On July 3, 2025, the U.S. House passed the One Big Beautiful Bill Act (OBBBA) by a 218-214 vote following an all-night session. This follows the Senate’s passage of the legislation on July 1, and the bill is expected to be signed into law by President Trump on July 4.
The bill contains approximately $4.5 trillion in tax cuts over ten years through reductions in corporate and individual income taxes and various other related tax changes. It is expected to add more than $3 trillion to the federal deficit. To offset a portion of this cost, the bill contains $3.5 trillion in spending cuts, largely targeting federal social programs.
This legislation spans 900 pages, and Aldrich will continue to monitor developments and provide timely updates as more details emerge.
Individual Tax Provisions
For individuals, the bill includes a range of tax relief measures aimed at middle- and upper-income households. The key provisions include:
- Tax Rates and Brackets: The 2017 Tax Cuts and Jobs Act (TCJA) rates are made permanent, with additional inflation adjustments for certain brackets.
- SALT Deduction Cap: Temporarily increased to $40,000 through 2029, then reverts to $10,000 in 2030. A phase-down applies for taxpayers with modified adjusted gross income (MAGI) over $500,000.
- Tips and Overtime: Introduces deductions for tip income (up to $25,000) and overtime pay (up to $12,500), both phased out for higher-income earners.
- Standard Deduction: Permanently increased to $15,750 (single), $23,625 (head of household), and $31,500 (married filing jointly), adjusted for inflation.
- Senior Deduction: Introduces a $6,000 deduction for individuals aged 65 and older, with phase-outs starting at $75,000 MAGI ($150,000 for joint filers).
- Child Tax Credit: Increased to $2,200 per child, indexed for inflation.
- Estate and Gift Tax Exemption: Permanently increased to $15 million for single filers ($30 million for married couples), adjusted for inflation.
Private Company Provisions
For private companies and their owners, the OBBBA legislation offers a suite of provisions intended to stimulate investment, innovation, and domestic production. Key aspects of the bill include:
- Pass-Through Deduction (Section 199A): Made permanent, with expanded phase-in ranges for specified service trades or businesses (SSTBs).
- Bonus Depreciation: 100% bonus depreciation made permanent.
- Section 179 Expensing: Increased limit to $2.5 million, with a phase-out threshold at $4 million, both indexed for inflation.
- Research and Development (R&D) Deduction: Full expensing for domestic R&D expenditures made permanent under new Section 174A.
- Business Interest Limitation: Reverts to an EBITDA-based limitation, made permanent.
- SALT Workarounds for Pass-Throughs: Preserves the use of pass-through entity taxes (PTETs) for all pass-through entities.
- Incentives for Small Manufacturers and Domestic Production: Introduces a 100% depreciation for qualified production property and increases the advanced manufacturing investment credit rate from 25% to 35%.
- Business Loss Carryforwards: Disallows the conversion of excess business losses to net operating losses (NOLs), making the limitation permanent.
- Employee Retention Credit (ERC) Enforcement Measures: Imposes due diligence requirements for ERC promoters, with penalties for non-compliance, and prevents the IRS from issuing additional unpaid claims unless filed by January 31, 2024.
Side-by-Side Comparison: Current Law vs. OBBBA
The chart below compares current law to the OBBBA legislation that has passed the House and Senate.
Comparison: Individual Tax Provisions
Provision | Current Law | OBBBA |
Tax Rates and Brackets | TCJA rates expire after 2025 | Makes TCJA rates permanent with inflation indexing |
SALT Deduction Cap | $10,000 cap | Raises to $40,000 (2025–2029); reverts with phase-down for high earners |
Tips Income Deduction | Taxable | Deductible up to $25,000 per return through 2028; phased out based on income |
Overtime Income Deduction | Taxable | Deductible up to $12,500 for single and $25,000 for joint filer, through 2028; phased out based on income |
Standard Deduction | $15,000 (single), $30,000 (MFJ) | Permanently increased to $15,750 (single), $31,500 (MFJ) w/ inflation adjustments |
Senior Deduction | Additional standard deduction for 65+ | Adds $6,000 deduction for individuals aged 65+; phased out at higher incomes |
Itemized Deduction Limitation | No limitation | Limits the benefit at $0.35 per dollar |
Child Tax Credit | $2,000 per child | Permanent $2,200 per child; indexed for inflation |
Estate & Gift Tax Exemption | $13.61M (2024) | Raised to $15M with inflation adjustment |
Comparison: Business Tax Provisions
Provision | Current Law | OBBBA |
Pass-Through Deduction (199A) | Expires after 2025 | Made permanent with no changes besides increased availability for certain small businesses |
Bonus Depreciation | Phasing down to 40% in 2025 | 100% bonus depreciation made permanent |
Section 179 Expensing | $1.22M limit; $3.04M phaseout (2024) | Increased to $2.5M; phaseout at $4M |
R&D Deduction | 5-year amortization | Full expensing for domestic R&D made permanent under Section 174A with acceleration available for some previously capitalized costs |
Business Interest Limitation | EBIT-based | Reverts to EBITDA-based permanently |
SALT Workarounds for Pass-Throughs | PTETs allowed | Preserves PTETs for all pass-through entities |
Production Real Property Incentives | Generally depreciated over 39 years | Introduces 100% expensing for certain real property used in manufacturing |
Business Loss Carryforwards | Convert to NOLs | Made permanent. Expanded to estates and trusts. |
Section 1202 | 5 year holding period for exclusion | Provides new incentives for three and four year holding periods and expands eligibility and the amount of gain that can be excluded |
ERC Enforcement | Open claims processing | Introduces promoter due diligence rules plus cutoff for unpaid ERC claims filed after Jan 31, 2024 |
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