With the passage of the One Big Beautiful Bill Act (OBBBA), many temporary tax laws set to expire at the end of 2025 have been made permanent. This blog post summarizes the changes to several popular deductions and credits.

How the One Big Beautiful Bill Act affects individuals

Many temporary tax provisions are made permanent, including:

• Tax rates: The higher tax rates expected next year will not occur
• Higher standard deduction: There is a slight increase in these levels for 2025
  • $31,500 Joint
  • $23,625 Head of Household
  • $15,750 All Others
• Elimination of personal exemptions: This is now permanent.
• Elimination of most miscellaneous itemized deductions: The primary impact is the loss of deducting unreimbursed business expenses.
• Higher child tax credit: The $2,000 per person is now $2,200 per person in 2025, with the same $200,000 single and $400,000 joint phaseouts.
• Higher estate and gift exemption levels: Permanently raises exemptions to $15 million in 2026 with inflation adjustments thereafter.

The One Big Beautiful Bill Act also impacts businesses

• The Qualified Business Income deduction. What is commonly known as QBI or Section 199A is now permanent. Further, there is also a minimum $400 deduction benefit for taxpayers who have at least $1,000 of qualified business income.
• Higher SALT. Good news for flow-through entities is the increase of the ceiling for taxes as an itemized deduction from $10,000 to $40,000 through 2029, making it less important to pay your business taxes on state tax returns. But if you do, the popular technique called PTET is still available.
• Fewer 1099s. In the future, there will be fewer 1099s, as the minimum reporting threshold for the Form 1099-NEC and many other 1099 forms increases from $600 to $2,000. Additionally, the threshold for determining who needs to issue and receive Form 1099-Ks for third-party billing purposes increases from $600 to $20,000. It also increases from 200 transactions to 200. This alleviates the filing headache for most taxpayers.
• Capital purchase benefits. The ability to expense capital purchases remains available with 100% bonus depreciation through 2029 and expansive Section 179 deductions of up to $2.5 million for qualified property.
• Expense R&D. Research and development expenditures can now be written off, rather than amortized over five years. There is even the ability to apply these new rules retroactively to 2022.
• C corporation tax unchanged. Equally important is what was not in the bill. The C corporation tax rate remained unchanged.

Other changes you should know

• Above-the-line charitable contributions: Starting in 2026, you can deduct $1,000 of charitable contributions if single or $2,000 if filing jointly. This is available to you whether you use the standard deduction or itemize your deductions. There is also the introduction of a .5% floor for itemizing charitable contributions.
• SALT limit increases: The itemized deduction limit for taxes (commonly known as SALT) rises from $10,000 to $40,000 through 2029, with an income phase-out of $500,000.
• The AMT stays high: The Alternative Minimum Tax retains the higher exemption amounts, but the phaseouts revert to 2018 levels starting in 2026. This will not impact many, but if it does, preparation is key.
• Itemized deduction phaseout returns: The Pease limit, which previously reduced up to 80% of your itemized deductions, is not in effect for 2025. However, a revised version specifically for top income earners will take effect in 2026 and beyond.
• Elimination of many energy credits: This includes the credit for purchasing electric vehicles after September 30, 2025, and the elimination of many residential energy efficiency purchase credits at the end of 2025.

What’s new?

Several items are entirely new for 2025 through 2028.

• Tax-free tips: Up to $25,000 of tips may be deducted for those working in traditionally tipped industries.
• Tax-free overtime pay: Up to $12,500 for single and $25,000 for joint filers of the premium portion of compensation is now tax-free.

Both the tip income and overtime benefits phase out when adjusted gross income exceeds $150,000 or $300,000 for joint filers.

• New senior $6,000 deduction: This benefit is for both itemizers and non-itemizers and phases out when modified AGI exceeds $75,000.
• New Trump accounts: An account will be established for each child born from January 1, 2025, through December 31, 2028, and will be pre-funded with $1,000. There are IRA-style accounts available for those born outside these years, but they are not funded.

Stay up-to-date with RRBB

This is a lot to cover in a single blog post. Over the next several weeks, our blog will focus on individual topics to help you navigate how the One Big Beautiful Bill Act. We hope to help you understand how the significant changes may impact you and your situation. In the meantime, feel free to contact our RRBB advisors if you have any questions.