The Act: Big Beautiful Bill Overview for Individual Taxpayers and Businesses

After multiple long congressional sessions, what is now officially known as “The Act” (formally referred to as “One Big Beautiful Bill”) went into effect Friday, July 4, 2025. At almost 900 pages, The Act contains a multitude of tax updates affecting both individual taxpayers and businesses.

The tax team at Corrigan Krause identified these key elements:

The Act/One Big Beautiful Bill Individual Taxpayer Updates

Rate reductions and tax bracket updates
- Individual rates and brackets are: 10%, 12%, 22%, 24%, 32%, 35%, and 37%
- Trust and estate rates are: 10%, 24%, 35% and 37%
Increase to the basic standard deduction statutory amounts for tax years beginning after December 31, 2024 to: $31,500 for joint filers and surviving spouses (computed as 200% of the single filers’ amount); $23,625 for heads of household; and $15,750 for singles and marrieds filing separately
For tax years beginning after December 31, 2024, all of the Tax Cuts and Jobs Act (TCJA) changes to the child tax credit (CTC) are permanent with the following modifications: (1) the nonrefundable CTC amount is increased to $2,200 per qualifying child
Credit of $500 for other dependents is now permanent
Phases out the deduction for taxpayers with modified adjusted gross income (MAGI) greater than $500,000 in 2025
The state and local tax deduction is increased to $40,000 for taxpayers who itemize. The cap is increased by 1% per year for 2026-2029
- Phases out the deduction for taxpayers with modified adjusted gross income of $500,000 in 2025
- SALT deduction cap will revert to $10,000 beginning in 2030
Raises the estate and gift tax exemption to $15 million in 2026 which will be adjusted for inflation each year thereafter
Individual alternative minimum tax exemption amounts are permanently increased with phaseout thresholds modified
New senior deduction for years 2025-2028: Taxpayers aged 65 or older—and their spouses, if filing jointly, can claim a $6,000 deduction per qualified individual. This senior deduction is reduced by 6% (but not below zero) for the adjusted gross income that exceeds $75,000 (or $150,000 for joint filers)
Provides individuals (including non-itemizers) with a temporary tax deduction for interest paid on loans used to purchase a new personal-use passenger vehicle.
- For tax years 2025-2028, individuals can deduct up to $10,000 of car loan interest per year, subject to a phase-out starting at $100,000 modified adjusted gross income (MAGI) for single filers ($200,000 for joint filers). To qualify for the deduction:
- The debt must be incurred after December 31, 2024, for the purchase of a new personal use vehicle, secured by a first lien on the vehicle, and the vehicle’s original use must begin with the taxpayer.
- The vehicle must be a car, minivan, van, SUV, pickup truck, or motorcycle, with a gross vehicle weight rating under 14,000 pounds, and final assembly of the vehicle must occur in the United States
Allows an individual taxpayer who is a U.S. citizen or resident an income tax credit equal to the aggregate amount of qualified contributions of cash made by the taxpayer during the tax year to a scholarship-granting organization. A scholarship granting organization is a non-public K-12 school
- The credit can’t exceed $1,700 per taxpayer per tax year, and is reduced by the amount allowed as a credit on any state tax return of the taxpayer for qualified contributions made by the taxpayer during the tax year.
- An amount taken as a credit under this provision can’t be counted as a charitable contribution for purposes of the Code Sec. 170 deduction
- The credit is available in tax years ending after December 31, 2026
Allows victims of qualified natural disasters to continue to claim personal casualty losses without needing to itemize their deductions. The standard deduction is increased by the amount of the net disaster loss, defined as the excess of qualified disaster-related personal casualty losses over personal casualty gains.
Permanently lowers the deduction for qualified residence interest to $750,000 in home mortgage acquisition debt. It also permanently treats certain mortgage insurance premiums on acquisition indebtedness as qualified residence interest
Permanently suspends miscellaneous itemized deductions
- Unreimbursed employee expenses for eligible educators are exempted and are still allowed
  - The deduction is available for equipment and supplementary materials used by eligible educators as part of an instructional activity
- This provision applies to tax years beginning after December 31, 2025
New tax-deferred investment accounts for children
- Creates a new tax-deferred investment account for children, called a “Trump account.” Specifically, these accounts are eligible to receive contributions from parents, relatives, employers, and other taxable entities as well as non-profit and government entities
  - Contributions to a Trump account are limited to $5,000 annually of after-tax dollars. The $5,000 contribution limit is indexed for inflation
  - No additional contributions of any kind shall be made to Trump accounts after the beneficiary has attained age 18
  - Subject to some exceptions, Trump account holders may not take distributions until age 18
  - Under a newborn pilot program, for U.S. citizens born between January 1, 2025, and December 31, 2028, the federal government will contribute $1,000 per child into every eligible account
- Enhances the adoption credit effective 2025, to include a refundable portion of up to $5,000
- Additional expenses treated as qualified higher education expenses for purposes of 529 accounts
  - Provides that tax-exempt distributions from 529 savings plans – tax-advantaged accounts that fund education expenses – apply to more expenses attributable to enrollment or attendance at an elementary or secondary public, private, or religious school
  - Increases the annual limit for 529 account distributions from $10,000 to $20,000. This limitation applies only to K-12 expenses
- Individuals’ charitable deductions: Floor of 0.5 % of AGI is imposed, and 60%-of-AGI ceiling for certain cash gifts is now permanent
  - Provides for a floor of 0.5% of the taxpayer’s contribution base (which is, generally, adjusted gross income, AGI) on the charitable deductions of individuals. Thus, an otherwise deductible charitable contribution must be reduced by 0.5% of an individual’s contribution base for the tax year. The Act provides rules for the order in which the taxpayer’s contributions are taken into account, and for carryforwards of contributions disallowed by the 0.5% floor
  - Floor provision is effective for tax years beginning after Dec. 31, 2025
- Provides that non-itemizers may claim a charitable deduction, not in excess of $1,000 ($2,000 for a joint return)
  - Non-itemizers’ charitable deduction is a below-the-line deduction, deducted from adjusted gross income in arriving at taxable income
  - Provision applies for tax years beginning after Dec. 31, 2025
- The itemized deduction for gambling losses is now limited to 90% of gambling winnings
  - The provision applies to tax years beginning after December 31, 2025
- The moving expense deduction is now permanently disallowed
- Permanently provides for additional contributions to Achieving a Better Life Experience (ABLE) accounts for employed individuals with disabilities
- Creates a temporary deduction for tips
  - The deduction phases out by $100 for every $1,000 of modified adjusted gross income (MAGI) above $150,000 (or $300,000 for joint filers)
  - Married taxpayers must file jointly to claim the deduction
  - The deduction is available to non-itemizers, meaning it can be claimed in addition to the standard deduction
  - Applies to taxable years beginning after December 31, 2024
  - The deduction is temporary and will expire for taxable years beginning after December 31, 2028
- Creates a temporary deduction for overtime page
  - Taxpayers may deduct up to $12,500 per year in qualified overtime compensation ($25,000 for joint filers). The deduction phases out by $100 for every $1,000 of modified adjusted gross income (MAGI) above $150,000 (single filers) or $300,000 (joint filers)
  - The deduction is available to non-itemizers, meaning it can be claimed in addition to the standard deduction

