Key Tax Provisions in the House’s One Big Beautiful Bill Act

We are writing to inform you of significant developments in federal tax legislation. On May 22, 2025, the House of Representatives passed H.R. 1, the “One Big Beautiful Bill Act,” a sweeping $3.8 trillion reconciliation package that includes a broad array of tax provisions affecting individuals, businesses, and international taxpayers.

While the bill is expected to undergo revisions in the Senate, we want to highlight the key provisions as currently drafted and offer preliminary insights into how they may affect your tax planning. Please contact us at your earliest convenience to discuss your situation so we can develop a customized plan. We continue to closely monitor any potential tax legislation and update you accordingly.

Individual income tax provisions

  • Permanent extension of lower tax rates and brackets: The bill would make permanent the individual income tax rates and brackets established by the Tax Cuts and Jobs Act (TCJA), including lower individual tax brackets. The top marginal rate remains at 37%, and inflation adjustments are retained for all but the top bracket.

  • Standard deduction: The nearly doubled standard deduction would be made permanent, with an additional inflation adjustment and a temporary increase for 2025–2028 ($1,000 for single filers, $1,500 for heads of household, $2,000 for joint filers).

  • Itemized deduction / Pease Limitation repeal: The bill would permanently remove the Sec. 68 overall limitation on itemized deductions (known as the Pease limitation) and would implement a two-pronged reduction.

  • Child Tax Credit: The bill would temporarily increase the child tax credit to $2,500 per child for 2025–2028. This would revert to $2,000 thereafter, with inflation indexing after 2028.

  • Estate and gift tax exemption: The increased exemption is made permanent and raised to $15 million per individual ($30 million for married couples) in 2026, indexed for inflation.

  • SALT deduction cap: The state and local tax (SALT) deduction cap is increased to $40,000 per household and would be phased out for taxpayers with modified adjusted gross income (MAGI) over $500,000. 

  • Charitable deduction for non-itemizers: A temporary above-the-line deduction for charitable contributions is reinstated for 2025–2028 ($150 for single filers, $300 for joint filers).

  • No tax on tips and overtime: For 2025–2028, above-the-line deductions are created for qualified tips (in certain occupations) and for overtime premium pay, subject to income and occupation limitations.

  • Enhanced deduction for seniors: For 2025–2028, a $4,000 deduction is available for seniors (age 65+) with income below $75,000 ($150,000 for joint filers).

  • Car loan interest deduction: For 2025–2028, up to $10,000 of interest on loans for U.S.-assembled passenger vehicles may be deducted, subject to income phaseouts.

  • Moving expense deduction: The bill permanently terminates the deduction except for Armed Forces.

  • Home mortgage interest and insurance premiums: The bill would make permanent the $750,000 Sec. 163(h)(3) limit on the treatment of mortgage insurance premiums as qualified residence interest. The exclusion of home-equity indebtedness from the definition of qualified residence interest would also become permanent.

  • Casualty loss deduction for personal casualties: The Sec. 165(h)(5) limitation on personal casualty loss deductions, under which a casualty loss is deductible only to the extent it is attributable to a federally declared disaster, would be made permanent.

  • Other deductions and credits: The bill makes permanent or enhances several other deductions and credits, including the adoption credit, employer-provided childcare credit, paid family and medical leave credit, and education-related benefits.

Business tax provisions

  • QBI deduction: The Sec. 199A qualified business income (QBI) deduction would be made permanent, and the deductible amount for each qualified business would be increased to 23% from 20%. The phase-in of the limit under Sec. 199A(b)(3) would change to 75% of the excess of the taxpayer’s taxable income over the threshold amount. 

  • PTET SALT deduction: The pass-through entity tax (PTET) deduction is tied to the Sec. 199A deduction, which eliminates the PTET deduction for SSTBs. The bill does not allow specified service trades or businesses (SSTBs) to deduct state and local income taxes, limiting the usefulness of state PTETs in avoiding the SALT cap. SSTBs would be subject to individual SALT deduction limits.

