On July 4, 2025, President Trump officially signed into law a comprehensive reconciliation bill initially known as the “One Big Beautiful Bill Act.” The bill successfully passed Congress following extensive negotiations, marathon sessions, and a tie-breaking vote by Vice President JD Vance in the Senate. This significant legislative victory secures key tax provisions and introduces substantial new changes impacting individuals and businesses alike..
Key Provisions Now Permanent
The newly enacted law addresses essential tax measures initially set forth by the Tax Cuts and Jobs Act (TCJA) of 2017, many of which were scheduled to expire at the end of 2025. The reconciliation law permanently retains:
- Income tax brackets introduced by TCJA (10% to 37%).
- Elimination of personal exemptions.
- Increased exemptions and thresholds for the alternative minimum tax (AMT).
- Limitations on mortgage interest deductions.
- Restrictions on casualty loss and miscellaneous itemized deductions.
- Provisions allowing rollovers from qualified tuition programs into ABLE accounts.
Additional adjustments include permanently reinstating deductions for mortgage insurance premiums and enabling teachers to deduct unreimbursed classroom expenses without stringent dollar limits.
Adjustments to the Standard Deduction
The standard deduction amounts for 2025 have been revised, with future adjustments based on inflation:
- $31,500 for joint filers
- $23,625 for heads of households
- $15,750 for single filers and married individuals filing separately
Expansion of the SALT Deduction
Addressing one of the more contentious issues, the state and local tax (SALT) deduction cap increases to $40,000 in 2025. The cap will incrementally rise by 1% annually through 2029, reverting to $10,000 in 2030. This deduction phases out for high-income earners, starting with modified adjusted gross incomes over $500,000.
Enhanced Child Tax Credit
The child tax credit has been permanently increased to $2,200 per child, adjusted annually for inflation. The refundable portion remains capped at $1,400, requiring valid Social Security numbers for eligibility.
Increased Estate Tax Exclusion
Effective from 2026 onward, the estate tax exclusion rises permanently to $15 million (inflation-adjusted annually).
Deductions for Tip and Overtime Income
Reflecting campaign promises, new deductions have been established temporarily:
- Deduction for tip income (up to $25,000, phasing out for higher incomes).
- Deduction for overtime pay (up to $12,500, phasing out for higher incomes).
Both deductions are effective through 2028 and do not require itemization.
Additional New Provisions for Individuals
- Special $6,000 deduction for seniors aged 65+ (2025-2028).
- Deduction for automobile loan interest up to $10,000 (2025-2028).
- Introduction of “Trump Accounts,” tax-advantaged accounts for newborns seeded with $1,000.
- Expansion of 529 savings programs to cover homeschooling and K-12 expenses.
Business and International Tax Provisions
Businesses benefit significantly from:
- Permanent 100% bonus depreciation on specific assets acquired from January 2025 onward.
- Immediate deductions for research and experimental expenditures reinstated permanently.
- Permanent Qualified Business Income deduction (Section 199A).
Internationally, rates related to foreign-derived intangible income (FDII) and global intangible low-taxed income (GILTI) have been adjusted, along with base erosion and minimum tax modifications.
Termination of Green Energy Credits
To fund these new tax provisions, the law terminates numerous green energy tax credits introduced by the Inflation Reduction Act of 2022. Consumer-focused credits and clean vehicle incentives will largely expire after 2025, with longer phase-outs for certain energy producers.
IRS and Compliance Updates
Operational changes include discontinuing the IRS Direct File program and implementing penalties for fraudulent promoters of specific tax schemes, albeit with significantly reduced penalties compared to initial proposals.
Moving Forward
The enactment of this bill substantially reshapes the U.S. tax landscape. Taxpayers should proactively consult financial advisors to effectively navigate and benefit from these sweeping changes.
Falcon Wealth Planning’s dedicated CFP® professionals are ready to assist you in understanding and optimizing your financial strategy under these new provisions. Contact us today for a tailored consultation.
*The content in this blog is for general informational purposes only and does not constitute personalized financial, investment, tax, or legal advice. Falcon Wealth Planning, Inc., a fee-only, true fiduciary, registered investment advisor, provides this information to give a broad understanding of financial concepts and strategies.
