Updated July 16, 2025
On July 4, 2025, Donald Trump signed the “Big Beautiful Bill” into law. While this bill does have many different facets, some of these will have an effect on both your finances and your taxes.
While this summary does not encompass everything that the legislation includes, our intention is to break down that which we believe will affect our customers. If you have any questions about your specific tax situation, please call our office to schedule a tax planning appointment.
Consumer Financial Protection
Title III reduces, by almost half, the funding cap of the Consumer Financial Protection Act, which gives the Consumer Financial Protection Bureau (CFPB) the authority to protect consumers from unfair, deceptive, or abusive tactics by allowing it the supervision, examination, and enforcement powers for financial industry institutions that offer financial products to consumers. The bill does, however, preserve the ability of the CFPB to request additional funds from Congress to maintain agency operations.
Clean Energy Amendments
The bill also amends much of the Inflation Reduction Act of 2022. Some of the most sweeping changes include:
- Energy-efficient home improvement tax credits will only be available to projects that are finished before December 31st of this year. For developers hoping to access energy-efficient home and building incentives, construction will have to start no later than June 30, 2026.
- Tax credits for new or used clean energy vehicle purchases (EVs) end after September 30, 2025. If you install a charging station at your home and business, that tax credit expires on June 30, 2026.
- Repeal of funding for a variety of clean energy programs and grants for states, cities, and tribes to implement programs to lower emissions and electricity use.
- Reimbursements for qualified bicycle commuting is permanently removed from the list of qualified transportation fringe and other commuting benefits and makes them taxable to employees.
Changes and Adjustments to Individual Deductions and Exemptions
In addition, tax provisions of the Tax Cuts and Jobs Act (TCJA) of 2017, which were set to expire at the end of this year, were made permanent. These include retention of the increased standard deduction and an increased Child Tax Credit, deductions for Qualified Business Expenses, an increased Alternative Minimum Tax Exemption. There are provisions for inflation increase adjustments for coming years, as well.
Some of the promises that were made with the bill’s inception are included, though the form of tax deductions rather than elimination. Tax on qualified tips (“Qualified tips” are voluntary cash or charged tips received from customers or through tip sharing) will be offset by a deduction not exceeding $25,000, though the amount allowed is reduced if the taxpayer’s modified adjusted gross income (MAGI) exceeds $150,000 ($300,000 for joint filers).
Rather than abolishing taxes on Social Security, the bill establishes a temporary Senior deduction for taxpayers who are 65 years or older. To qualify for the additional deduction, a taxpayer must attain age 65 on or before the last day of the taxable year. The $6,000 deduction begins to phase out when the taxpayer’s MAGI exceeds $75,000 ($150,000 for joint filers) and is set to expire in 2028, unless renewed by a future session.
Instead of the “No Tax on Overtime,” the bill provides a temporary deduction of up to $12,500 for a single filer ($25,000 for joint filers) for qualified overtime compensation received during the tax year. Employers and other payors are required to file information returns with the IRS (or SSA) and furnish statements to taxpayers showing the total amount of qualified overtime compensation paid during the year. Like the tip deduction, this also phases out with the MAGI over $150,000 for a single taxpayer. As with the Senior deduction, this will expire in 2028 unless renewed.
The deductions for tips, overtime, and the Senior deduction are all “above-the-line” deductions, which mean that they are available to taxpayers even if they do not itemize and instead use the standard deduction on their taxes.
Estate and Gift Tax Exemption
The bill also permanently increases the estate tax and lifetime gift tax exemptions to $15 million for single filers and $30 million for those who file jointly in 2026, with inflation increases after that.
Itemized and SALT Deductions
Many of the itemized deductions that were eliminated in the 2017 TCJA were also made permanent. Miscellaneous itemized deductions including unreimbursed employee expenses, tax preparation fees, etc. have been eliminated, with an exception for certain unreimbursed educator expenses. Also gone is the deduction of moving expenses, except for certain members of the armed forces and intelligence community.
