On July 1, 2025, the Senate passed its version of the One Big Beautiful Bill Act which was officially signed by President Trump on July 4, 2025. This bill imposed numerous tax changes that are particularly relevant for high-net-worth individuals and their financial planning. Many of these provisions made soon-to-expire tax rules permanent and introduced several new elements.
Here’s a breakdown of the key highlights and what this means for you:
Permanent Extension of TCJA Individual Provisions
- The current lower individual rate brackets (10, 12, 22, 24, 32, 35, and 37 percent).
- Higher standard deductions (e.g., $31,500 for joint filers in 2025).
- The elimination of personal exemptions.
- Increased alternative minimum tax exemption and threshold amounts.
- Lower limitation on the deduction of mortgage interest, with mortgage insurance premiums continuing to qualify.
- Limitation on casualty loss deduction only for federal disasters ** state disasters now included**
Increased Estate Tax Exemption
The TCJA temporarily doubled the estate tax basic exclusion amount, which is currently inflation-adjusted to $13.99 million. Estate and Gift tax exemptions are now set at $15 million ($30 million joint) for 2026 and inflation adjusted thereafter.
Modified SALT Deduction Cap
One of the most debated provisions of the TCJA was the $10,000 cap on the deduction for state and local taxes (SALT). For 2025, the limit is raised to $40,000 with a one percent increase each year through 2029, before reverting to $10,000 in 2030. This increased cap is subject to a 30% reduction for taxpayers whose modified adjusted gross income (MAGI) exceeds a threshold of $500,000 for 2025 (Married Filing Jointly), which also increases by one percent annually through 2029. The deduction limit would never be reduced below $10,000.
Return of Itemized Deduction Limitation
For taxpayers in the highest income brackets, the bill includes a return of the limitation on itemized deductions (known as the “Pease” limitation) for those in the 37 percent income tax bracket, effective after 2025. This new limitation will reduce itemized deductions by 2/37ths of the lesser of the amount of itemized deductions or the amount of taxable income that exceeds the start of the 37% tax bracket. The permanent repeal of miscellaneous itemized deductions remains, though unreimbursed educator expenses would be allowed as a miscellaneous itemized deduction. As a note, the language was also expanded to include coaches as being eligible to claim unreimbursed educator expenses.
Key Business Tax Permanence and Modifications
For those with business interests, the bill has made several critical provisions permanent:
- 100 percent bonus depreciation was made permanent for property acquired after January 19, 2025.
- The deduction for domestic research and experimental expenditure costs incurred after 2024 are permanently reinstated.
- The qualified business income (QBI) deduction under Code Sec. 199A is made permanent at 20 percent.
- There are also modifications to international tax provisions, including changes to the foreign-derived intangible income (FDII) and global intangible low-taxed income (GILTI) rates, and the base erosion minimum tax amount (BEAT). For example, the FDII rate changes to 33.34 percent (from 37.5 percent), and the GILTI rate to 40 percent (from 50 percent) after 2025. The BEAT rate will be 10.5 percent (from 10 percent) after 2025.
- The bill also includes specific holding period requirements for the Qualified Small Business Stock (QSBS) exclusion: 50% if held for 3 years, 75% for 4 years, and 100% for 5 years.
Green Energy Credit Terminations
As a key method of offsetting the cost of new taxpayer-friendly provisions, the bill includes the early termination of many “green” energy tax credits created by the Inflation Reduction Act of 2022. Termination dates vary, with some credits ending after September 30, 2025 (e.g., previously owned and qualified commercial clean vehicle credits), and others after December 31, 2025 (e.g., energy efficient home improvement credit) or later.
Excise Tax on Private University Endowments
The bill increases the excise tax on net investment income of endowment funds for private universities and colleges, with tiered rates from 1.4% to 8% depending on the endowment size.
Other Noteworthy Individual Provisions
Senior Deduction:
An additional $6,000 above-the-line deduction for seniors age 65 and older from 2025 through 2028, phasing out for individuals with MAGI exceeding $75,000 ($150,000 for joint filers). This deduction is intended to address the goal of making Social Security income tax-free, which the bill does not directly include.
Car Loan Interest Deduction:
A new deduction of up to $10,000 for interest paid on an automobile loan for cars purchased after 2024, available from 2025 through 2028 for both itemizers and non-itemizers.
Trump Accounts:
The creation of tax-favored accounts for newborn children, seeded with an initial $1,000 credit, with annual $5,000 contributions allowed until age 18 and withdrawals commencing at age 18.
Charitable Contribution Deductions:
A new deduction for non-itemizers up to $1,000 ($2,000 for joint filers).
Child and Dependent Care Credit:
The percentage of eligible expenses has increased from a max of 35% to 50% which phases out for individuals with MAGI exceeding $75,000 ($150,000 for joint filers), not to go below 20%.
Gambling Loss Limitations:
Previously taxpayers who itemized were able to offset gambling winnings up to 100% with losses on their Schedule A. This is now capped at 90% of losses- state rules vary.
Child Tax Credit:
Permanently increases the base amount of the credit to $2,200, subject to annual inflation increases, with a refundable portion capped at $1,400.
Deductions for Tips and Overtime:
New above-the-line deductions are introduced for amounts received as tips (capped at $25,000) and for overtime pay (capped at $12,500). Both are temporary for 2025 through 2028, and phase out based on MAGI.
IRS Direct File Program Termination:
The bill requires the termination of the IRS Direct File program within 30 days after passage and appropriates funding for the IRS to research a public-private partnership to replace the current “free file” program.
1099 Reporting
Beginning in 2026, the minimum threshold for 1099 (MISC, NEC) reporting will increase from $600 to $2,000. 1099-K reporting will revert to previous requirements of $20,000 and 200 transactions in a single year. A new Form 1099-DA will also be issued for digital assets reporting which will include income in 2025, and both income and basis in 2026.
What’s Next?
Please contact us to discuss your circumstances and explore tailored strategies to navigate these potential tax reforms.