2025 Tax Bill: Trump’s One, Big, Beautiful Bill

On July 4, 2025, President Trump enacted the One Big Beautiful Bill (OBBB), the far-reaching tax and budget package poised to reshape the financial lives of millions. Spanning nearly 1,000 pages, the bill makes permanent several provisions from the 2017 tax reforms, such as reduced individual income tax rates, 100% bonus depreciation, and an expanded estate tax exemption. It also introduces temporary deductions for seniors, overtime pay, tip income, and auto loan interest, while raising the cap on state and local tax (SALT) deductions.

What Are the Individual Income Tax Provisions?

The 2025 Tax Bill (OBBB) introduces key updates to individual income tax, making several deductions permanent and offering new temporary incentives:

• Permanent tax brackets: Rates remain at 10%, 12%, 22%, 24%, 32%, 35%, and 37%.
• Increased standard deduction: Permanently set at $23,625 (Head of Household), $15,750 (Single), and $31,500 (MFJ).
• New senior exemption: Seniors aged 65+ receive a $6,000 exemption per qualified individual (MAGI limits apply).
• Temporary deductions (expire after 2028):
  • Overtime pay deduction (up to $25,000; $12,500 single)
  • Tip income deduction (up to $25,000)
  • Auto loan interest deduction (up to $10,000)

Extension of Reduced Rates

• The current tax rate is permanent (10%, 12%, 22%, 24%, 32%, 35%, 37%).
• Impact: Tax rates are not increasing for high earners.

Extension of Increased Standard Deduction

• This is permanent.
  • $23,625 (Head of Household)
  • $15,750 (Single)
  • $31,500 (MFJ)

Termination of Personal Exemptions Except For Seniors

• This has been gone since 2018.
• But, now Seniors get a ‘new’ personal exemption moved up to $6,000 instead of $2,000.
• What is a ‘qualified individual’ for a senior?
  • Has attained the age of 65 and the spouse is over 65
  • MAGI cannot be over $75k/$150k
  • Must have SSN
  • It is EACH qualified individual

No Tax on Overtime

• What is qualified overtime compensation?
  • Can’t be more than $25,000 ($12,500 if filing single)
  • Look at the definition of the Fair Labor Standards Act
    • Which means the .5x of 1.5x qualifies
  • Expires in 2028
  • Important Income Phaseouts
    • $150k for single filing/$300k for MFJ Filing: Reduced by $100 for every $1,000 over the thresholds

No Tax on Tips

• This comes in as an ‘above’ the line deduction, not an exclusion.
• $25,000 Cap
• Based on AGI (so basically, before applying this limitation, you have to first look at AGI, then apply it)
• Important Income Phaseouts
  • 150/300k S-MFJ Filing: Reduced by $100 for every $1,000 over the threshold
• Businesses can use it too.
• What is a qualified tip?
  • Cash tips (which means direct cash or credit card)
  • Not negotiated (which means it’s a ‘service’ tip)
  • SSTBs are specially excluded from this.
  • So an accountant having a ‘forced’ tip? No. A bartender crushing and gets a 50% tip? Qualifies
    • Has to be on a W2, 1099K, 1099NEC, or Form 4137

No Tax on Car Loan Interest

• 2025-2028
• Auto Loan Interest becomes an ‘above the line’ deduction.
• What is Qualified Passenger Loan Interest?
  • Interest paid (or accrued) during the taxable year incurred by a taxpayer
  • Exceptions (to not be deductible)
    • A loan to finance fleet sales
    • A loan incurred for purchase of a commercial vehicle
    • Any lease financing
    • A loan for the purchase of a vehicle with a salvage title
    • VIN Requirement
• Max $10,000
• AGI Limits:
  • $100/200k, every $1000 over, $200 deduction lost
• What is an ‘applicable Passenger Vehicle’?
  • Original use commences with taxpayer
  • Manufactured for use on public streets, roads and highways (no trains)
    • Doesn’t require installation, just means ‘in pieces’
  • The final assembly must be in the United States.
• Allowed to non-itemizers
  • Has a SSN

What are the Biggest Changes for Individuals?

This legislation brings long-overdue certainty by making many provisions permanent. The current individual tax brackets (10 percent through 37 percent) and increased standard deduction amounts are now locked in, eliminating the 2025 sunset.

A new $6,000 personal exemption is introduced for each qualified senior aged 65 or older, subject to MAGI limits.

New above-the-line deductions are introduced for tips up to $25,000, overtime up to $25,000 ($12,500 if single), and car loan interest up to $10,000. Each of these is subject to AGI limits and will expire after 2028 unless extended.

