and what they might mean for you:

Federal Individual income tax provisions

• Permanent extension of lower tax rates and brackets: The bill makes permanent the individual income tax rates and brackets established by the Tax Cuts and Jobs Act (TCJA), including lower individual tax brackets. The top marginal rate remains at 37%, and inflation adjustments are retained for all but the top bracket.
• Standard deduction: The new law makes permanent the increases to the basic standard deduction created by the TCJA. Additionally, for tax years beginning after 2024, the standard deduction is increased to $15,750 for a single filer, $23,625 for a head of household and $31,500 for married individuals filing jointly and adjusted for inflation thereafter
• Itemized deduction / Pease Limitation repeal: The bill permanently removes the Sec. 68 overall limitation on itemized deductions (known as the Pease limitation) after December 31, 2025.. Under the new law, an individual‘s itemized deductions are reduced by 2/37 of the lesser of (1) the taxpayer’s itemized deductions or (2) the taxpayer’s taxable income for the tax year (determined without regard to this section and increased by the amount of itemized deductions) that exceeds the dollar amount at which the taxpayer’s 37 percent rate bracket begins. The limitation on itemized deductions applies after the application of any other limitation on the allowance of any itemized deduction.
• Child Tax Credit: The bill temporarily increases the child tax credit to $2,200, per child for 2025 Thereafter, the dollar amount will be adjusted annually for inflation. The $500 “other dependent credit” for a dependent of the taxpayer other than a qualifying child under age 17 is made permanent.
• Estate and gift tax exemption: The increased exemption is made permanent and raised to $15 million per individual ($30 million for married couples) in 2026, indexed for inflation.
• SALT deduction cap: The state and local tax (SALT) deduction cap is increased to $40,000 per household for 2025 and is phased out for taxpayers with modified adjusted gross income (MAGI) over $500,000. The SALT deduction cap is $40,400 for 2026, $40,804 for 2027, $41,212 for 2028, $41,624 for 2029 and $10,000 for 2030 and thereafter.
• Charitable deduction for non-itemizers: A temporary above-the-line deduction for charitable contributions is reinstated for tax years after December 31, 2025 ($1000 for single filers, $2000 for joint filers).
• No tax on tips and overtime: For 2025–2028, above-the-line deductions are created for qualified tips (in certain occupations) and for overtime premium pay, subject to income and occupation limitations.
• Enhanced deduction for seniors: For 2025–2028, a $6,000deduction is available for seniors (age 65+) with income below $75,000 ($150,000 for joint filers).
• Car loan interest deduction: For 2025–2028, up to $10,000 of interest on loans for U.S.-assembled passenger vehicles may be deducted, subject to income phaseouts beginning at $100,000 ($200,000 for joint filers).
• Moving expense deduction: The bill permanently terminates the deduction except for Armed Forces and members of the intelligence community.
• Home mortgage interest and insurance premiums: The bill makes permanent the $750,000 Sec. 163(h)(3) limitation of the deduction for qualified residence interest to interest on acquisition debt, and excluding home equity debt. The treatment of mortgage insurance premiums as qualified residence interest is made permanent.
• Casualty loss deduction for personal casualties: The Sec. 165(h)(5) limitation on personal casualty loss deductions, under which a casualty loss is deductible only to the extent it is attributable to a federally declared disaster, is made permanent.
• Other deductions and credits: The bill makes permanent or enhances several other deductions and credits, including the adoption credit, employer-provided childcare credit, paid family and medical leave credit, and education-related benefits.

Business tax provisions

QBI deduction: The Sec. 199A qualified business income (QBI) deduction is made permanent. It also expands the deduction limit phase-in range by increasing the $50,000 (non-joint returns) and $100,000 (joint returns) amounts to $75,000 and $150,000, respectively.

