Overview
The One Big Beautiful Bill Act (HR1), signed into law on July 4, 2025, represents a comprehensive overhaul of the U.S. tax code. Below is a summary of key changes effective for tax years 2025 and beyond, with some provisions retroactive to 2024.
Individual Tax Changes
• Top individual tax rate of 37% is made permanent.
• Standard deduction increased to $15,750 (single), $31,500 (joint), $23,625 (head of household).
• Seniors 65 and over will receive a new additional standard deduction of $6,000 (2025 – 2028). Phased out at $75,000(single) and $150,000(joint).
• Personal exemption permanently eliminated. This was temporarily eliminated in 2018.
• Child Tax Credit increased to $2,200 per child (refundable portion remains $1,600). Once the child turns 17, the amount still changes to $500 and is non-refundable.
• State and Local Tax (SALT) deduction for itemized deductions cap is raised to $40,000 (2025–2029), from $10,000. This is phased out above $500,000 AGI.
Business Tax Changes
• Section 199A QBI deduction made permanent; phase-in ranges expanded starting 2026.
• Section 179 expense limit increased to $2.5M with $4M phaseout.
• 100% immediate expense for equipment, R&D.
• Expansion of Business interest deduction based on EBITDA (2025–2029).
Employment & Family Benefits
• Employer childcare credit increased to 40% ($500K cap), 50% for small businesses ($600K cap).
• Dependent Care FSA limit raised to $7,500 per household starting in 2026.
• Tip income deduction up to $25,000 (2025–2028), phased out above $150K(single)/$300K (joint) AGI.
• Overtime pay deduction up to $12,500 ($25,000 joint), same phaseout as tips.
Auto Loan Interest Deduction
• Up to $10,000/year deductible for interest on loans for new, U.S.-assembled vehicles.
• Applies to personal-use vehicles purchased after Dec 31, 2024; phased out above $100K(single)/$200K(joint) AGI.
Energy Tax Credit Phase-Outs (2025)
• Residential Clean Energy Credit (Section 25D): Ends for expenditures made after December 31, 2025. Previously offered a 30% credit through 2032 for solar panels, geothermal heat pumps, battery storage, and more.
• Energy Efficient Home Improvement Credit (Section 25C): Ends for property placed in service after December 31, 2025. Previously allowed up to $1,200 annually for insulation, windows, doors, HVAC systems, and water heaters.
• Clean Vehicle Credits (Section 30D & 25E): Ends for vehicles acquired after September 30, 2025. Provided up to $7,500 for new EVs and $4,000 for used EVs. Income limits apply: $150K (single), $300K (joint), $225K (head of household).
TRUMP Accounts
• A new savings account program for individuals under 18 was established, with annual contribution limits of $5,000, adjusted for inflation after 2027. Contributions are not deductible, and distributions are restricted until age 18. Qualified distributions after 18 are tax free. The regulations are yet to be published for these accounts. Please let us know if you have questions.
Other Changes
1099-K Reporting: Form 1099-K reporting requirements were changed to over $20,000 and over 200 transactions. This will eliminate 1099-K reporting for minor money exchanges.
Electronic payments to/from IRS: As of September 30, 2025, the IRS will not accept payments by check and will not pay refunds or amounts due to the taxpayer by check. All taxpayers must provide banking information for payments to or from the IRS.
Conclusion
These changes offer significant opportunities for tax planning and savings. Clients are encouraged to consult with Green CPA PLLC to understand how these provisions may impact their individual and business tax situations.
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