On July 4, 2025, President Trump signed H.R. 1, the “One Big Beautiful Bill Act” (OBBBA), into law. The landmark legislation significantly reshapes tax policy by cutting spending in the federal budget, extending and modifying provisions of the 2017 Tax Cuts and Jobs Act (TCJA), and introducing new measures for businesses and individuals.
These sweeping changes require taxpayers and businesses at all levels to reassess their tax, business, and estate strategies. Below, we highlight the most significant changes and actionable steps to help you stay aligned with the latest provisions and navigate the opportunities and challenges ahead.
The OBBBA’s Legislative Journey: How It Passed and What Has Changed
The OBBBA originated as part of the 2025 budget reconciliation process and was passed by the House of Representatives in late May. After weeks of congressional negotiations, the Senate approved the bill with amendments on July 1.
Key Senate amendments included:
- Revisions to the SALT deduction cap
- Preservation of Pass-Through Entity Tax
- QBI Deduction extended and enhanced for pass-through entities at 20%, beginning January 1, 2026
- Accelerated phaseouts for green energy tax credits:
- Electric vehicles acquired after Sept. 30, 2025
- Residential clean energy property (including solar energy property) placed in service after Dec. 31, 2025
- EV charging equipment placed in service after June 30, 2026
The final bill did not include an earlier House provision that would broaden existing federal limitations on state corporate income taxes under P.L. 86-272. The omitted House provision would have clarified that protected solicitation covers any business activity that assists with order solicitation, even if that activity also serves another independent business purpose unrelated to solicitation.
The House accepted the Senate’s amendments without further changes on July 3, clearing the way for the signing on July 4.
Impacts on Individuals
Individual taxpayers will notice changes that impact both their current tax liability and long-term financial planning strategies.
State and Local Tax (SALT) Deduction Cap
The OBBBA temporarily raises the SALT deduction cap to $40,000, indexed for inflation at 1% annually, for tax years 2025 through 2029, subject to a phase-out for taxpayers with an adjusted gross income (AGI) of $500,000 or more, also indexed at 1% annually. Beginning in 2030, the cap will revert to $10,000.
This temporary increase may provide significant relief to taxpayers in high-tax states such as New York and New Jersey. Individuals should work with their advisors to review their current and projected state taxes, consider state-specific Pass-Through Entity Tax (PTET) strategies, and model tax scenarios for 2030, when the $10,000 cap is reinstated.
Estate and Gift Tax Exemption
Effective January 1, 2026, the OBBBA permanently increases the estate and gift tax exemption to an inflation-adjusted $15 million per individual ($30 million for married couples). This change preserves and increases today’s historically high exemption thresholds, preventing the exemption from dropping to pre-TCJA levels (roughly $7 million) at year-end.
Child Tax Credit
Effective January 1, 2025, the OBBBA temporarily increases the Child Tax Credit to $2,200 per qualifying child under age 17, with a refundable portion of up to $1,400, subject to income thresholds. The credit begins to phase out for incomes exceeding $200,000 ($400,000 for joint filers). The enhanced credit is set to expire on January 1, 2029, at which point the credit will revert to $2,000 per child, indexed for inflation.
Impacts on Businesses
The legislation introduces several business tax changes that affect deductions, expensing, and planning across various industries.
Pass-Through Entity Tax (PTET) Deduction
Effective for tax years beginning January 1, 2025, the final legislation preserves federal deductibility of PTET, allowing pass-through entities (such as S corporations and partnerships) to continue paying state income taxes at the entity level. This effectively bypasses the individual SALT deduction cap, providing relief to businesses in high-tax states.
Earlier versions of the bill proposed limiting or eliminating PTET deductions for Specified Service Trade or Business (SSTB) — including law, consulting, healthcare, and other professional-based services — but the restrictions were removed in the final legislation.
