Last week President Trump signed his highly anticipated “One Big Beautiful Bill” (OBBB), enacting a second round of major federal tax reform over the past decade.  While the OBBB serves to extend various provisions of the 2017 Tax Cuts and Jobs Act (TCJA), it goes further to introduce various new provisions promised by President Trump during his 2024 presidential campaign.  Below are the key tax highlights of the OBBB.

Individual Highlights

• TCJA provisions made permanent:
  • Lower tax brackets, with maximum rate of 37%
  • Higher Federal Estate Tax Exemption ($15M in 2026, adjusted annually for inflation)
  • Increased Standard Deduction ($31,500 MFJ, $23,625 HOH, $15,750 Single for 2025)
  • Increased child tax credit ($2,200 per child, adjusted annually for inflation)
  • Personal and Dependency Exemptions repealed
  • Elimination of miscellaneous itemized deductions subject to 2% floor
  • Qualified Business Income deduction
  • Excess Business Loss limitation
• “No tax on tips” via a deduction of up to $25,000 to offset tip income, subject to income limitations
• “No tax on overtime” via a deduction of up to $12,500 to offset certain overtime payments required under Federal law, subject to income limitations
• State and Local Tax Deduction increased to $40,000, subject to phaseouts for high income earners
• Above the line charitable deduction of $1,000 ($2,000 MFJ) for nonitemizers
• Deduction for up to $10,000 of automobile loan interest for vehicles purchased after 2024
• Additional deduction of up to $6,000 for senior citizens, subject to income limitations

Business Highlights

• Bonus depreciation permanently set to 100% for eligible assets placed in service after 1/19/2025
• Domestic Research & Development costs are immediately deductible for years beginning after 12/31/2024
• Business interest expense deduction limitation reverts back to an EBITDA calculation, resulting in higher interest expense deduction for some taxpayers
• Beauty Service businesses eligible for the FICA Tip Credit

Energy Efficient Credit Changes

• $7,500 clean vehicle credit terminates for vehicles acquired after 9/30/2025
• Residential clean energy credits and energy efficient home improvement credits are terminated as of 12/31/2025
• New energy efficient home credit expires early and may not be claimed for a qualified home acquired after 6/30/2026
• Alternative fuel vehicle refueling property credit does not apply to any property placed in service after 6/30/2026

Other Highlights

• $1,000 Trump accounts are created operating like individual retirement accounts for children born after 12/31/2024 and before 1/1/2029, who are U.S. citizens at birth
• 1099 Information reporting threshold for business payments increased to $2,000 in 2026 (previously $600), adjusted annually for inflation
• 529 Plan qualified higher education expenses are expanded to include additional expenses in connection with enrollment or attendance at a private, public or religious elementary or secondary school

TBC will continue to monitor the implementation of the OBBB over the coming months. Stay tuned for more detailed correspondence, including criteria, eligibility, and limitations for the OBBB provisions. For more information, please contact your TBC advisor.