On July 4, 2025, President Trump signed the One, Big, Beautiful Bill Act (OBBB) into law, enacting significant tax reforms with wide-ranging implications for individuals and businesses.
Aimed at delivering meaningful tax relief to the middle class and small businesses, the OBBB brings several notable changes:
Individual Provisions:
- SALT deduction cap increased from $10,000 to $40,000, with a phaseout beginning at $500,000.
- No limitation on the use of Pass-Through Entity Taxes (PTET) as a SALT deduction workaround.
- Permanent increase of the Child Tax Credit to $2,200 per child, with $1,700 as a refundable.
- Estate tax exemption raised permanently to $15 million starting in 2026 and adjusted for inflation.
- No tax on tips and overtime – Above-the-line deduction subject to income-based phaseouts.
- No Tax on Car Loan Interest – Deduction of up to $10,000 in interest on new car loans (2025-2028) for vehicles assembled in the U.S., subject to income limitations.
- Charitable deduction for non-itemizers. A $1,000 above-the-line deduction for single and $2,000 for married.
Business Provisions:
- Permanent increase to the Qualified Business Income Deduction (199A) at 20% of qualifying business income. Owners of specified service trade or business (SSTB) may benefit from an increased phase-out limitation. Includes a minimum deduction of $400 for certain taxpayers.
- Allows full deduction of domestic R&D expenditures in the year incurred, for tax years beginning after 12/31/24. Also includes provisions to accelerate the deduction of previously capitalized R&D expenses.
- Reinstates the EBITDA limitation under Sec. 163(j) for tax years beginning after December 31, 2024.
- 100% bonus depreciation made permanent for qualified property acquired and placed in service after January 19, 2025.
- 100% depreciation allowance on certain US facilities that produce tangible personal property subject to certain requirements and placed in service before 1/1/2031.
- Increase section 179 deduction to $2,500,000 from $1,250,000 with increased the phaseout threshold amount to $4 million.
- Retroactively terminate the Employee Retention Tax Credit (ERC) for taxpayers who filed refund claims after January 31, 2024. Increases enforcement mechanisms.
- Opportunity Zones made permanent on a rolling 10-year basis, starting on January 1, 2027.
- Expansion of the Sec. 1202 exclusion on Qualified Small Business Stock.
- Tip credit for employer-paid FICA expanded to beauty service industry.
- Termination of clean energy tax incentives.
- Increases threshold from $600 to $2,000 for certain Form 1099 Reporting and reinstates the pre-ARPA threshold for 1099-K reporting ($20,000 and 200 transactions).
International Provisions:
- Permanent overhaul of GILTI and FDII regimes.
- GILTI is rebranded as Net CFC Tested Income (NCTI); effective for tax years beginning after December 31, 2025, with the prior 37.5% deduction eliminated. The effective GILTI (NCTI) tax rate is now 14% (up from 13.125%).
- FDII is retitled Foreign-Derived Deduction Eligible Income (FDDEI) and also taxed at 14%, aligning with the revised GILTI rate.
- Reinstatement of CFC ownership attribution rule (Sec 958(b)(4)).
- This restores the prior rule to prevent automatic downward attribution of foreign corporate ownership—avoiding unintentional creation of additional CFCs and more Subpart F filings.
- BEAT rate set permanently at 10.5%.
- The Base Erosion Anti-Abuse Tax rate is fixed at 10.5% for taxable years after December 31, 2025.
- New 1% excise tax on certain cross-border remittances.
- Beginning January 1, 2026 for transfers sent after December 31, 2025, a 1% tax applies to cash-based remittances (e.g., cash, money orders, cashier’s checks). Exemptions include transfers via U.S. based bank accounts or U.S.-issued debit/credit cards.
If you have any questions or would like to discuss the above, please contact your SAX Advisor.