We wanted to bring your attention to a major piece of tax legislation that was just signed into law on July 4th. Officially referred to as the 2025 Budget Reconciliation Act (unofficially nicknamed the One Big Beautiful Bill Act), this new law includes permanent tax cuts for individuals and businesses, updates to deductions and credits, and a rollback of many recent green energy incentives. Below is a summary of the most important changes that may affect you personally or your business.

Key Individual Tax Changes

Permanent Extension of Trump-Era Tax Cuts

Many of the individual provisions of the 2017 Tax Cuts and Jobs Act (TCJA) that were set to expire in 2025 have been made permanent. This includes the current lower tax brackets (10% to 37%), the increased standard deduction, and the elimination of personal exemptions. Mortgage insurance premiums are now permanently deductible, and teachers will see an expanded deduction for classroom expenses.

Standard Deduction Increase

For 2025, the standard deduction will increase to:

• $31,500 for joint filers
• $23,625 for heads of household
• $15,750 for single filers

These amounts will be adjusted for inflation going forward.

Higher SALT Cap (Temporarily)

The cap on the deduction for state and local taxes (SALT) has been raised to $40,000 in 2025, increasing by 1% annually until 2029. It then reverts to $10,000 in 2030.

Child Tax Credit Increase

The Child Tax Credit is now permanently set at $2,200 per child with inflation adjustments. The refundable portion remains and SSNs are required for all parties claiming the credit.

Estate Tax Exclusion Grows

The estate tax exemption increases to $15 million in 2026, also adjusted for inflation thereafter.

New Tax Breaks for Individuals

No Tax on Tips and Overtime Pay

Rather than being excluded from income, tip and overtime income can now be deducted (up to $25,000 for tips, $12,500 for overtime; double for joint filers). These deductions phase out at higher incomes and expire after 2028.

Auto Loan Interest Deduction

Interest on auto loans for cars purchased after 2024 can be deducted (up to $10,000 through 2028), even if you don’t itemize. The vehicle must be new and its final assembly must have occurred in the United States.

“Trump Accounts” for Newborns

New tax-favored savings accounts for newborns, seeded with $1,000 and modeled on IRAs, have been introduced.

Other Provisions

• Deduction for charitable giving (even without itemizing) returns.
• 529 plans expanded to cover home schooling and more
• Credits for donations to scholarship funds introduced
• Taxpayers aged 65 or older-and their spouses, if filing jointly, can claim a $6,000 deduction per qualified individual for tax years 2025-2028. This senior deduction is reduced by 6% (but not below zero) for the adjusted gross income that exceeds $75,000 (or $150,000 for joint filers)

Business Tax Changes

Bonus Depreciation Made Permanent

The 100% bonus depreciation (full expensing of certain business property) is now permanent for purchases made after January 19, 2025.

R&D Expensing Returns

The deduction for domestic research and experimental costs is reinstated and can even be applied retroactively for small businesses (Less than $31 million in gross receipts).

Qualified Business Income Deduction Made Permanent

The popular 20% deduction for pass-through business income under Section 199A will not expire as planned.

Other Business Updates

• Section 179 deduction limits increased
• Special interest exclusions for loans secured by rural/agricultural real estate
• Changes to low-income housing credit rules

Energy & IRS Program Changes

Green Energy Credits Cut

Many of the clean energy credits introduced in 2022 will be phased out after 2025, including:

• EV credits (both new and used)
• Home energy efficiency upgrades
• Solar and other residential energy credits

IRS Direct File Program Ends

The IRS will shut down its Direct File program within 30 days. A public-private alternative is planned.

Reduced Penalties for Fraudulent ERC Claims

The Act sets new, lower penalties for improper Employee Retention Credit promotion—though additional regulation may follow.

Final Thoughts

The main takeaway from this bill is that it makes permanent many of the tax provisions originally set to expire after 2025. For most individuals and businesses, taxes in 2026 and beyond will closely resemble what you’ve experienced since 2018. If you have questions about how these changes may affect your personal return or business planning, we’re here to help you navigate the new law and take advantage of any new opportunities.

Feel free to reach out to schedule a planning session!

© 2025