Qualified Business Income (QBI) Deduction
Beginning January 1, 2026, the OBBBA permanently extends and enhances the Section 199A QBI deduction at 20% for pass-through entities. The legislation also eases W-2 wage and capital investment limitations, particularly for SSTBs. Business owners should review their entity structure and income projections with advisors to incorporate this permanent deduction into long-term tax planning.
Section 179 Expensing
Effective January 1, 2025, the OBBBA increases the Section 179 expensing limit from $1 million to $2.5 million, with a phase-out threshold of $4 million, both of which are indexed for inflation. This allows businesses to immediately deduct the cost of qualifying equipment and property placed in service, rather than depreciating it over time. The expanded limit is especially valuable for capital-intensive sectors such as manufacturing and construction, where large equipment purchases are common. The limitation is at the entity and individual levels.
Excess Business Loss (EBL) limitations
Makes permanent the current limitations on business losses allowed to offset other income treating EBLs as net operating losses (NOLs).
Bonus Depreciation
Effective January 19, 2025, the OBBBA permanently restores 100% bonus depreciation for qualifying property. Businesses can immediately deduct the full cost of eligible assets (such as equipment, machinery, and software) placed in service after the date of acquisition. Companies should review 2025 capital projects, verify asset eligibility, and incorporate bonus depreciation into multi-year tax strategies.
Interest Deduction Relief
From January 1, 2025, through December 31, 2029, the OBBBA temporarily reinstates the EBITDA-based limitation on business interest deductions. Businesses may deduct interest expenses using an EBITDA-based cap, rather than EBIT. Fiscal-year filers should review timing strategies to optimize deductibility during this five-year window.
Tips and Overtime Pay
Introduces above-the-line deductions for tax years 2025–2028, up to certain dollar amounts, for tips ($25,000 per individual) and overtime compensation ($12,500 per individual or $25,000 for joint filers), phased out at certain adjusted gross income levels.
Research and Experimentation (R&E) Deduction
Effective for tax years beginning after January 1, 2025, the OBBBA permanently restores immediate expensing for domestic R&D costs under Section 174A, reversing the TCJA’s five-year amortization rule. Businesses with gross receipts under $31 million may elect a “catch- up” deduction for costs incurred from 2022 to 2024. Foreign R&E remains subject to a 15-year amortization period.
Clean Energy Credits
The OBBBA accelerates the phaseout of renewable energy credits for projects placed in service after December 31, 2025, reduces credits for wind and solar facilities by 20%, and repeals the clean vehicle credit effective January 1, 2026. Businesses should consider completing eligible projects in 2025 to secure remaining credits and explore state-level incentives to offset federal reductions.
Strategies to Prepare for the One Big Beautiful Bill
With many provisions taking effect immediately, businesses and individuals should act proactively to adapt their financial and tax strategies, and consider the following:
- Review your current and projected tax position, considering the new legislation.
- Model the financial impact of updated deductions, credits, and thresholds.
- Reassess estate and gift plans to align with the increased exemption limits.
- Reevaluate your business entity structure and consider the timing of capital investments to align with changes in expensing and depreciation.
- Review research and development activities for potential opportunities to expense immediately.
- Assess the timeline and feasibility of clean energy projects before credit reductions take effect.
- Identify relevant federal and state-level incentives that may support your goals.
- Coordinate with your tax and financial advisors to ensure your strategy aligns with the latest tax provisions.
Attend Our Upcoming Webinar on the OBBB
On Thursday, July 10, from 12:00 to 1:00 p.m. EDT, Grassi’s tax professionals will host a live webinar exploring the key provisions of the One Big Beautiful Bill and what they mean for your business or personal tax strategy. Hear directly from our advisors as they provide practical insights and planning considerations under the new law.
Plan With an Advisor
In a changed tax environment, careful planning has never been more important. Grassi’s team is here to help you navigate these changes confidently, whether you need guidance on tax, business, or estate strategies. Contact our advisors today for personalized advice on how the One Big Beautiful Bill may affect your goals.
