Major tax law changes under the pending One Big Beautiful Bill Act

Note: This article was written before the bill’s final passage. On July 4, 2025, the One Big Beautiful Bill Act was officially signed into law. Additional insights to follow.

By Patrick Charvat, CPA

On May 22, 2025, the Republican-controlled House of Representatives passed the “One Big Beautiful Bill Act” (BBB), an expansive piece of legislation spanning over 1,000 pages.

While the bill includes wide-ranging reforms, this article focuses on the proposed income tax changes likely to impact large segments of taxpayers.

This article outlines the provisions of the House-approved bill, which are subject to change as the legislation still requires Senate approval. We have also included guidance aimed at helping taxpayers make informed decisions based on the potential changes in tax credits and deductions.

Extension, expansion, and modification of existing tax laws

A key aspect of the BBB is the permanent extension of numerous tax provisions from the Tax Cuts and Jobs Act of 2017 (TCJA), many of which would otherwise expire after December 31, 2025. These include:

• Increases to the standard deduction

• Expansion of the child tax credit

• Lower individual income tax rates

• Elimination of the personal exemption

• Elevated Unified Gift and Estate Lifetime Exemption

For a deeper dive into TCJA provisions that could expire, see our prior article: What Expiring TCJA Provisions Mean for Businesses and Individuals: https://www.cpabr.com/article-what-expiring-TCJA-provisions-mean-for-businesses-and-individuals

In addition to making these provisions permanent, under the BBB, some of these same provisions have been modified and expanded:

• SALT (State and Local Tax) Deduction Cap: Raised from $10,000 to $40,000 for single filers earning less than $250,000 and joint filers under $500,000. The deduction phases down to $10,000 above those income thresholds.
• Standard Deduction Boost (2025–2028): Aside from the standard inflation-indexed increases, the BBB provides additional annual increases of $1,000 for single filers and $2,000 for joint filers. Taxpayers aged 65 and older receive a further $4,000 annually during this period.
• Unified Gift and Estate Tax Exemption: Increased from $13.99 million in 2025 to $15 million in 2026.

Business income tax reforms

The bill also brings substantial changes to business taxation:

• Qualified Business Income (QBI) Deduction expansion: The deduction for eligible sole proprietorships, partnerships, and S-corporations increases from 20% to 23% and is made permanent in the tax code.
• Bonus Depreciation (Section 168(k)): Qualifying assets placed in service from January 19, 2025, through December 31, 2028, are eligible for 100% bonus depreciation, allowing the purchaser to expense the full cost of said assets immediately. This reverts to 0% in 2029.
• Expanded Eligibility for Bonus Depreciation: Under the BBB, Bonus Depreciation includes production buildings used in manufacturing, agriculture, chemical production, and refining. Excluded areas — such as administrative or R&D space — may require cost segregation studies for business owners seeking to build new property during this timeframe.

New individual tax deductions

The BBB introduces several new deductions aimed at working families and middle-income earners, some of which President Trump discussed during his campaign:

• Tip and Overtime Income Deductions (2025–2028): Taxpayers earning less than $160,000 may deduct tips received in occupations that “traditionally and customarily” earn tips. The Department of Treasury and the IRS must provide regulations to determine which industries fall under this scope.
• Overtime: As defined under Section 7 of the Fair Labor Standards Act (FLSA), Overtime compensation would also be deductible under the same income threshold. The IRS must create mechanisms to track and report this income separately.
• Automobile loan interest deduction: This provision allows above-the-line deduction of up to $10,000 in interest on qualifying passenger vehicles. Taxpayers with AGIs above $100,000 (single) or $200,000 (joint) would phase out, and qualifying vehicles must be for primary use on public roads and assembled in the U.S.
• New savings accounts, known as “Trump Accounts”: BBB established new tax-advantaged savings accounts with $5,000 annual contribution limits (adjusted for inflation) for children under 8. Distributions taken from this account for higher education, career credentials, first home purchase, or small business start-ups will be taxed at the favorable long-term capital gains rates (generally 15% or 20%) instead of ordinary income rates once the beneficiary turns 18.

Repeal of Green Energy Tax Credits

To offset revenue losses from broad tax cuts, the BBB proposes phasing out or repealing several green energy-related tax incentives introduced or expanded under the Inflation Reduction Act of 2022. Key repeals include:

• New Energy-Efficient Home Credit (Section 45L): This credit expires for properties acquired after 2025 unless construction started before May 12, 2025.
• Commercial Clean Vehicle Credit (Section 45W): Ends after 2025 unless under a binding purchase contract before May 12, 2025.
• Previously Owned Clean Vehicle Credit (Section 25E): Ends for vehicles purchased after 2025.
• Clean Vehicle Credit (Section 30D): This credit expires after 2025 unless the vehicle’s manufacturer has sold fewer than 200,000 vehicles since 2010; in that case, it expires in 2026.

Other credits that the BBB would repeal after 2025:

• Energy-Efficient Home Improvement Credit (25C)
• Residential Clean Energy Credit (25D)
• Alternative Fuel Refueling Property Credit (30C)

With the above in mind, individuals and businesses dealing in such alternate energy vehicles or property should consider accelerating purchases of such assets before the end of the calendar year should the BBB pass.

Bottom line

The potential passage of the BBB into law would have sweeping implications on the tax landscape, necessitating taxpayers to alter their tax planning approaches. The specialists at Boyer & Ritter are available to discuss changes further and will continue to monitor for passage or adjustments to the bill.

Patrick T.R. Charvat, CPA, is a tax manager at Boyer & Ritter. He provides tax and accounting services for individuals and businesses, including multistate and local entities. Contact Patrick at 717-761-7210 or pcharvat@cpabr.com.