By: Ben Bowers | 07/08/25
On July 4th, 2025, President Trump signed the One Big Beautiful Bill Act (the “Act”), a sweeping piece of tax legislation, including several provisions that will meaningfully impact individuals and businesses across a range of industries. The legislation extends many of the expiring provisions from the Tax Cuts and Jobs Act (“TCJA” passed during Trump’s first administration in 2017) as well as provides new tax cuts for both individuals and businesses. In addition to the tax changes, the Act also increases funding for border enforcement and imposes additional limits on Medicaid and other safety net programs. Below are a few ways the Act will impact a few relevant industries (i.e. Construction, Entertainment, Healthcare, Hospitality, Manufacturing & Distribution, Nonprofits, Private Equity & Investment, Professional Services, Real Estate, and Technology).
The industry highlights segment below is followed by 10 ways in which the Act is likely to impact individual taxes (i.e. Permanent Extension of Lower Tax Rates, SALT Deduction Cap, Immediate Expensing of R&D Costs, 100% Bonus Depreciation, Federal Estate/Gift Tax Exemption, No Tax on Tips/Overtime, Deductibility of Car Loan Interest, $1,000 Trump Accounts, Charitable Contribution Deduction Changes, New Limitation on Itemized Deductions).
The section below highlights changes that affect individual taxpayers, with ten key provisions from the Act that individuals should be aware of.
What changed: The lower individual income tax brackets created by the Tax Cuts and Jobs Act (TCJA), maxing out at 37% for those in the highest tax bracket, were originally scheduled to sunset after 2025. The Act makes these rates permanent, at least until changed by future legislation. Several other provisions from the TCJA that were also set to expire have been made permanent, including the 20% qualified business income deduction, the increased standard deduction amount, the repeal of personal exemptions, and the suspension of miscellaneous itemized deductions subject to the 2% floor.
Who is affected: All individual taxpayers will be impacted by the permanent extension of the lower tax rates. This includes the highest-earning taxpayers, since the top marginal rate of 37% remains below the pre-TCJA rate of 39.6%. Retaining the higher standard deduction amount means that more taxpayers will continue to find it more beneficial to take the standard deduction rather than itemize.
Planning opportunity: With income tax rates still low by historical standards, now may be a good time to consider a Roth conversion – transferring funds from a traditional IRA or other pre-tax retirement account into a Roth IRA. A conversion is taxable in the year of the transfer, but future qualified withdrawals from the Roth (including any growth) are tax-free. Converting in a low-tax-rate environment can help to reduce overall tax liability and provides a hedge against the risk of higher rates in the future.
The child tax credit will continue to benefit families with income under $400,000 ($200,000 if unmarried), while owners of pass-through business entities will benefit from the permanent 20! QBI deduction. On the other hand, the permanent suspension of miscellaneous itemized deductions, including investment advisory fees, will be detrimental to high-net-worth individuals.
What changed: One of the most controversial provisions of the 2017 Tax Cuts and Jobs Act was the $10,000 cap on the deduction for state and local taxes (SALT), which previously had no dollar limit (though it was only available to those who itemized). The new law increases the SALT deduction cap to $40,000 and provides for annual inflation adjustments through December 31, 2029, at which point it will revert to the $10,000 limitation. The deduction is phased down for taxpayers with modified adjusted gross income (MAGI) over $500,000, reducing the allowable deduction by 30% of the excess over the threshold. The deduction cannot be reduced below $10,000, regardless of income.
Importantly, the law does not alter or restrict the workaround regimes many states have implemented through pass-through entity tax (PTET) elections, meaning those structures will remain viable for taxpayers who pay a portion of their state income tax through business entities.
Who is affected: This change primarily benefits middle- to upper-middle-income taxpayers who pay substantial state income taxes or real estate taxes, and particularly those in high-tax states such as New York or California. High earners with MAGI above $500,000 will see a reduced benefit, and those with income over $600,000 will be limited to the original $10,000 cap.
Example: Jack and Jill are married and file jointly. In 2025, their MAGI is $550,000. They pay $20,000 in real estate taxes and $25,000 in state income taxes.
