President Donald Trump’s “One Big Beautiful Bill Act” has officially been signed into law. This sweeping legislation, passed via the fast-track reconciliation process, makes significant changes across various sectors, impacting individuals, families, and businesses.   

At nearly 900 pages, this legislation is a comprehensive collection of tax breaks, spending cuts, and other Republican priorities, including new funding for national defense and immigration enforcement.

Democrats stood united against the bill but were ultimately unable to stop its passage as long as Republicans remained unified. The Senate passed the legislation on Tuesday, with Vice President JD Vance casting the tie-breaking vote. The House had passed an earlier version of the bill in May by a single vote, and approved the final version on Thursday with a vote of 218-214.

To partly offset the lost tax revenue and new spending, Republicans are offsetting some of those costs with deep cuts to Medicaid, food assistance programs, student loans, and clean energy programs. Now that the bill is law, it’s a good time to examine its actual contents and determine when some of its provisions take effect.   

Key provisions include:

Increased Spending for Security: The bill substantially boosts funding for immigration enforcement, border protection, and national defense. This includes significant allocations for border wall construction, expanded immigrant detention facilities, and increased staffing for agencies like Immigration and Customs Enforcement (ICE).

Cuts to Discretionary Spending: To offset some of these increases and tax reductions, the bill implements cuts to other discretionary spending, notably targeting Medicaid and the Supplemental Nutrition Assistance Program (SNAP). These changes introduce stricter eligibility requirements, new work mandates for some adults, and reduced federal reimbursements to states, which could lead to millions losing coverage or assistance.

Debt Ceiling Increase: The legislation also includes a substantial increase to the United States debt ceiling (by $5 trillion), aiming to prevent a government default.

Significant Tax Changes (Extending TCJA Provisions): A core component of the bill is the extension of many expiring provisions from the Tax Cuts and Jobs Act of 2017 (TCJA). 

The newly passed Republican bill includes reductions for businesses and new individual tax breaks  

The changes take effect retroactively as of January 1, 2025 (except for bonus depreciation).  The existing tax rates and brackets would become permanent under the bill, solidifying the tax cuts approved in Trump’s first term. 

Business Tax Provisions

Permanent Deduction for Domestic R&D: The bill permanently reinstates the ability to immediately deduct domestic research and experimental (R&D) expenses under Section 174, with retroactive application for certain small businesses.

Business Interest Expense Limitation Adjustment: This adjustment permanently restores the add-back for amortization and depreciation when calculating the business interest expense limitation under Section 163(j), which is likely to increase the deductible interest for businesses.

100% Bonus Depreciation Revival: For qualified property placed in service after January 19, 2025, 100% bonus depreciation is permanently reinstated.

Special Depreciation for Production Property: A new 100% depreciation deduction is created for qualified production property placed in service in the U.S. before 2031, provided construction began after January 19, 2025, and before January 1, 2029.

Increased Section 179 Expensing: The maximum amount businesses can expense under Section 179 is increased to $2.5 million.

Enhanced Opportunity Zone Deduction: The enhanced deduction for investments in Opportunity Zones is renewed and made permanent. Qualified Opportunity Zones will be redesignated every 10 years starting in 2026. For investments made after January 1, 2027, any deferred gains will be recognized on the earlier of five years or the date the investment is sold. Investors can receive a 10% step-up in basis if the investment is held for five years. Additionally, no taxes will be owed on investment gains if the qualified investment is held for at least 10 years and up to 30 years.

Tighter Executive Compensation Rules: The aggregation rules for limiting the deduction for excess compensation under Section 162(m) are tightened.

Higher 1099-K Reporting Threshold: The reporting threshold for Form 1099-K (“Payment Card and Third Party Network Transactions”) reverts to the previous, higher threshold, retroactively effective for 2021 and subsequent years.

Employee Retention Credit (ERC) Restrictions: Claims and refunds for the Employee Retention Credit (ERC) are restricted through new penalties for ERC promoters, the denial of claims filed after January 31, 2024, and an extension of the assessment period of limitations.