Trump Accounts provide tax-favored savings for children born in 2025 or later.

529 plans are expanded to include online coursework and credentialing programs.

What are the Business and Real Estate Investor Provisions?

The OBBB significantly impacts business owners and real estate investors by solidifying beneficial tax policies and introducing strategic incentives:

• 100% bonus depreciation: Permanent expensing for qualified property acquired after Jan. 19, 2025.
• Enhanced §179 expensing: Increased threshold ($2.5M), higher phase-out limit ($4M), both inflation-indexed.
• Qualified Business Income (QBI): Threshold increases ($50k to $100k individual, $75k to $150k joint) to maintain the 20% deduction.
• Interest deduction: Calculation now excludes depreciation, increasing deductible amounts for capital-intensive businesses.

QBI Deduction 2025

• Increase in taxable income limits
  • Goes from $50k to $100k, and from $75k to $150k for pure 20% deduction
• ‘Minimum’ QBI
  • $1000 of income = $400 deduction (minimum threshold)
  • Must MP in the business under § 469(h)
  • Inflation adjusted
• Impact: No crazy changes, BUT will allow for continued planning in this for any small business with or without employees.

Is 100% Bonus Depreciation Permanent?

• 100% Bonus Depreciation
  • No cliff or sliding scale in any way
• Permanent Bonus Depreciation Provision
• Anything after January 19th, 2025
  • The acquisition date is determined when a binding contract is entered into for such acquisition.
• If outside the threshold, it falls to 40%.
• Impact: Check for elections on self-constructed property if built AFTER, but flexibility to get immediate expensing now.

Expansion of §179 Deductions

• Expensing threshold goes from $1.5M to $2.5M.
• Acquisition phase out amounts go from $2.5M to $4M.
• Inflation is tagged as well.
• Impact: There is more opportunity to conform with states.

Interest Expensing

• Adjusted to be ‘permanent’ and then also to have all depreciation NOT be added back into the calculation
  • The ATI (adjusted Taxable Income Limitation) now has a higher floor; therefore, to deduct higher interest.
• Impact: Less limitations for interest going forward, real estate syndications get a big boost.

Domestic Research Expensing

• Amortization of expensing is gone (for R&D at least).
• If you are under the gross receipts test (average $31 million),
  • You can choose to amend those tax returns or choose to do an accounting method change.
• Permanent
• Impact: Great planning opportunities if amending a return or accelerating deductions. No situation is the same, but, a great time to fix old issues.

Excess Business Losses

• Permanent, and the cap is inflation-tagged
• No change like the House bill showed.
• Impact: This is why we pay attention to the bill, but pay closer attention to changes. This is a massive impact for high W2 earners.

What are the Biggest Changes for Real Estate Investors?

The Qualified Business Income Deduction stays at 20% with some income threshold changes (differing from the House draft).

Bonus depreciation is restored to be PERMANENTLY 100% for qualified property acquired and placed in service after January 19, 2025. The acquisition date is based on when a binding contract is entered.

Domestic research costs are once again fully deductible, with small businesses able to amend prior returns or use Form 3115.

The business interest deduction calculation now excludes depreciation and amortization, moving from an EBIT to EBITDA approach, which increases deductibility for capital-intensive operations such as real estate.

Section 179 expensing expands with a $2.5 million expensing cap and a $4 million phaseout, both indexed for inflation.

Excess business losses under Section 461(l) are now permanent and do convert into net operating losses, which was not expected with the original House draft.

Was the Estate & Gift Tax Extended?

Estate planning sees greater certainty and improved flexibility under the new legislation, providing substantial relief for high-net-worth individuals:

• Permanent estate and gift tax exemption: Increased to $15 million starting in 2026.
• Applicability: $15 million exemption applies specifically to gifts after 2025; earlier gifts follow previous rules ($14 million).

Extension and Enhancement of Estate & Gift Tax

• § 2010(c)(3) amended to be $15,000,000
  • $15,000,000 only applies to gifts after 2025..
  • This means everything else is going to be under $14,000,000 rules.
• Impact: Estate planning no longer has a cliff.

Estate & Gift Tax Provisions in the OBBB

The estate and gift tax exemption is also permanent and increases to $15 million starting in 2026, easing long-term estate planning concerns.

What are the Capital Gains & Equity Incentives?

