On July 4th, President Trump signed the One Big Beautiful Bill Act into law, extending many provisions originally set to expire from the previous Tax Cuts and Jobs Act of 2017 (“TCJA”) and also creating new provisions. We have summarized some of the most important tax updates so that you may plan effectively for 2025 and beyond.
Tax Cuts and Jobs Act – Individual Provisions Made Permanent
- The TCJA tax brackets, with a top tax bracket of 37%, have been made permanent.
- The standard deduction has been increased permanently ($15,750 single, $31,500 joint) and personal exemptions have been eliminated permanently.
- Certain personal deductions such as tax preparation fees, investment management fees, and unreimbursed business expenses are now permanently nondeductible.
- The mortgage interest deduction is now permanently limited to interest on up to $750,000 of mortgage principal.
- The 20% pass-through entity deduction for certain owners of passthrough entities has been made permanent.
Important Updates for Individuals
- The state and local deduction (“SALT”) limitation has been increased temporarily to $40,000 with slight increases scheduled from 2025 – 2029, but does begin to phase down to $10,000 for those with adjusted gross income over $500,000. For those clients who are owners of passthrough entities, the passthrough entity tax remains a viable tax planning strategy.
- Charitable Deductions – Beginning in tax year 2026, there will be a new 0.5% “floor” on charitable contribution deductions. Essentially, taxpayers who itemize their deductions will only be able to deduct charitable gifts if they exceed 0.5% of their adjusted gross income. Taxpayers who do not itemize will be allowed to deduct up to $1,000 (if single) or $2,000 (if filing jointly) in charitable contributions.
- In addition, overall itemized deductions would be capped at a 35% tax benefit. For taxpayers in the highest tax bracket of 37%, this rule would only allow itemized deductions to be claimed at a 35% benefit rate.
- Clean-Energy Tax Credits will begin to phase down or expire. Wind and solar credits will phase down beginning in 2026 and will phase out completely in 2028. Clean vehicle credits will expire on September 30, 2025. Residential and commercial energy efficient credits will expire on December 31, 2025.
- Lifetime Exemption – For gifts and estates, the lifetime exemption has been raised permanently to $15 million per person in 2026 and will be adjusted for inflation thereafter.
Qualified Small Business Stock
The One Big Beautiful Bill Act revamped provisions for Qualified Small Business Stock (QSBS) acquired AFTER July 4, 2025. For QSBS acquired after July 4, 2025, the QSBS exclusion has been increased to $15 million and the gross asset limitation required at the time of QSBS acquisition has been increased to $75 million. In addition, new tiered gain exclusions will apply:
- 50% for QSBS held 3 years
- 75% for QSBS held 4 years
- 100% for QSBS held 5 years
Please note that for QSBS acquired PRIOR to July 4, 2025, the QSBS rules previously in place will still apply.
Qualified Opportunity Zones
The Qualified Opportunity Zone (“QOZ”) program has been made permanent under the One Big Beautiful Bill Act. Based on the existing QOZ program, gains previously deferred under the original Qualified Opportunity Zone program initiated by the TCJA would still be recognized in 2026. After 2026, new opportunity zones will be designated every 10 years and taxpayers may continue to invest their gains in Qualified Opportunity Zones and defer recognition of their capital gains. If the new Qualified Opportunity Zone investment is held for at least 5 years, taxpayers would be able to increase their basis by 10% of their deferred gain (30% if in a Qualified Rural Opportunity Zone). Additional benefits may apply if the Qualified Opportunity Zone investment is held 10 years or more.
Business Tax Provisions
- 100% bonus depreciation has been reinstated and applies to property acquired and placed in service after January 19, 2025. In addition, the Section 179 deduction limitation has been increased to $2.5 million with phase-out beginning at $4 million of property placed in service.
- Research and experimental expenditures paid or incurred after December 31, 2024 are now deductible. Taxpayers can also make an election to capitalize and amortize these expenditures.
- Business Interest Deduction – In general, businesses are allowed to deduct business interest to the extent it does not exceed 30% of income. The One Big Beautiful Bill modifies the calculation of business income to remove deductions for depreciation, amortization, and depletion.
- For corporate charitable deductions, a 1% floor has also been put into place.
The excess business loss limitation, which limits the aggregate amount of loss that a noncorporate taxpayer can deduct in a year, has been made permanent.
California Tax Law Updates
Please note that California tax law has not conformed to many of the provisions of the TCJA or the One Big Beautiful Bill.
On June 27, 2025, Governor Newsom signed SB 132 into law. This law extended the passthrough entity elective tax in California for an additional five years. It also relaxed the rules related to the required June 15th prepayment. Instead of disallowing the election if payment is not properly made by the June 15th deadline, taxpayers will be allowed to make the CA PTE election, but their California credit will be reduced by 12.5%.
We are here to help!
If you have any questions about the current tax law changes or how they might impact your tax liability, please feel free to reach out. We’re here to help and would be happy to discuss any questions you may have.
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