The Act/One Big Beautiful Bill Business Updates

Permanently sets bonus depreciation at 100%
- This provision is effective for property acquired after Jan. 19, 2025
Any otherwise allowable charitable contribution by a corporate taxpayer for any tax year (other than certain qualified conservation contributions) will be allowed only to the extent that the aggregate of such contributions exceeds 1% of the taxpayer’s taxable income for the tax year
- Charitable contributions disallowed either for exceeding the 10% maximum or failing to reach the 1% threshold can be carried forward for five years
Increases the section179 expensing limit to $2,500,000 and increases the phase-down threshold to $4,000,000
- Effective for property placed in service in tax years beginning after Dec. 31, 2024
100% Depreciation election for real property used for producing tangible personal property
- Qualified production property (QPP) construction must start between January 20, 2025, and December 31, 2029; and the property must be placed in service in the U.S. (or a U.S. possession) before January 1, 2031
Increases the general reporting threshold for form 1099-MISC or 1099-NEC from $600 to $2,000
- Effective for payments made after December 31, 2025
Research and Development Changes
- For tax years beginning after December 31, 2024, domestic R&D costs are fully deductible in the year incurred
- Companies with average gross receipts of $31 million or less over the past three years who have capitalized research and development costs can:
  - Amend 2022–2024 returns and claim a deduction for the capitalized costs (must be done within one year of the bill’s enactment) or
  - Take a catch-up deduction for all unamortized costs in 2025 or split it between 2025 and 2026.
- Companies with receipts over $31million cannot amend prior returns, but they can accelerate remaining amortization from 2022–2024 over one or two years starting in 2025.
- The 15-year amortization rule remains for foreign research and development costs
Terminates multiple energy incentives:
- Wind energy terminated after 2027
- Energy efficient home improvement credit terminated by December 31, 2025
- Residential clean energy credits terminated by December 31, 2025
- Energy efficient commercial buildings deduction for construction terminated beginning after June 30, 2026
  - Terminates the energy efficient commercial building deduction for the cost of energy efficient commercial building property the construction of which begins after June 30, 2026
- Previously-owned clean vehicles credit terminated
  - Significantly accelerates the termination date to vehicles acquired after September 30, 2025
- Clean vehicle credit terminated
  - Significantly accelerates and changes the parameter for termination, such that the credit now terminates for vehicles acquired after September 30, 2025
- Qualified commercial clean vehicles credit terminated
  - Significantly changes this and terminates the credit for any vehicle acquired after September 30, 2025
- Alternative fuel vehicle refueling property credit terminated
  - Significantly accelerates this and terminates the credit for property placed in service after June 30, 2026
- New energy efficient home credit terminated
  - Effective for homes acquired after June 30, 2026

It is important to note that the above list is not exhaustive of what is included in The Act/One Big Beautiful Bill, but a high-level overview of the most impactful provisions.

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