OBBBA: Tax Provisions for Individuals and Businesses

If you are a long-time reader of our Family Wealth Matters articles, you might recall seeing several mentions that, “if Congress fails to act by 2025,” the tax issue being discussed might revert to a less favorable condition.

Henceforth, you will not see that phrase. When President Trump signed into law last month the One Big Beautiful Bill (OBBB) Act, he made “permanent” major 2017 business and individual tax provisions that were due to expire at the end of 2025. The Act also introduces some new provisions that will benefit many taxpayers, and this article provides a snapshot of the continuing and new elements.

We place permanent in quotation marks because it’s not literally correct, as Congress, in future sessions, could vote to revise or repeal. Instead, “permanent” here means that the OBBB removed the expiration or sunset date, and undoing a provision would require another act of Congress.

The Act wouldn’t include the word “big” if we could describe it all here. To learn more about some of the provisions mentioned below, or to explore additional provisions, see the July 2025 Journal of Accountancy article, “Tax Provisions in the One Big Beautiful Bill Act.”

Here is a look at some of the more notable tax provisions, first for individuals, then for businesses.

INDIVIDUAL TAX PROVISIONS

Estate and Gift Taxation. For individuals who pass away after December 31, 2025, the federal estate and gift tax exemption will increase to $15 million ($30 million for a married couple) in 2026 and be indexed for inflation in subsequent years. The current exemption is $13.99 million per individual. If Congress had not acted this year, the exemption would have dropped to about $7 million in 2026.

Income Taxation. The OBBB makes “permanent” the individual income tax rates and wider tax brackets that were enacted in 2017 and would have expired at the end of this year. For 2026 and beyond, the top individual rate will stay at 37% (instead of reverting to 39.6%), and married couples filing jointly will typically not incur higher taxes compared to filing as singles.

Standard Deduction. The standard deduction has been increased and enhanced. For 2025, the standard deduction is $30,000 for joint filers, $22,500 for heads of household, and $15,000 for singles. For 2026 and beyond, those amounts increase to $31,500, $23,625, and $15,750.

Itemized Deductions. The Pease limitation, which reduces the value of itemized deductions for high-income taxpayers, is permanently repealed starting with 2026.

Mortgage Loan Interest. If your home mortgage exceeds $750,000, you can deduct only the interest paid on the first $750,000 of the loan.

Age 65+ Deduction. For tax years 2025-2028, individuals who are 65 or older (and their spouses, if filing jointly) can claim a new $6,000 per-person deduction. The deduction decreases for taxpayers whose adjusted gross incomes exceed $75,000 (single) or $150,000 (joint), and it applies equally to itemizers and non-itemizers.

Charitable Contributions. Beginning in 2026, taxpayers who do not itemize can claim a partial deduction of up to $1,000 (single) or $2,000 (joint) for charitable contributions.

Auto Loan Interest. For tax years 2025-2028, individuals can deduct up to $10,000 per year in interest paid on loans for new personal-use vehicles, even if they don’t itemize. The deduction phases out for single filers with modified AGI over $100,000 ($200,000 for joint filers). It applies to purchase-money loans, secured by a first lien, for new, U.S.-assembled vehicles (under 14,000 pounds).

Tax on Tips. Effective for 2025 through 2028, employees and self-employed individuals may deduct qualified tips received in occupations that the IRS has listed as “customarily and regularly receiving tips.”

Tax on Overtime. Also effective for 2025 through 2028, individuals who receive qualified overtime compensation may deduct the pay that exceeds their regular rate of pay. The deduction is limited to $12,500 for individuals and $25,000 for joint filers.

SALT Limitation. For 2025, the state and local tax deduction cap is temporarily increased to $40,000. It increases by 1% per year until 2029, then reverts to $10,000 in 2030.

Alternative Minimum Tax. The exemption amounts for the dreaded AMT are permanently increased for 2026 and beyond (that’s good news), but the phaseout rate for higher-income taxpayers doubles from 25% to 50%. Because AMT liability can occur unexpectedly, high-risk taxpayers should continue to seek guidance from their tax professional.

Child Tax Credit. The credit is increased to $2,200 per qualifying child and, after 2025, is adjusted for inflation.

Child and Dependent Care Credit. Starting in 2026, the maximum credit increases to 50% of eligible expenses, up to $3,000 for one qualifying child or $6,000 for two or more. The full credit applies to families with AGI up to $15,000 and phases down to 35% for AGI up to $75,000 ($150,000 for joint filers).