Jack and Jill can claim a $25,000 SALT deduction. The deduction is $15,000 less than the new $40,000 cap due to the income-based phase-down, but is still significantly more than they would have been able to deduct under prior law.
What changed: Prior to 2022, businesses were generally allowed to immediately deduct their research and development (R&D) expenditures, which are the costs associated with innovation and creating new products or services. Beginning in 2022, however, the Tax Cuts and Jobs Act imposed a requirement on companies to capitalize and amortize R&D costs over five years for domestic expenditures and 15 years for foreign expenditures.
The new law reinstates full expensing of domestic R&D expenditures starting in 2025 and for future tax years. However, foreign R&D expenses must still be capitalized and amortized over 15 years.
The law also includes a retroactive provision for small businesses – defined as those with average annual gross receipts of $31 million or less – allowing them to apply this change retroactively to tax years 2022 – 2024 by filing amended returns. In addition, all businesses, regardless of size, may accelerate the deduction of any remaining unamortized domestic R&D expenses from 2022 – 2024 over a one- or two-year period.
Who is affected: Individuals who own interests in businesses with domestic R&D activity may benefit from this change – particularly if prior-year amended returns are filed to claim additional expenses and reduce taxable income. While R&D expenses are common in technology, pharmaceuticals, engineering, manufacturing, and biotech, they may also arise in less obvious sectors like financial services, consumer goods, and agriculture, depending on product development activity.
Example: Megan is a 50% partner in a partnership that started in 2024 and had gross receipts under $31 million. The business incurred $200,000 of domestic R&D expenses, which under prior law had to be capitalized, yielding only a $20,000 amortization deduction in 2024. Megan’s 2024 Schedule K-1 showed $100,000 of taxable income, inclusive of the limited deduction.
Under the new law, the partnership is eligible to amend its 2024 return to fully deduct the $200,000 in R&D expenses, resulting in an additional $180,000 deduction. Megan’s share of that deduction is $90,000, reducing her K-1 income from $100,000 to $10,000. This revised information will be reported on a 2024 amended K-1, and Megan will need to file a Form 1040-X to claim a refund based on the reduced taxable income.
What changed: One of the key provisions of the Tax Cuts and Jobs Act that is being reinstated under the new law is the ability for businesses to immediately expense 100% of qualifying capital investments in the year placed in service using bonus depreciation. This deduction had been phasing down in recent years, and was previously scheduled to expire entirely after 2026. Under the new law, full 100% bonus depreciation is restored permanently for qualifying property placed in service after January 19, 2025.
The provision applies to tangible property with a recovery period of 20 years or less, such as machinery, equipment, furniture, and other personal property. Bonus depreciation generally does not apply to buildings or land. Eligible property includes both new property whose original use begins with the taxpayer and used property, provided certain acquisition rules are met.
Who is affected: Business owners – whether operating as sole proprietors or via pass-through entities such as partnerships or S corporations – may benefit if they operate in capital-intensive industries such as manufacturing, logistics, farming, hospitality, or healthcare. These businesses can now deduct the full cost of qualifying capital purchases in the first year, rather than depreciating them over several years.
Planning opportunity: While real property generally does not qualify for bonus depreciation, real estate investors can still benefit from this provision through the use of cost segregation studies. These studies break out and identify shorter-lived, non-structural components of a building – such as carpeting, lighting, and certain HVAC systems – that may qualify for 100% bonus depreciation, accelerating tax deductions into the year of purchase.
What changed: The federal estate and gift tax exemption was previously scheduled to be cut in half at the end of 2025, from $13.99 million to approximately $7 million. This exemption provides the amount that an individual can pass on to their heirs or beneficiaries free of federal transfer taxes. The Act reverses this sunset provision and permanently increases the exemption to $15 million, indexed annually for inflation. The new exemption applies to decedents dying and gifts made after December 31, 2025.
Who is affected: High-net-worth individuals with taxable estates above or around $7 million (the level the exemption was expected to revert to) will benefit from the increased exemption. However, those with estates exceeding $15 million may still face the 40% estate tax and should plan accordingly.