Expanded Small Business Stock Gain Exclusion: The gain exclusion deduction for qualified small-business stock under Section 1202 is expanded. The §1202 small business stock exclusion has been revised to allow a partial exclusion of gain from the sale of qualified small business stock issued after the enactment date and held for a minimum of three years. This exclusion is 50% if held for at least three years, 75% if held for at least four years, and 100% if held for at least five years. Furthermore, the gross asset limitation for qualification has been increased to $75 million, and the per-taxpayer gain exclusion cap is now $ 15 million.

Individual Tax Provisions  

Permanent Extension of TCJA Individual Tax Rates: Most expiring individual provisions from the Tax Cuts and Jobs Act (TCJA) are made permanent, including lower individual marginal tax rates and limitations on various deductions and losses. 

Higher Standard Deduction with Senior Bonus: The bill permanently instates a higher standard deduction; it will be $15,750 for single taxpayers ($31,500 for joint filers). Additionally, a new senior bonus of $6,000 will be available from 2025 through 2028, phasing out for seniors with incomes exceeding specific thresholds. 

Itemized Deduction Limits for High Earners: Itemized deductions will be limited for individuals whose income falls into the highest marginal tax bracket. Miscellaneous itemized deductions are now permanently eliminated (i.e., unreimbursed employee expenses, tax preparation fees, etc.), with a new exception for certain unreimbursed educator expenses.

Permanent Pass-Through Deduction (Section 199A): The Section 199A pass-through tax deduction is made permanent, with favorable revisions to its eligibility rules and computation, benefiting many small business owners.

Modified SALT Cap: The $10,000 cap on state and local tax (SALT) deductions is made permanent. However, it will be temporarily quadrupled to $40,000 in 2025, $40,400 in 2026, with further increases from 2027 through 2029, and will include phase-outs for higher-income individuals. It’s a provision essential to California and other high-tax states, though the House wanted it to last for 10 years.

Increased Estate and Gift Tax Exemption: The TCJA’s higher estate and gift tax exemption is made permanent, setting it at $15 million for individuals who die in 2025, with this amount indexed for inflation for those dying in 2026 and beyond.

Permanent and Enhanced Child Tax Credit: The TCJA’s higher Child Tax Credit is made permanent, with the maximum credit increasing to $2,200. A Social Security number requirement is also added for both the child and the taxpayer to claim the credit.   

Certain Mortgage Insurance Premiums: will now qualify as acquisition indebtedness for the mortgage interest deduction.

Temporary Deductions for Tips, Overtime, and Car Loan Interest: From 2025 through 2028, certain types of cash payments, including tips, overtime pay, and car loan interest, will be eligible for temporary deduction. These deductions will have specific limits and income-based eligibility criteria. For example, the new law provides a temporary car loan interest deduction of up to $10,000, applicable to vehicles that undergo final assembly in the United States.  Beginning this year, tips totaling less than $25,000 annually will be tax-deductible through 2028. This deduction is available to individuals earning up to $150,000 annually—or $300,000 for joint filers—under the new law.

The legislation also updates the rules for deducting overtime pay. Through 2028, up to $12,500 of additional overtime pay can be deducted each year, subject to the same income thresholds: $150,000 for single filers and $300,000 for joint filers.  

The Alternative Minimum Tax (AMT): exemption has been permanently increased to $1,000,000 for joint filers (and $500,000 for single filers), with these amounts indexed for inflation. Additionally, the phaseout exemption amount will be adjusted from 25% to 50% after 2025.

Looking Ahead   

We may cover these new tax changes in greater detail in future articles.  

This new tax law brings both opportunities and challenges for taxpayers. Expect a wave of new guidance and tax form changes from the U.S. Department of the Treasury and the IRS, which could add to the complexity.

Understanding the full impact won’t be easy. If you have any questions about these changes and how the new law may impact your financial situation, please don’t hesitate to contact Huckabee CPA for a complimentary consultation.