  • Bonus depreciation: 100% expensing (bonus depreciation) for qualified property is restored for property placed in service from Jan. 19, 2025, through Dec. 31, 2029.

  • Sec. 179 expensing: The maximum amount a business may expense is increased to $2.5 million, with the phaseout threshold raised to $4 million, both indexed for inflation after 2025.

  • Qualified production property “manufacturing property:” The bill would introduce an elective 100% depreciation allowance for qualified production property that is acquired and placed in service between Jan. 19, 2025, and Dec. 31, 2029, and must be placed in service prior to 2033, restoring full expensing for a broader range of assets.

  • R&D expenditures: The TCJA introduced a requirement that specified research and experimental (R&D) expenditures be capitalized and amortized ratably over a five-year period for tax years after 2021. The bill would suspend that requirement for domestic research or experimental expenditures paid or incurred in tax years beginning after Dec. 31, 2024, and before Jan. 1, 2030. Foreign R&D would continue to be capitalized and amortized over 15 years.

  • EBL permanency: The bill makes the Sec. 461(l) excess business loss (EBL) limitation permanent, which is currently set to expire at the end of 2028.  It would also modify the limitation, subjecting previously disallowed EBLs to retesting in the subsequent year.

  • Business interest deduction: For 2025–2029, the Sec. 163(j) limitation is calculated using earnings before interest, taxes, depreciation and amortization (EBITDA), rather than earnings before interest and taxes (EBIT).

  • FDII and GILTI: Under the TCJA, after 2025, the foreign-derived intangible income (FDII) deduction was scheduled to be reduced from 37.5% of FDII to 21.875%, and the global intangible law-taxed income (GILTI) inclusion deduction amount was scheduled to be reduced from 50% to 37.5% under Sec. 259(a)(3). The bill as originally written would have repealed those reductions. The manager’s amendment changes 37.5% to 36.5% and 50% to 49.2% and repeals the TCJA reductions.

  • BEAT: The bill repeals the scheduled increase in base-erosion and anti-abuse tax (BEAT) from 10% to 12.5% after 2025 and instead increases it to 10.1%.

  • Certain fringe benefits as: Expenses incurred by a tax-exempt organization under the bill for qualified transportation fringe benefits will be treated as unrelated business taxable income UBTI. There is an exception for church organizations and this is effective for amounts paid or incurred after Dec. 31, 2025. 

  • Third-party network transaction reporting threshold:  The bill would revert to the prior rule for Form 1099-K, Payment Card and Third Party Network Transactions, reporting, under which a third-party settlement organization (TPSO) would not be required to report unless the aggregate value of third-party network transactions with respect to a participating payee for the year exceeds $20,000 and the aggregate number of such transactions with respect to a participating payee exceeds 200.

  • Form 1099 reporting threshold: The bill would increase the information reporting threshold for certain payments to persons engaged in a trade or business and payments of remuneration for services to $2,000 in a calendar year (from $600), with the threshold amount to be indexed annually for inflation in calendar years after 2026.

  • Renewed OZs: A new round of opportunity zones (OZs) is created for 2027–2033, with revised eligibility and incentives, including special rules for rural areas.

  • Clean energy and IRS credits: The bill would terminate or phase out several clean energy credits from the Inflation Reduction Act (IRA).

What’s next?

The bill now moves to the Senate, where significant revisions are expected. As noted by Senate Finance Committee members, the upper chamber will not rubber-stamp the House version.  We will monitor developments closely and provide updates as the legislative process unfolds. As of this writing, the bill is expected to go to a vote in the Senate later on this week.

How you can prepare

We recommend reviewing your current tax strategy in light of these proposed changes. Our team is available to discuss how these provisions may impact your personal or business tax situation and to help you plan accordingly.

Please don’t hesitate to contact us with any questions or to schedule a consultation.

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