In July 2025, the U.S. enacted one of the most sweeping federal tax overhauls in decades via the One Big Beautiful Bill Act (OBBBA). Signed into law by President Donald Trump on July 4, this legislation restructured key tax provisions for individuals, businesses, and estates—while triggering sharp debate over deficits, fairness, and long-term economic impact.
Below is a breakdown of the key provisions, all of which are retroactively effective to January 1, 2025, unless otherwise noted.
1. Signature Provisions of the One Big Beautiful Bill Act (OBBBA)
- The act makes permanent many expiring elements of the 2017 Tax Cuts and Jobs Act (TCJA), including the 37% top tax rate, reduced income brackets, and the expanded standard deduction. (Kahn Litwin)
- The standard deduction increases to $15,750 (single) and $31,500 (married filing jointly), with a $6,000 bonus deduction for taxpayers over 65. (The Week)
- The SALT deduction cap—previously limited to $10,000—is temporarily raised to $40,000 through 2029 and indexed for inflation thereafter. (Journal of Accountancy)
- The Child Tax Credit is increased to $2,200 per child, indexed annually. (The Week)
- New deductions apply to overtime and tip income, as well as up to $10,000 of interest on car loans for U.S.-built vehicles (2025–2028). (The Week)
- “Trump Accounts” are introduced—tax-advantaged investment accounts for minors, aimed at promoting long-term savings. (Kiplinger)
- The estate and gift tax exemption jumps to $15 million per person, $30 million per married couple. (The Week)
- Charitable deductions now allow non-itemizers to deduct up to $2,000 (married) and itemized deductions are capped at 35% of the value. Corporate charitable contributions face new outbound transfer taxes. (BakerHostetler)
- The act rebrands technical terms in international taxation: e.g., GILTI becomes Net CFC Tested Income (NCTI). (Politico)
2. Key Business & Corporate Tax Changes
- Bonus depreciation is restored and made permanent for domestic manufacturing equipment placed in service between 2025 and 2029. (BakerHostetler)
- The R&D tax credit is expanded and made permanent, while the semiconductor credit rises to 35%. (Investopedia)
- The EBITDA rule for business interest deductibility is reinstated, starting with tax years after 2024. (BakerHostetler)
- Programs like Opportunity Zones, New Markets Tax Credits, and Low-Income Housing Credits are expanded with increased investment caps. (JD Supra)
- Updates to foreign tax credits, including Section 960, are designed to reduce profit shifting by multinationals. (BakerHostetler)
3. Inflation Adjustments from the IRS
The IRS published over 60 adjustments for 2025, including:
- Standard deductions and bracket thresholds
- Foreign earned income exclusion: raised to $130,000
- Gift tax exclusion: raised to $19,000
- Adjustments to HSA, FSA, and transportation benefit limits
(IRS Newsroom)
4. IRS Regulatory Updates
- New guidance appeared in IRS Internal Revenue Bulletins 2025-05 and 2025-26, including Circular 230 changes, revised AMT calculations, and appraiser rules.
(IRS Bulletin 2025-26) - The proposed Circular 230 overhaul bans contingent fees and revamps return preparer conduct.
(IRS Bulletin 2025-05)
5. Related Legislation in 2025
- The Foreign Pollution Fee Act of 2025, though not yet passed, could impose carbon-based import tariffs in the near future. (Wikipedia)
- The GENIUS Act, passed in July 2025, regulates stablecoin issuers and includes mandatory audits and asset-backing standards—affecting how crypto is taxed and reported. (Wikipedia)
6. Economic and Social Impacts
- More take-home pay because higher standard deduction and new credits increase disposable income.
- Business investment boost – Bonus depreciation and R&D credits encourage capital spending.
- Domestic job growth – Tax breaks favor U.S.-based manufacturing and production.
- Small business support – Higher estate tax exemption helps family businesses stay intact.
- Simpler filing – Expanded deductions reduce the need for itemization when filing taxes.
- Relief for hourly workers – Overtime and tip income now deductible.
- Encourages youth saving – “Trump Accounts” help kids build tax-free investments.
- More charitable giving – New write-offs for non-itemizers support nonprofits.
- Help for seniors – Extra $6,000 deduction eases costs for retirees.
- Stable long-term planning – Permanent tax cuts create predictability in the market.
- The Congressional Budget Office (CBO) estimates the bill could add $3.4 trillion to the deficit. (AP News)
- The Social Security Administration recently walked back an inaccurate claim that benefits would be tax-free under OBBBA. In truth, benefits remain partially taxable, though some retirees receive larger deductions. (MarketWatch)
- Green energy tax credits, including for EVs and solar, expire mid-2025. Buyers must act fast to claim existing incentives. (Kiplinger)
- Starting in 2026, gambling loss deductions are capped at 90% of winnings, potentially resulting in “phantom income.” (Kiplinger)
Conclusion
The 2025 tax overhaul is a landmark achievement for supporters of tax simplification and business growth. While many provisions reduce tax burdens, the law's critics point to its potential for widening inequality, increasing deficits, and creating future volatility in social programs.
For individuals and businesses, proactive tax planning is essential. Stay informed via IRS bulletins, consult with advisors, and prepare to adapt your 2025–2026 filings to this new tax landscape.