The State and Local Tax (SALT) deduction, which allows tax payers who itemize to subtract things like property taxes, state income taxes, and sales taxes from their taxable income was capped at $10,000 in 2017. The Big Beautiful Bill raises that limit to $40,000, starting in 2025. This deduction is phased out for taxpayers with a MAGI of $250,000 for single filers and $500,000 for joint filers. There is a provision for a 1% per year increase in this limit for the years 2026 – 2033, with the limit remaining at the 2033 amount in years after.
The TCJA provision that limited the itemized deduction for personal casualty losses to only those resulting from federally declared disasters was made permanent, however it expands the provision to include certain state-declared disasters.
Also made permanent are the limitation of qualified residence interest deduction to the first $750,000 in home mortgage acquisition debt, the exclusion of interest on home-equity indebtedness, like HELOCs, from the definition of qualified residence interest, and the treatment of certain mortgage insurance premiums on acquisition indebtedness, in other words, the financial obligation taken on during the construction, improvement, or purchase of a primary or secondary residence1, as qualified residence interest.
Wagering & Business Losses
The losses that can be claimed from wagering transactions is made permanent by the bill. These include losses incurred by taxpayers who engage in gambling activities at casinos, card tables, racetracks, or other wagering venues, real or virtual. With this, there is also an amendment, however, which limits the term “losses from wagering transactions” to 90% of the amount of those losses, and losses will be deductible only to the extent of the taxpayer’s gains from wagering transactions during the year.2
Another permanent extension for business losses incurred by non-corporate taxpayers is also included, with the income threshold for determining excess business losses including adjustments for inflation.
New Deductions & Credits
There are several new deductions made available by the passing of the bill. Beginning in 2026, those taxpayers who do not itemize are allowed a cash charitable contribution deduction of up to $1,000 ($2,000 for joint filers). Additional tax credits are allowed for those individuals who contribute to scholarship-granting organizations. This credit is limited to the greater of 10% of the taxpayer’s adjusted gross income (AGI), or $5,000.
The bill also includes a deduction for car loan interest on a qualified vehicle, even for those taxpayers who do not itemize. A qualified vehicle is a car, minivan, van, SUV, pick-up truck or motorcycle, with a gross vehicle weight rating of less than 14,000 pounds, and that has undergone final assembly in the United States, used to purchase a vehicle, the original use of which starts with the taxpayer (used vehicles do not qualify), for a personal use vehicle (not for business or commercial use), secured by a lien on the vehicle, and was purchased after December 31, 2024. The taxpayer must include the VIN on the tax return for any year in which the deuction is claimed and lenders must file information returns with the IRS and furnish statements to taxpayers showing the total amount of interest received during the taxable year.
This deduction is limited to $10,000 per year, and is eliminated for individuals earning more than $100,000 ($200,000 for joint filers). This deduction is also temporary, available for years 2025 – 2028, unless renewed at a later date.
Child & Dependent Care
Several provisions also effect child and dependent care, permanently increasing the amount of the child and dependent care tax credit from 35% to 50% of qualifying expenses, with a phase down for taxpayers with an AGI over $15,000, and increases the annual excludable amount of dependent care assistance programs from $5,000 to $7,500. In addition, the bill makes a portion of the adoption credit refundable up to $5,000, with adjustments for inflation.
“Trump” Accounts & Qualified Tuition Programs
While the concept of saving for a child’s future is something that normally falls on parents or relatives, the bill institutes the creation of a new, tax-advantaged investment account prefunded with $1,000 for each child born from the beginning of 2025 through the end of 2028.3 Not to be excluded, children born before 2025 are also eligible for an IRA-style account, but do not receive the prefunded $1,000. These “Trump” accounts are available for parents to open at the bank of their choice, with contributions capped at $5,000 per year, including up to $2,500 tax-free from contribution by a parent’s employer. The money from these accounts grows tax-free until it’s withdrawn and must be invested in a broad stock index. Children with these accounts can make partial withdrawals when they turn 18 and can access the full amount at age 25, however those withdrawals are limited to “qualified purposes” such as paying for college, starting a business, or buying a first home. Any funds remaining at age 30 are eligible to be used for any purpose.
