The 2025 Tax Law Overhaul: What the “One Big Beautiful Bill Act” Means for You
Chris Barrett
Introduction
The Senate and House have passed H.R. 1, the “One Big Beautiful Bill Act,” a major tax reform bill. Passed by the Senate on July 1, 2025, and approved by the House on July 3, the bill is expected to be signed into law shortly.
This legislation modifies and extends several provisions of the Tax Cuts and Jobs Act (TCJA). It also reduces or eliminates certain clean energy credits, and introduces new deductions and provisions for individuals and businesses.
This guide outlines the most significant provisions of the law and their practical implications for business owners and individual taxpayers.
Business Tax Reform
Several business tax provisions from the TCJA are now permanent under the One Big Beautiful Bill Act, with additional adjustments:
- 100% Bonus Depreciation: Full expensing of qualified property under Section 168(k) is now permanent. This allows businesses to deduct the entire cost of eligible capital assets in the year the property is placed in service, rather than depreciating it over several years. The change applies to property placed in service after January 19, 2025. This can improve after-tax cash flow, especially for asset-intensive industries.
- Section 174 Expensing of R&D: Domestic research and experimental (R&E) expenditures are once again deductible in the year incurred. Taxpayers may elect to amortize these costs over five or ten years instead. Retroactive treatment allows businesses to deduct certain expenses capitalized in prior years, offering relief for companies that faced increased tax burdens due to the TCJA’s prior capitalization requirements.
- Business Interest Deduction: The EBITDA-based limitation under Section 163(j) is reinstated. Interest expense limitations are now calculated before depreciation and amortization deductions, restoring a more favorable threshold for highly leveraged businesses. This change applies to many industries, including real estate, manufacturing, and private equity.
- Section 168(n) for Production Property: A new temporary provision allows for 100% bonus depreciation on nonresidential real property used in qualified production activities. The provision targets U.S.-based manufacturing investments and includes eligibility criteria related to acquisition timing, prior use, and geographic location. The deduction applies to property placed in service between January 1, 2025, and December 31, 2030, with special provisions for delays caused by natural disasters.
Who this impacts: Businesses across sectors with significant capital investments, R&D activity, or leverage, particularly in industries such as manufacturing, real estate, and private equity.
Actions you should take: Review fixed asset policies, reassess capital budgeting strategies, evaluate R&D spending plans, and analyze interest expense limitations under the revised EBITDA standard. Multistate taxpayers should also monitor conformity to these federal changes.
Clean Energy Credits
The One Big Beautiful Bill Act modifies several clean energy incentives:
- Phase-out of Wind and Solar Credits: Credits under Sections 45Y and 48E are eliminated for projects not started within 12 months of enactment and placed in service after December 31, 2027.
- Restrictions on Foreign Influence: Projects involving certain foreign entities may be disqualified based on ownership or supply chain criteria.
- Transferability of Credits: Credits remain transferable, but not to foreign-influenced entities.
- Section 48D Manufacturing Credit: Increased from 25% to 35% for qualified investments after 2025.
Who this impacts: Businesses and developers involved in wind, solar, and other clean energy projects, particularly those relying on federal tax credits or with foreign supply chains.
Actions you should take: Review existing and planned project timelines, assess supply chain partners for compliance with foreign entity rules, and model the impact of phased-out or modified credits on project returns.
International Tax Changes
The One Big Beautiful Bill Act makes significant changes to international tax provisions:
- GILTI renamed NCTI: Effective tax rate is 14%, with a 90% foreign tax credit.
- FDII renamed FDDEI: Also subject to a 14% effective rate.
- BEAT Rate Increase: The Base Erosion and Anti-Abuse Tax increases to 10.5% beginning after 2025.
The bill also addresses expense allocation, foreign tax credit limitations, and removes Section 899.
Who this impacts: U.S. multinational corporations, especially those with controlled foreign corporations, intangible income streams, or payments subject to base erosion rules.
Actions you should take: Reevaluate international tax positions, update foreign tax credit and expense allocation methodologies, and revise BEAT exposure analyses using the new rates and definitions.
Individual Tax Changes
Individual taxpayers will also see changes under the One Big Beautiful Bill Act:
37% Top Rate: Made permanent, with broader income brackets and inflation indexing.
Higher Standard Deduction: Increased to $31,500 for married joint filers starting in 2026.
Child Tax Credit: Raised to $2,200 per child and indexed for inflation.