Planning opportunity: If your taxable estate exceeds $15 million or might approach that amount in the future, now is an ideal time to consider strategies for removing future appreciation from your estate. Options include:
What changed: The Act delivers on one of President Trump’s major campaign promises by significantly reducing taxes on both tips and overtime pay. It introduces a temporary above-the-line deduction of up to $25,000 for qualified tips received in occupations that customarily receive tips (such as restaurant servers). Because the deduction is above the line, taxpayers can take advantage of it even if they do not itemize. The deduction begins to phase out once modified adjusted gross income exceeds $150,000 (or $300,000 for joint filers) and will only be available for tax years 2025 through 2028.
The deduction for overtime pay is structured similarly, with a slightly different amount. The maximum deduction is $25,000 for married filing joint taxpayers, but only $12,500 for all other taxpayers. The same income phase-out and eligibility window apply to both the tips deduction and the overtime deduction.
Who is affected: These provisions primarily benefit hourly workers who receive tips and/or work overtime, but not those with high incomes above the phase-out thresholds. Affected professions include restaurant staff, bartenders, rideshare drivers, hotel employees, tradespeople, police officers, and firefighters.
Example: Joe works as a waiter at a restaurant, earning $10,000 in hourly wages and $35,000 in tips during 2025. These are his only sources of income for the year. Since his income is below the $150,000 threshold, he qualifies for the full $25,000 tip deduction, reducing his adjusted gross income to $20,000.
What changed: Under prior law, interest paid on loans used to acquire personal-use assets was generally not deductible, with the notable exception of mortgage interest paid on a loan used to acquire a primary residence. The Act changes this by introducing a new above-the-line deduction for interest paid on car loans, provided the vehicle meets specific criteria. The deduction applies to indebtedness incurred to purchase a new passenger vehicle with final assembly in the United States. Taxpayers may deduct up to $10,000 of qualifying interest per year, but the deduction is phased out by $200 for every $1,000 of modified adjusted gross income in excess of $100,000 for single filers and $200,000 for joint filers. This deduction applies to vehicles purchased in tax years 2025 through 2028.
Who is affected: This provision benefits individuals who plan to finance the purchase of a U.S.-made vehicle in the next three and a half years, as long as their income falls below the phase-out thresholds. Since the deduction is above-the-line, even individuals who do not itemize can take advantage of it. High-income taxpayers may have the benefit partially phased out, or receive no deduction at all.
Planning note: While the car loan interest deduction can help offset the cost of a new vehicle, it should not drive the decision to purchase a car or take out a larger loan than is necessary. The deduction fully phases out for individuals in the 24% marginal tax bracket, meaning the maximum annual tax savings is around $2,400. This provides modest relief by making the net cost to borrow slightly lower, but should not be used as a reason to take on unnecessary debt.
What changed: The new law creates a special type of individual retirement account (IRA) for minors called a Trump account. Contributions may only be made to these accounts before the calendar year in which the beneficiary turns age 18, and are not tax-deductible. Distributions are not allowed until the calendar year the beneficiary reaches age 18, at which point withdrawals will be taxed under the annuity rules of Section 72: earnings are taxed as ordinary income, while contributions (basis) are returned tax-free.
Trump accounts must be designated as such at the time of creation, and no contributions can be made until 12 months after the law’s enactment (i.e. no earlier than July 4, 2026). Account assets are limited to low-cost mutual funds and ETFs that meet certain criteria, such as tracking a broad U.S. equity index. Annual contributions are capped at $5,000 per beneficiary, adjusted for inflation after 2027. Employers can also contribute to Trump accounts, and such contributions are excludible from the employee’s income.
The Act also establishes a pilot program under which taxpayers may be eligible for a $1,000 tax credit for opening a Trump account for a child born between January 1, 2025 and December 31, 2028. Approximately $410 million has been appropriated to fund this initiative.