For those who already have, or are considering starting, a Qualified Tuition Program, such as a 529 account, these tax-exempt accounts are now expanded to include tuition and material expenses for elementary, secondary, and home school expenses. Qualified higher expenses are also expanded to include tuition and expenses in connection with a recognized postsecondary credential program.4
Small Business Stock
The small business stock exclusion is revised to include not only the partial exclusion of 50% of gain from the sale of a qualified small business stock issued after February 17, 2009 that is held for at least three years, but also includes a 75% exclusion if the stock is held for at least four years and a 100% exclusion if held for five years or more. The gross asset limitation to qualify is increased to $75 million, with a per-taxpayer gain exclusion cap of $15 million.
Business Deductions
The tax changes do not only effect individual taxpayers, but also businesses. Some of the provisions made permanent from the TCJA include the first-year bonus depreciation deduction. The allowance is increased to 100% for property acquired or placed in service on or after January 19, 2025 and includes specified plants planted or grafted on or after that date.
The bill also increases the amount a taxpayer may expense to $2.5 million, reduced by the amount by which the cost of qualifying property exceeds $4 million2 and also allows for the immediate deduction of domestic research or experimental expenses paid in tax years beginning after December 31, 2024. Research or experimental expenses that can be attributed to research that is conducted outside the United States are still required to be capitalized and amortized over 15 years. Small business taxpayers with average gross receipts of $31 million or less will be permitted to apply this change retroactively to tax years beginning after December 31, 2021, and all businesses that made these expenditures between January 1, 2022 and December 31, 2024 will be permitted to elect to accelerate the remaining deductions over a one- or two-year period.
Earnings before interest, taxes, depreciation, and amortization (EBITDA) limitations are reinstated for tax years beginning after December 31, 2024, which means that the adjusted taxable income for the business will be computed without regard to other deductions, like depreciation, amortization, or depletion. The bill also modifies the definition of “motor vehicle” to allow interest on floor plan financing for certain trailers and campers to be deductible.
Businesses also benefit from allowances for manufacturing, including a special 100% first-year depreciation deduction for qualified production property, and an advanced manufacturing investment credit that is increased from 25% to 35%, effective for property put into service after December 31, 2025.
Family & Community Deductions
The employer credit for paid family and medical leave is made permanent with this bill and also increases the amount of qualified child care expense credit from 25% to 40%, with the maximum increased from $150,000 to $500,000 ($600,000 for eligible small businesses), with an adjustment for inflation.
Temporary deferment of tax on eligible gains invested in Opportunity Zones, or what the bill defines as “low-income community,” are also permanent, now, as is the new market tax credit, both of which support the economic growth of these areas.
Reporting Thresholds
For both businesses and individuals, the bill reverts previously passed legislation for reporting of income received on a Form 1099-K, which was scheduled to have a reporting threshold of $600 starting in 2026. Instead, taxpayers will not receive a 1099-K form unless the value of third-party transactions exceeds $20,000 and the number of transactions exceeds 200.
The Form 1099 reporting threshold for payments to persons engaged in a trade or business, and payments for remuneration of services, is increased to $2,000 from the previous amount of $600, and will be increased annually for inflation after 2026.
Footnotes
1 Investopedia: https://www.investopedia.com/terms/a/acquisitiondebt.asp
2 Journal of Accountancy: https://www.journalofaccountancy.com/news/2025/jun/tax-changes-in-senate-budget-reconciliation-bill/
3 Yahoo! Finance: https://finance.yahoo.com/news/heres-how-the-new-trump-accounts-work–and-why-financial-experts-dont-love-them-150126358.html
4 Proskauer: https://www.proskauertaxtalks.com/2025/05/one-big-beautiful-bill-passed-by-the-house/
Other sources
https://www.congress.gov/bill/119th-congress/house-bill/1/text
https://www.thetaxadviser.com/issues/2013/may/clinic-may2013-story-07/