Overview of the One Big Beautiful Bill

The One Big Beautiful Bill is comprehensive legislation encompassing both individual and business tax provisions that will affect tax returns for 2025 and future years. Understanding these changes is essential for effective tax planning and minimizing taxable income. 

This article provides an overview of the key components of the One Big Beautiful Bill, highlighting its significant impact on both individuals and businesses. Please note, the details contained within this whitepaper may evolve as the IRS and other relevant agencies provide further guidance following the bill's passage through Congress. 

The One Big Beautiful Bill, which we will refer to as the Bill, contains numerous provisions impacting high net worth individuals and families. Let’s explore some of the notable provisions in more detail.

Extension of Tax Brackets 

The top tax bracket was cut from 39.6% to 37.0% under the 2017 Tax Cuts and Jobs Act (TCJA). One of the provisions in the One Big Beautiful Bill was extending these rate cuts, which were set to expire at the end of 2025. The adjusted tax brackets under the TCJA are now permanent. 

Extension of Higher Standard Deduction 

Similarly, the TCJA nearly doubled the standard deduction for all filing statuses. The Bill kept these original provisions and increased the deduction amount to $31,500 for joint filers, $23,625 for head of household filers, and $15,750 for single taxpayers in 2025. Going forward, the standard deduction will be adjusted for inflation each year. 

Added Mortgage Insurance Premium Deduction 

The Bill permanently treats mortgage insurance premiums as qualified residence interest, which is deductible on Schedule A if you itemize. 

Increase in SALT 

Continuing on the Schedule A changes, the State and Local Tax (SALT) deduction on Schedule A was increased to $40,000. Prior to the Bill, only $10,000 of SALT would qualify toward your itemized deduction amount. Now, taxpayers can include up to $40,000 of eligible SALT expenses. 

However, there is a cap at 30% of the amount by which the taxpayer’s modified adjusted gross income exceeds the threshold. For 2025, this threshold is $500,000. The limit is set to increase by 1% each year through 2029, with the cap reverting back to $10,000 in 2030. 

For business owners, this provision may warrant the reconsideration of your entity-level tax decisions to determine if paying pass-through taxes at the individual level is now more favorable. 

New Itemized Deduction Limits 

Taxpayers in the 37% income tax bracket are subject to a new itemized deduction limit. The prior Pease limitation, which reduced itemized deductions by 3% of the specified adjusted gross income threshold, was removed. The new limit reduces all itemized deductions by 2/37 of the lesser of total itemized deductions or the amount that taxable income is in excess of the 37% bracket. 

New Charitable Contribution Tax Deduction 

Beginning in 2026, taxpayers who itemize can deduct charitable contributions only if they exceed 0.5% of the taxpayer’s contribution base. A carryforward is only available if the 0.5% contribution base requirement is met. The 60% adjusted gross income limit for cash gifts is still in place. Additionally, non-itemizers can deduct up to $1,000 as a single filer or $2,000 as a joint filer for charitable contributions. 

New Overtime Tax Deduction 

A deduction for qualified overtime is available through 2028. The deduction amount is $12,500 for single taxpayers and $25,000 for married filing joint taxpayers. The deduction begins to phase out once modified adjusted gross income exceeds $150,000 for single filers and $300,000 for joint filers. 

The specifics and application of this deduction are still being worked out. More information surrounding no tax on overtime will likely be available over the next few months. 

New Vehicle Loan Interest Deduction 

Car loan interest is deductible up to $10,000 for vehicles purchased after 2024. This deduction is available regardless of whether you take the standard deduction or itemize. The deduction is reduced by $200 for each $1,000 that modified adjusted gross income exceeds $100,000 for single filers or $200,000 for joint filers. 

Preserved Estate Tax Basic Exclusion Amount 

Like many other provisions in the TCJA, the estate tax basic exclusion amount was set to revert back to the 2017 amount, which was $5 million adjusted for inflation. The Bill increased the base amount to $15 million for 2026. This exclusion amount will be indexed for inflation each year after. 

Removal of Home Energy Credits 

The Bill also repealed many energy-efficient home credits on the individual income tax return. For one, the Energy Efficient Home Improvement credit will end at the end of 2025. The Residential Clean Energy Credit will also end in 2025. These credits were short-lived, only going into effect on January 1, 2023. 