Who is affected: Taxpayers who are planning to have children during the 2025 – 2028 window may be eligible for the $1,000 credit, providing a head start on saving for their child’s future. This credit can supplement any additional contributions made by the family. Families with children under age 18 who were born prior to 2025 can still utilize these accounts, but will not receive the $1,000 bonus.
Planning note: Trump accounts offer a new, flexible vehicle for long-term savings on behalf of children, with fewer restrictions than traditional retirement accounts or college savings plans like 529s. After age 18, the funds can be used for any purpose: a down payment on a house, a car purchase, a wedding, or even as a retirement fund. While contributions are not deductible, the potential for tax-free growth and broad flexibility in the use of the funds make these accounts a useful alternative option for parents looking to save for their children’s future.
What changed: The Act makes two notable changes to the deduction for charitable contributions, one favorable for taxpayers and the other unfavorable. First, the Act expands the charitable contribution deduction by allowing a limited deduction for individuals who do not itemize – a significant shift from prior law, which only permitted charitable deductions for those who itemize. Beginning in 2026, taxpayers who take the standard deduction can claim a charitable deduction of up to $1,000 (single) or $2,000 (married filing jointly) for qualifying contributions.
The second (unfavorable) change affects taxpayers who itemize their deductions. The Act imposes a new 0.5% floor on the charitable deduction, meaning the allowable deduction is reduced by 0.5% of the taxpayer’s contribution base, or adjusted gross income, for the year.
Who is affected: These changes affect all taxpayers who make charitable contributions. Non-itemizers will gain access to a modest charitable deduction for the first time since 2021. Itemizers will see a slight reduction in their deductible charitable contributions due to the new floor.
Example: Ray itemizes his deductions and donates $75,000 to charity in 2026. His adjusted gross income is $500,000. The 0.5% floor is calculated by taking his contribution base (AGI) of $500,000 and multiplying by 0.5%, which yields a $2,500 floor. His allowable charitable deduction is $72,500.
Planning opportunity: Taxpayers who do not itemize may want to defer year-end charitable gifts from 2025 into 2026, in order to take advantage of the new $1,000 (single) or $2,000 (joint) deduction for non-itemizers beginning in 2026.
What changed: The Act permanently eliminates the Section 68 overall limitation on itemized deductions (also known as the Pease limitation), which required high-income taxpayers to reduce certain itemized deductions by three cents for every dollar of adjusted gross income (AGI) over a threshold amount. In its place, the Act introduces a new limitation on the tax benefit from itemized deductions that reduces a taxpayer’s total allowable itemized deductions by 2/37th of the lesser of:
This change applies to tax years beginning after December 31, 2025.
Who is affected: Taxpayers in the top marginal tax bracket will be subject to this new limitation. For 2025, the top brackets start at $626,350 for single taxpayers and $751,600 for married filing joint taxpayers. While these are the 2025 thresholds, the limitation takes effect in 2026, and the applicable tax brackets for that year are not yet available.
Example: Donna is a single filer in 2026 with AGI of $800,000 and itemized deductions of $100,000. Assume the 37% tax bracket begins at $650,000 for single filers in 2026.
Donna’s allowable itemized deductions are reduced to $97,297, and her final taxable income is $702,703.
The One Big Beautiful Bill Act provides for major changes to the tax landscape, with many of the tax cuts from the 2017 Tax Cuts and Jobs Act being extended, while also creating new incentives and limitations that will apply to a wide range of industries and taxpayers. The permanence of lower tax rates, expansion of write-offs for state and local taxes, and new above-the-line deductions create opportunities for tax savings across the board. The Act also includes taxpayer-favorable provisions for owners of domestic businesses and addresses uncertainty related to federal transfer taxes.
Although this article focuses on the provisions most relevant to individuals and businesses, the Act also contains significant changes to international tax, rollbacks of clean energy incentives, and restructuring of IRS funding and enforcement. To understand the full impact of the new law on your situation, it is important to work closely with a tax advisor to identify the changes that may impact you and how to plan to take advantage of them. For individuals looking for advice, our team is available to help you navigate the complexities of the Act and strategize to reduce your tax burden. To learn more, contact Ben Bowers or call 770.396.2200.
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