On July 4, 2025, the One Big Beautiful Bill was signed into law. With perhaps the most sweeping and widespread legislative tax impact since the Tax Cuts and Jobs Act (TCJA) in 2017, this law will impact individuals and businesses for years to come. emc has been monitoring the progress of this bill as its traveled through Congress, reviewing the final legislative language in detail, and we’re providing the following summary to keep you informed of the most impactful changes.

Key Highlights for Individuals

Tax Rates & Standard Deduction

• 2017 tax brackets are made permanent.
• The standard deduction increases in 2025 to (with annual inflationary increases in subsequent years):
  • $15,750 for single filers
  • $23,625 for heads of household
  • $31,500 for married filing jointly

SALT Cap Relief

• SALT deduction cap temporarily raised to $40,000 starting in 2025 and adjusted for inflation through 2029 (subject to phase-out provisions for high-income taxpayers). Deduction cap reverting to $10,000 in 2030 without legislative intervention.
• No changes to passthrough entity tax (PTET) SALT workarounds—good news for business owners.

Child & Dependent Credits

• Child tax credit increased to $2,200 ($2,000 under the TCJA) and refundable portion of $1,400 adjusted annually for inflation. Remains subject to phase-out for high-income taxpayers.
• Child & Dependent Care Credit raised to 50% (previously 35%) of qualifying expenses. Remains subject to phase-out for high-income taxpayers.
• Dependent care FSA cap increased to $7,500 (previously $5,000).
• Up to $5,000 of the adoption credit is now refundable.

Qualified Business Income (QBI) Deduction

• 20% QBI deduction made permanent.
• Higher phaseout thresholds for Specified Service Trade or Businesses (SSTBs) (up to $150,000 MFJ).

Temporary Exclusions for Tips and Overtime

• Deduction up to $25,000 for reported tips and $12,500 for overtime wages (2025–2028).
• Subject to phase-out for high-income taxpayers at $150,000 MAGI ($300,000 MFJ).

Estate and Gift Tax Exemption

• Permanently increase the estate and lifetime gift tax exemption to $15 million for single filers ($30 million for married filing jointly), indexing the amount for inflation subsequent to 2025.

Mortgage & Personal Deductions

• Mortgage interest deduction limited to interest on first $750,000 in home mortgage acquisition remains permanent.
• Allows for the treatment of mortgage insurance premiums on acquisition indebtedness as qualified residence interest.
• Unreimbursed educator expenses are no longer subject to limitations, rather treated as miscellaneous itemized deduction.
• Personal exemptions remain at $0, but individuals 65 and older can claim a $6,000 temporary deduction (2025–2028). Provision aimed at the elimination of tax on social security.
• Car loan interest for eligible vehicles deductible up to an annual cap of $10,000, with phase-out for high-income taxpayers.

“Trump Accounts” for Children

• New IRAs for children under 18 with $5,000/year contribution limit with limit adjusted annually for inflation.

Charitable & Education Provisions

• Above-the-line charitable deduction returns ($1,000 single / $2,000 MFJ).
• New credits for donations to scholarship funds and expanded 529 usage. Credits subject to annual allocation of funds and awarded on a first-come, first-served basis.

Key Business Provisions

Bonus Depreciation & Section 179 Expensing

• Bonus depreciation permanently extended at 100% for eligible property placed in service after January 19, 2025.
• Section 179 expensing limit increased to $2.5 million, phaseout begins at $4 million.

Qualified Production Property

• Additional first-year depreciation deduction equal to 100% of the cost of new non-residential property used for manufacturing/refining
• Must begin construction after Jan 19, 2025, and be placed in service by Jan 1, 2031

R&D Expensing Restored

• Immediate deduction for domestic R&D expenses resumes after 2024.
• Small business taxpayers with average annual gross receipts of $31 million or less will generally be permitted to apply this change retroactively to tax years beginning after December 31, 2021.

Interest Deduction Rule Change (Section 163(j))

• EBITDA limitation returns for 2025 (previously EBIT).

Paid Leave & Childcare Incentives

• Paid Family and Medical Leave credit is now permanent.
• Employer childcare credit increased to $500,000 (or $600,000 for small businesses) (Previously $150,000).

Qualified Small Business Stock

• Increased capital gains exclusions:
  • 75% after 4 years (previously 50%)
  • 100% after 5 years (for newly acquired stock)

Excess Business Loss Limitation

• Section 461(l) limitations will no longer expire after 2028.

Opportunity Zones & New Markets Tax Credit

• Both programs made permanent with more stringent definitions

Rollback of Clean Energy Credits

Significant rollbacks have been enacted, reducing or eliminating credits for:

• Electric vehicle purchases (Sections 25E, 30D, 45W)
• Residential and commercial energy efficiency (Sections 25C, 25D, 179D)
• Solar, wind, and nuclear production (Sections 45Y, 48E, 45V)

Some clean fuel production credits (e.g., Section 45Z) will continue, but with new limitations based on foreign component sourcing or ownership.

We recognize that these changes may raise questions or prompt a need to revisit your current tax strategy. Our team at emc is here to help you understand how these updates apply to your specific situation and identify opportunities for tax savings or planning.

Please don’t hesitate to reach out with any questions or to schedule a time to discuss your individual or business needs in more detail.