The new law also introduces an inflation-adjusted minimum deduction of $400 for taxpayers who have at least $1,000 of QBI from one or more active trades or businesses in which the taxpayer materially participates. The amendments apply to tax years beginning after December 31, 2025

• Bonus depreciation: 100% expensing (bonus depreciation) for qualified property is restored for property placed in service after Jan. 19, 2025.
• Sec. 179 expensing: The maximum amount a business may expense is increased to $2.5 million, with the phaseout threshold raised to $4 million, both indexed for inflation after 2025.
• Qualified production property “manufacturing property:” The bill introduces an elective 100% depreciation allowance for qualified production property that is acquired and placed in service between Jan. 19, 2025, and Dec. 31, 2029, and must be placed in service prior to January 1, 2031, restoring full expensing for a broader range of assets.
• R&D expenditures: The TCJA introduced a requirement that specified research and experimental (R&D) expenditures be capitalized and amortized ratably over a five-year period for tax years after 2021. The bill suspends that requirement for domestic research or experimental expenditures paid or incurred in tax years beginning after Dec. 31, 2024, and before Jan. 1, 2030. Foreign R&D would continue to be capitalized and amortized over 15 years. Small business taxpayers. Small business taxpayers with average annual gross receipts of $31 million or less may retroactively elect to apply this change to tax years beginning after December 31, 2021 (Act Sec. 70302(f)(1) of the One Big Beautiful Bill Act (P.L. 119-XXX)). The election must be made by July 4, 2026 (within one year of the date of enactment) and requires amended returns for tax years impacted by the election
• EBL permanency: The bill makes the Sec. 461(l) excess business loss (EBL) limitation permanent, which is currently set to expire at the end of 2028.
• Business interest deduction: For tax years beginning after December 31, 2024, the Sec. 163(j) limitation is calculated using earnings before interest, taxes, depreciation and amortization (EBITDA), rather than earnings before interest and taxes (EBIT).
• FDII and GILTI: Under the TCJA, after 2025, the foreign-derived intangible income (FDII) deduction was scheduled to be reduced from 37.5% of FDII to 21.875%, and the global intangible law-taxed income (GILTI) inclusion deduction amount was scheduled to be reduced from 50% to 37.5% under Sec. 259(a)(3). The bill changes 37.5% to 33.34% and 50% to 37.5% and repeals the TCJA reductions.
• BEAT: The bill repeals the scheduled increase in base-erosion and anti-abuse tax (BEAT) from 10% to 12.5% after 2025 and instead permanently increases it to 10.5%.
• Third-party network transaction reporting threshold: The bill reverts to the prior rule for Form 1099-K, Payment Card and Third Party Network Transactions, reporting, under which a third-party settlement organization (TPSO) would not be required to report unless the aggregate value of third-party network transactions with respect to a participating payee for the year exceeds $20,000 and the aggregate number of such transactions with respect to a participating payee exceeds 200.
• Form 1099 reporting threshold: The bill increases the information reporting threshold for certain payments to persons engaged in a trade or business and payments of remuneration for services to $2,000 in a calendar year (from $600), with the threshold amount to be indexed annually for inflation in calendar years after 2026.
• Renewed OZs: A new round of opportunity zones (OZs) is permanently created using rolling ten-year opportunity zone designations beginning on January 1, 2027 with revised eligibility and incentives, including special rules for rural areas.
• Clean energy and IRS credits: The bill terminates or phases out several clean energy credits from the Inflation Reduction Act (IRA).

Additionally, the State of Maryland passed the Budget Reconciliation and Financing Act of 2025 containing the following personal income tax changes that apply to tax years beginning after December 31, 2024.

• Capital Gains Surcharge — 2% surcharge for filers earning over $350,000 Surcharge does not apply to: sale or exchange of principal residence sold for less than $1.5million; assets held in specified retirement savings plans; cattle, horses, or breeding livestock held for more than 12 months; certain land subject to a conservation, agricultural, or forest preservation easement; section 179 eligible property; or affordable housing owned by a nonprofit organization.
• Higher PIT Rates for Top Earners:
  6.25% on income above $500,000
  6.5% on income above $1 million
• Standard deduction changes
  $3,350 for single, dependents, and married/separate (was $2,800)
  $6,700 for married/joint (was $5,600)
• Itemized Deduction Caps
  Applies to filers earning over $200,000: A “phase-out” factor of 7.5% of the excess over the $200,000 Federal AGI is applied to calculate the allowed deductions maximum amount. E.g., AGI of $500,000 is $300,000 excess over the $200,000, times 7.5% is $22,500; say that $50,000 is the tentative claimable itemized deductions: $50,000 minus $22,500 phase-out = $27,500 maximum itemized deductions allowed.

How you can prepare
We recommend reviewing your current tax strategy in light of these changes. Our team is available to discuss how these provisions may impact your personal or business tax situation and to help you plan accordingly.
Please don’t hesitate to contact us with any questions or to schedule a consultation.