Adoption Credit. Starting in 2025, the adoption credit is enhanced to include a refundable portion of up to $5,000 per child (indexed for inflation) in the year in which the adoption is finalized. Eligible taxpayers can receive up to $5,000 as a refund even if they owe no tax.

Scholarship Contributions. For 2027 and after, taxpayers can claim a federal income tax credit of up to $1,700 per year for cash contributions to qualifying scholarship-granting organizations in participating states (including Arizona). The federal credit is reduced by the amount of any state tax credits claimed.

529 Plans – K-12. Owners of 529 savings plans can use tax-free distributions for a much broader range of K-12 education expenses – not just tuition, but also books, tutoring, standardized test fees, dual enrollment, and educational therapies for students with disabilities. In addition, starting in 2026, the annual limit for K-12 distributions doubles from $10,000 to $20,000 per beneficiary.

529 Plans – Beyond College. Plan distributions can be used tax-free not only for college costs but also for “qualified postsecondary credentialing expenses” – e.g., tuition, fees, books, supplies, and equipment – required for enrollment in recognized certificate, licensing, or apprenticeship programs, even if they are not traditional degree programs.

ABLE Accounts. “Achieving a Better Life Experience” (ABLE) accounts benefit employed individuals who have disabilities. The OBBBA adjusts the base limit amount by one year for inflation, and it permanently allows beneficiaries who make qualified contributions to their ABLE account to qualify for the Saver’s Credit, which will increase to a maximum of $2,100 starting in 2027.

Eliminated Tax Breaks. The OBBA terminates tax deductions and credits related to the following issues:

• energy-efficient home improvements placed in service after 2025;
• residential clean energy expenditures made after 2025;
• clean vehicles (personal or commercial) acquired after September 30, 2025; and
• electric vehicle charging stations placed in service after June 30, 2026.

BUSINESS TAX PROVISIONS

QBI Deduction. The Qualified Business Income deduction, which allows eligible business taxpayers to deduct up to 20% of their QBI, is made permanent. It also provides a $400 minimum deduction for “applicable taxpayers” and increases the phase-in amounts from $50,000 to $75,000 for single filers and $100,000 to $150,000 for joint filers.

Bonus Depreciation. The OBBBA makes permanent the additional first-year (bonus) depreciation for certain qualified property permanent at 100%, now with no phase-out for property acquired after January 19, 2025. There is also a new 100% bonus depreciation provision for “qualified production property” – non-residential real property used in the manufacturing, production or refining of certain tangible personal property – placed in service after July 4, 2025.

Section 179 Expensing. For property placed in service after 2024, the Code Sec. 179 expensing limits are increased, with inflation adjustments, to $2.5 million, and the phasedown threshold is increased to $4 million.

Form 1099. For payments made after 2025, the reporting thresholds for Forms 1099-NEC and -MISC are increased from $600 to $2,000.

Research Deduction. Section 174A allows a full deduction for domestic research or experimental (R&E) expenditures paid or incurred during the taxable year.

Qualified Small Business Stock. Taxation of gain on the “applicable percentage” is eliminated for QSBS acquired after July 4, 2025. Also, the gain exclusion threshold is increased from $10 million to $15 million, and the $50 million aggregate gross asset limit is increased to $75 million.

Corporate Charitable Contributions. The OBBBA imposes a new 1% floor (in addition to the 10% ceiling) on corporate charitable deductions for tax years after 2025.

Manufacturing Investment Credit. The advanced manufacturing investment credit (also known as the “semiconductor credit” or “CHIPS credit”) on qualified investments in an advanced manufacturing facility built before January 1, 2027, is increased to 35% (from 25%) for property placed in service after 2025.

Farm Sales. For sales or exchanges of qualified farm property occurring after July 4, 2025, sellers may elect to pay capital gains tax in four equal annual installments.

Eliminated Tax Breaks. The OBBA terminates tax deductions and credits related to the following issues:

• energy-efficient commercial building property (construction beginning after June 30, 2026);
• wind energy components produced and sold after December 31, 2027;
• clean vehicles (commercial or personal) acquired after September 30, 2025; and
• electric vehicle charging stations placed in service after June 30, 2026.

Just in Case. If you own a spaceport – i.e., a facility that is used to manufacture, assemble, launch, or repair spacecraft – your property will henceforth be treated like an airport under the exempt-facility bond rules.