On July 4, 2025, H.R. 1 from the 119th Congress, also known as the One Big Beautiful Bill Act (OBBBA), was signed into law by President Trump. The OBBBA extends and enhances many of the tax breaks from the 2017 Tax Cuts and Jobs Act (TCJA). It also significantly changed aspects of the Inflation Reduction Act (IRA) of 2022, particularly in the area of clean energy tax credits and environmental programs. Most notably for homeowner, the 30% Energy Efficient Home Improvement and the 30% Residential Clean Energy Credits originally ending 2032 now ends in 2025. Homeowners planning to take advantage of this credit will need to complete improvements by 12/31/2025.
As individuals and businesses plan for the 2025 tax year, below are some of the main tax law changes from the 870-page document. Contact the office with questions about how the new law may affect you.
Tax Highlights for Individuals
Individual tax rates of 10%, 12%, 22%, 24%, 32%, 35% and 37%.
Tax Income Changes
Overtime Pay:
For 2025–2028, creates a new deduction of up to $12,500 for single filers or $25,000 for joint filers for qualified overtime pay, subject to income-based phaseouts.
Tip Income:
For 2025–2028, creates a new deduction of up to $25,000 for tip income in certain industries, subject to income-based phaseouts.
Tax Deduction Changes
Standard deduction of $15,750 for single filers, $23,625 for heads of households and $31,500 for joint filers, with annual inflation adjustments going forward.
Taxpayers 65 and older:
For 2025–2028, creates an additional deduction of up to $6,000 for taxpayers age 65 or older, subject to income-based phaseouts.
State and Local Taxes:
Temporarily increases the limit on the deduction for state and local taxes (the SALT cap) to $40,000 for 2025, with a 1% increase each year through 2029, after which the $10,000 limit will return.
Qualified Passenger Vehicle Loan Interest Deduction:
For 2025–2028, creates an above-the-line deduction of up to $10,000 for qualified passenger vehicle loan interest on the purchase of certain American-made vehicles, subject to income-based phaseouts.
Charitable Contribution Deduction:
The Act creates a charitable contribution deduction for taxpayers who do not elect to itemize, allowing nonitemizers to claim a deduction of up to $1,000 for single filers or $2,000 for married taxpayers filing jointly for certain charitable contributions.
Education Expenses: Expands the allowable education expenses that can be paid with tax-free Section 529 plan distributions, beginning July 5, 2025, or Jan. 1, 2026, depending on the type of expense.
Tax Credit Changes
Child tax credit of $2,200 per child, with annual inflation adjustments going forward.
Included are increases to the Child and Dependent Care credit from 35% to 50% of qualifying expenses; subject to income-based phaseouts.
Clean Energy Tax Credits:
Eliminates clean energy tax credits, generally after 2025, such as the energy-efficient home improvement and residential clean energy credits — but eliminates the clean vehicle credits for both new and used vehicles after Sept. 30, 2025.
Increases the federal gift and estate tax exemption amount to $15 million for individuals and $30 million for married couples beginning in 2026, with annual inflation adjustments going forward.
See IRS.gov for H.R. 1 Tax Deductions for working Americans and seniors. https://www.irs.gov/newsroom/one-big-beautiful-bill-act-tax-deductions-for-working-americans-and-seniors
Tax Highlights for Businesses
Business Deduction Changes
Expands the 20% Sec. 199A qualified business income (QBI) deduction for owners of pass-through entities (such as partnerships, limited liability companies and S corporations) and sole proprietorships,
Allows the immediate deduction of domestic research and experimentation expenses (retroactive to 2022 for eligible small businesses), and
Eliminates clean energy tax incentives, such as the alternative fuel vehicle refueling property credit and the Sec. 179D deduction for energy-efficient commercial buildings after June 30, 2026 — but eliminates the qualified commercial clean vehicle credit after Sept. 30, 2025.
Depreciation Changes
Bonus depreciation increases to 100% for qualified new and used assets acquired after January 19, 2025,
Section 179 expense limit increased to $2.5 million and the expensing phaseout threshold to $4 million for 2025, with annual inflation adjustments going forward,
H.R. 1 from the 119th Congress can be accessed through https://www.congress.gov/bill/119th-congress/house-bill/1
To stay abreast of all IRS updates and news check out https://www.irs.gov/newsroom/tax-updates-and-news-from-the-irs
Any accounting, business, Medicare or tax advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues, nor a substitute for a formal opinion, nor is it sufficient to avoid tax-related penalties. If desired, we would be pleased to perform the requisite research and provide you with a detailed written analysis. Such an engagement is the subject of a separate engagement letter that would define the scope and limits of the desired consultation services.