Other Provisions 

The One Big Beautiful Bill has dozens of provisions that impact individual income tax returns. Here are a few other provisions worth noting: 

• The Child Tax Credit is increased from $2,000 per child to $2,200 per child beginning in 2025.
• Educators can deduct excess expenses as a miscellaneous itemized deduction on Schedule A. An above-the-line deduction is available for up to $300, with the excess going to Schedule A.
• Eligible tips up to $25,000 can be deducted against taxable income through 2028. The deduction begins to phase out at a modified adjusted gross income of $150,000 for single filers and $300,000 for joint filers.
• 529 program eligibility has been expanded to include elementary, secondary, and homeschooling expenses.
• Trump Accounts are eligible for babies born between 2025 and 2028. These accounts are seeded with $1,000. Parents can contribute an additional $5,000 per year, with an additional $2,500 in tax-free employer contributions. They operate similarly to IRAs.
• Health Savings Accounts will now treat bronze-level and catastrophic health plans as high-deductible health plans.

Commentary on Individual Provisions 

The extension of many of the TCJA provisions are beneficial for high-income earners, especially the reduced top tax bracket and the extension of the estate exclusion. The large estate exclusion will continue to facilitate the transfer of wealth between generations. High net worth families should reevaluate their estate transfer plans to ensure they are taking full advantage of the limitations. 

Similarly, the SALT deduction cap has been a hot topic of debate in high-tax states, like New York and California. High-income earners may see limited benefits of this adjustment with the phaseout in excess of the $500,000 modified adjusted gross income cap. Timing income and expense recognition will become more important with these caps in place. 

Importantly, the Bill also includes several provisions that provide tangible benefits for working families. These include an expansion of the Child Tax Credit, a continued charitable contribution deduction for non-itemizers, and deductions for taxes on tip income and overtime—each of which supports everyday earners, especially those in the service and hourly wage sectors. A new interest deduction on vehicle loans also eases the financial burden of car ownership, while the provision allowing IRA contributions on behalf of newborns permit families to begin long-term savings from a child’s earliest days. 

The business taxation landscape will also change due to the passage of the One Big Beautiful Bill. Let’s explore a few of these provisions in more detail: 

Reinstatement of Bonus Depreciation 

The TCJA began to phase out bonus depreciation, with a full phaseout by 2027. The Bill reinstated bonus depreciation, making it a permanent provision of the tax code. It’s important to note that this provision goes into effect for assets purchased after January 19, 2025. Assets purchased and placed in service between January 1, 2025, and January 18, 2025, will be subject to the old limitation of 40%. 

Increase of Section 179 Threshold 

Prior to the Bill, the 2025 Section 179 limit was $1,250,000. The Bill doubled this threshold to $2,500,000 for 2025. The deduction begins to phase out once $4,000,000 of fixed assets are placed in service. The increased deduction applies to assets placed in service after December 31, 2024. 

Research and Experimental Expenditure Expensing 

Changes to research and experimental expenditures are one of the most important business components worked into the Bill. Starting in 2022, businesses were required to capitalize and amortize research and experimental expenditures over five years. For businesses that were research-intensive, this caused a huge swing in taxable income. 

The Bill permanently reinstates the immediate expensing of research and experimental costs incurred after 2024. Businesses that had previously capitalized research and experimental costs have two options. The first option is available for small businesses with an average annual gross receipts below $31 million. These businesses can retroactively claim the deduction to 2022 by amending returns. The other option is to continue amortizing expenses incurred between 2022 and 2024. 

Alterations of Business Interest Deduction 

Currently, businesses are able to deduct business interest expense if the amount is under 30% of adjusted taxable income, plus interest income, plus floor plan financing interest. The Bill increases the amount of interest expense businesses will be able to deduct by removing depreciation, amortization, and depletion from the calculation of adjusted taxable income. Businesses can now add these costs back to taxable income to unlock a higher business interest expense deduction. 

Renewal of Qualified Opportunity Zone Program 

The Qualified Opportunity Zone Program was originally created to encourage economic development in distressed communities by offering tax incentives to investors. The Bill makes this program permanent. Governors will designate new opportunity zones, which will then be in effect for ten years. The first period will be effective from January 1, 2027, through December 31, 2026. 

Taxation of capital gains invested in these opportunity zones will be deferred until the date of disposition or five years from the date of investment, whichever is first. New provisions also make investments tax-free if the investment is held between 10 and 30 years. The fine details of the Qualified Opportunity Zone Program are still being worked out. 