Pass-Through Deduction: Section 199A remains at a 20% deduction for qualified business income (QBI) from pass-through entities such as sole proprietorships, partnerships, and S corporations. This expands the income phase-in threshold, allowing more taxpayers to benefit from the full deduction before limitations based on income, wages, or investment begin to apply. Additionally, a new $400 minimum deduction is introduced for taxpayers who have at least $1,000 of qualified trade or business income and who materially participate in the business. This ensures that even low-income active business owners can receive some benefit from the deduction.
SALT Cap Adjustment: The deduction for state and local taxes (SALT) has been raised from $10,000 to $40,000 for tax years 2025 through 2029. The increased cap is subject to a phase-out for taxpayers with modified adjusted gross income (MAGI) exceeding $500,000 in 2025. This threshold increases slightly each year through 2029. After 2029, the cap reverts to its previous $10,000 limit unless extended by future legislation.
Temporary Worker Deductions: The One Big Beautiful Bill Act introduces a series of temporary deductions aimed at supporting working individuals in lower- and middle-income brackets. Employees in occupations where tips are customary can deduct up to $25,000 in reported tip income. Individuals earning overtime pay can deduct up to $12,500 (or $25,000 for joint filers) in qualifying overtime compensation. Additionally, taxpayers may deduct up to $10,000 in interest paid on loans used to purchase a personal-use vehicle. These deductions are effective through the end of 2028 and are subject to eligibility criteria.
Itemized Deduction Cap: The One Big Beautiful Bill Act introduces a cap that limits the tax benefit of itemized deductions to the 35% income tax rate bracket. This means that taxpayers in the top 37% tax bracket will not receive the full value of deductions such as mortgage interest, charitable contributions, and state and local taxes. Instead, the value of these deductions is effectively reduced, increasing the taxpayer’s overall effective tax rate. The cap applies to all taxpayers who itemize and is effective for tax years beginning after 2025.
Excess Business Losses: Limits made permanent; losses continue to be treated as NOLs under current law
Who this impacts: Individual taxpayers, especially high-income earners, parents with dependents, gig workers, and owners of pass-through businesses.
Actions you should take: Update individual tax projections, assess eligibility for new or expanded deductions, and review entity-level planning for pass-through income. Consider how the capped itemized deductions and SALT limitation affect your effective tax rate.
Investment and Other Provisions
The One Big Beautiful Bill Act also includes several other key provisions:
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Opportunity Zones: Made permanent with updated designation periods and enhanced benefits for rural investments.
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Qualified Small Business Stock (QSBS): Partial exclusions now available at three and four years. Full exclusion remains at five years. Lifetime gain exclusion increased to $15 million.
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Foreign Remittance Excise Tax: 1% tax begins in 2026 on specified cash transfers abroad, with exclusions for certain payment methods.
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Charitable Deductions: New floors apply 0.5% for individuals and 1% for corporations.
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Education Endowment Tax: Revised with a tiered structure based on institutional size.
Who this impacts: Investors in qualified small businesses, opportunity zone funds, individuals making foreign remittances, tax-exempt institutions, and donors making significant charitable contributions.
Actions you should take: Evaluate eligibility for QSBS and opportunity zone incentives, structure planned giving to align with new floors, and analyze foreign transfer patterns for potential excise tax exposure.
Tax Accounting and State Conformity
Changes made by the One Big Beautiful Bill Act must be recognized in financial reporting under ASC 740 at the time of enactment. This includes updates to deferred tax balances and uncertain tax positions.
Who this impacts: All corporate taxpayers and any entity required to report deferred tax assets and liabilities, particularly those operating across multiple states.
Actions you should take: Update ASC 740 calculations, assess the impact of tax law changes on deferred tax positions, and monitor state legislative and administrative guidance to identify compliance gaps or planning opportunities.
Final Thoughts on the One Big Beautiful Bill Act
Business owners, investors, and high-income individuals should review current tax strategies and consider updates based on the new provisions in the One Big Beautiful Bill Act. Planning should take into account the permanency of key provisions, changes to deductions and credits, and evolving state-level guidance.
Midwest CPA is available to assist with analysis and planning based on the final legislative text and related guidance.
Disclaimer
The content contained in this blog post is intended for general informational purposes only and is not meant to constitute legal, tax, accounting, or investment advice. You should consult a qualified legal or tax professional regarding your specific situation.