QSBS expansion brings improved tax benefits and planning flexibility for startup investors under the new legislation:

• Tiered capital gain exclusions based on holding period (for stock acquired after July 4, 2025)
• $15 million gain exclusion cap introduced and now indexed for inflation

QSBS Expansion

• Holding period (beginning after July 4th)
  • 3 years = 50% Exclusion
  • 4 years = 75% Exclusion
  • 100% Exclusion = 5 years
• 28% gain on anything not excluded.
• $15M Gain Exclusion now (and inflation-indexed)
• If stock is before July 4th, play by old rules.
• Aggregate assets goes from $50M to $75M.
• Impact: Fantastic off-ramps create more creativity and allow for more flexibility in the planning stages of these start-ups. Investing and going C Corp route got more attractive.

Capital Gains & Equity Incentives Updates

Qualified Small Business Stock exclusions are now tiered, offering 50 percent after three years, 75 percent after four years, and 100 percent after five years, with a new $15 million gain exclusion cap and an increased asset threshold of $75 million.

Are there Real Estate & Investment Incentives?

The OBBB provides strategic tax benefits for U.S.-based manufacturing and expands long-term incentives for rural real estate investment:

• Qualified Production Property (QPP) expensing: New §168(n) allows full expensing for U.S. factory construction used exclusively for manufacturing (excludes offices, parking, and leased areas). Applies to projects beginning between Jan. 19, 2025, and Dec. 31, 2028.
• Qualified Opportunity Zones (QOZ): Program extended with new zoning limits, Treasury reporting requirements, and a 10-year duration.

Creation of Qualified Production Property Provision

• New § 168(n) Carveout
• Factory Expensing
  • Only the portion that is ACTUALLY for manufacturing
  • No office, no parking lot, etc
  • Factory has to be in the US
  • Original use commences with taxpayer
  • Construction begins on January 19, 2025 and before Jan 1, 2029
  • Can’t just lease out the property to be used by an operator either
    • Lessor to lessee, means not QPP
  • Manufacturing, production, or refining the qualified product
• Impact: I don’t think this is intended for syndicators, but if you’re the operator and invest with the operator, there are opportunities. We’ll see how deals flow from this.

Permanent Renewal of Qualified Opportunity Zones

• New zoning rules and limitations
• Limitation on the number of designations by states
• Increased reporting requirements (to come from Treasury)
• Zone stays in effect for 10 years
• Deferrals in the future are recognized
  • Year of Sale
  • Year 5 of investment
  • Whichever is later
• Hold for 5 years = 10% step up at time of investment or 30% in rural QOZ
• Hold for 10 years to elect step-up, forced step-up at 30 years
• Rural areas only need a 50% improvement to adjusted basis of the property
• New rules go into effect after 2026 (2027)
• No continued gain deferral for 2026
• Impact: This is a great provision and is another tool to defer tax for multiple years, plus get more investing into rural areas.

The Real Estate & Investment Incentives

Qualified Opportunity Zones are extended and renewed permanently, allowing new designations, year-five gain recognition, and special treatment for rural zones.

A new §168(n) carveout creates the Qualified Production Property (QPP) provision, allowing expensing for U.S.-based factory construction that begins between January 19, 2025, and January 1, 2029, but only for portions used directly in manufacturing, production, or refining, excluding offices, parking lots, or properties leased to operators, where original use begins with the taxpayer.

What are the Itemized Deduction Limitations?

The OBBB imposes new limits on deductions for high-income taxpayers and professional gamblers, with key thresholds and expirations:

• SALT deduction cap adjustment (§164(b)(6)): Increased to $40,000 with AGI phase-out starting at $500,000 and ending at $600,000 (inflation-indexed). Minimum deduction remains $10,000. Expires in 2029.

• Wagering losses: Only 90% of losses may offset income, and only to the extent of gains. Ensures a baseline tax liability for professional gamblers.

Limitation on SALT Deductions

• § 164(b)(6)
• $40,000 to match the House
• BUT AGI limitations on phase start at $500,000 (inflation-indexed)
• The threshold is slowly reduced over time, basically up to $600,000, where you get back to $10,000 (not below $10,000).
• Expires 2029
• Impact: The $500,000 AGI Threshold just became vastly more attractive (also, no PTET changes).

Extension & Modification of Limitations on Wagering Losses

• Only 90% of losses offset income
  • And only if you have gains as well
  • Essentially will always have to pay some tax ultimately
• Impact: Despite losses, earnings will always need to be set aside to play liability as a pro gambler.

Itemized Deduction Limitations in the OBBB

The SALT deduction cap increases to $40,000, but with a phaseout of the deduction starting at $500,000. Once you get around $600,000, the cap goes back to $10,000.

Personalized guidance from a seasoned tax strategist is key to adapting your situation strategically amid these changes.

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