International Tax Adjustments 

The Bill made two provisions of international tax permanent. First, the Global Intangible Low-Taxed Income (GILTI), which is now renamed the Net CFC Tested Income (NCTI), rate was adjusted to 40%. While the rate was currently 50% for 2025, it was set to drop to 37.5% under the TCJA. 

Similarly, the Foreign-Derived-Intangible-Income (FDII), now renamed the Foreign-Derived Eligible Income (FDDEI), tax rate was adjusted to 33.34%. The rate was set at 37.5% for 2025, but was going to drop down to 21.875% under the TCJA. 

Green Energy Credits Repealed 

Like energy-efficient homeowner credits were repealed, many business green energy credits also got cut. These include the Previously Owned Clean Vehicle Credit, the Clean Vehicle Credit, the Qualified Commercial Clean Vehicle Credit, and the Alternative Fuel Refueling Property Credit. Most of these credits are set to expire at the end of 2025. 

Other Business Provisions 

Here are a few more notable business provisions in the One Big Beautiful Bill: 

• The Qualified Business Income Deduction is now permanent.
• The New Markets Tax Credit is now permanent.
• The Advanced Manufacturing Credit increases from 25% to 35%.

Commentary on Business Provisions 

Businesses in the manufacturing sector will see the most relief with the adjustments to research and experimental expenditure capitalization. Similarly, the extension of 100% bonus depreciation and the increased Section 179 will lower the tax burden for businesses purchasing high levels of fixed assets. The expansion of special depreciation options was made in lieu of President Trump’s proposed plan to drop the corporate tax for manufacturers down to 15%. 

The Qualified Business Income (QBI) deduction, also made permanent, offers another key planning tool. Businesses should assess how to structure their income and investments to maximize this deduction, particularly in years with fluctuating profitability. Taken together, these three major provisions—Bonus Depreciation, Section 179, and QBI—provide a powerful tax-saving toolkit for businesses making large investments or undergoing rapid expansion. 

The manufacturing R&D credits, alongside these deductions, present additional opportunities for manufacturers to reduce their effective tax rate. These benefits are no longer just passive savings—they require proactive planning. Discussions with your tax advisors well before the next tax year ensure these incentives are properly modeled and aligned with their financial projections. Evaluating specific circumstances, forecasting income levels, and developing a multi-year strategy is essential. Without this, businesses risk generating tax benefits they are unable to use due to income thresholds or phaseout rules. 

While the new tax provisions are particularly favorable for manufacturers, other industries, especially those making investments in energy production, will need to assess the impact of the repealed green energy tax credits. The same goes for international companies subject to FDDEI and FDII. 

With these federal provisions enacted on the date signed into law, many states will now need to evaluate their stance on the tax code alterations. While many states choose to conform to the federal tax treatment of these different items, others will have specific provisions that can impact your tax situation. 

• Review your eligibility for new deductions and credits introduced by the bill to identify ways to reduce your tax liability. A KDG Tax Professional can help you pinpoint these opportunities.
• Work closely with a KDG Tax Professional to fully understand how these updates may apply to your situation before filing your next return.
• Stay informed about potential changes at the state level, as states may choose to conform or diverge from new federal tax provisions, affecting your tax outcome. Reach out to a KDG expert for the latest updates and insights.
• Begin tax planning early in the year with guidance from a KDG Tax Professional to ensure you maximize available deductions and credits.

• Consult a KDG Tax Professional to assess the impact of new and permanent provisions such as the Qualified Business Income Deduction and the New Markets Tax Credit on your business strategy.
• For manufacturers, take advantage of the increased Advanced Manufacturing Credit (now 35%) and evaluate opportunities related to research and experimental expenditure capitalization with KDG's expert guidance.
• Leverage the extension of 100% bonus depreciation and the increased Section 179 limit to optimize the tax benefits on new fixed asset purchases—KDG can help tailor these strategies to your needs.
• If your business previously claimed green energy credits, plan to adjust your investments and operations in light of repealed or expiring incentives, with strategic advice from KDG Tax Professionals.
• International businesses should review changes regarding FDDEI and FDII with a KDG expert to ensure compliance and optimize tax positions.
• Monitor developments in state tax law—KDG will keep you informed as state-level responses to federal changes may impact your company's overall tax strategy.
• Engage in proactive, ongoing tax planning with KDG to make the most of the new provisions and avoid surprises at year-end.

Sources All data comes from https://www.congress.gov/bill/119th-congress/house-bill/1/text