Tax Updates in the One Big Beautiful Bill Act

On July 4, 2025, H.R.1, also known as the One Big Beautiful Bill Act, was signed into law. With legislation from 11 congressional subcommittees, the bill covers varying issues.  Below is a highlight of the legislative changes relating to the tax code section of the bill.

Changes for Individual Taxpayers

One of the key provisions of the bill is the extension of provisions in the 2017 Tax Cuts and Jobs Act, which was to expire at the end of this year.                

• Individual tax rates from the 2017 Tax Cuts and Jobs Act (TCJA) are made permanent; the standard deduction is permanently increased to:
  • $15,750 (single)
  • $23,625 (head of household)
  • $31,500 (married filing jointly), indexed for inflation

• State and Local Tax (SALT) deduction cap raised from $10,000 to $40,000 through 2029.*

* Begins phasing down for incomes over $500,000 but never drops below $10,000.

• Tip and overtime income exemptions: New deductions eliminate income tax on certain tips and overtime pay, aimed at benefiting service and hourly workers.

• Enhanced deduction of $6,000 for taxpayers over 65. Income limitations apply.

• Estate and gift tax exemptions increased to $15 million per individual, indexed for inflation, and made permanent.

Key Provisions for Business Owners

• Bonus depreciation: 100% bonus depreciation made permanent for property placed in service after January 19, 2025.

• Section 199A Deduction (QBI): Qualified Business Income (QBI) deduction of 20% is permanently extended.

• Section 179 Expensing: limit doubled from $1.25 million to $2.5 million, with the phase-out threshold raised to $4 million.

• Pass-Through Entity Tax (PTET): Full PTET deduction retained.
• Restoration of the immediate expensing of domestic research & development expenses incurred for tax years ending after December 31, 2024. Retroactive application for businesses with average gross revenue below $31M per year.

• Expansion of Section 1202 “small business” stock gain exclusions.

• Expansion and renewal of the Opportunity Zone Program.

• Paid leave and student loan benefits
  • Section 45S tax credit for paid family and medical leave made permanent.
  • $5,250 tax exemption for employer-paid student loan assistance also made permanent.

Other Notable Changes

• Clean energy tax credits significantly rolled back starting December 31, 2025.
• Corporate foreign income rules revised to reduce tax burdens on multinational businesses.
• Reinstatement of Section 163(j) Interest Expense Deduction, including the depreciation and amortization addbacks.

When Do These Changes Take Effect?

The effective dates for specific provisions vary, with some taking effect retroactively as of January 1, 2025, including certain key provisions, particularly those impacting payroll, employment taxes, and employee benefits. Many provisions related to tax law changes, including extensions of the 2017 Tax Cuts and Jobs Act provisions, became effective July 4, 2025, when the bill was signed.

Stay Informed

At DSB Rock Island, we understand that staying informed about legislative changes is crucial for individuals and business owners planning their financial future. We will continue to provide information on specific policies included in H.R.1. If you would like to discuss how you might be impacted by any specific policy or issue, connect with your tax advisor. Subscribe to our newsletter and follow us on social media for ongoing updates and detailed information about legislative changes.