One Big Beautiful Bill
Written by: Becky Gibbs, CPA - Partner, Boyum Barenscheer
The One Big Beautiful Bill (OBBB) introduces tax changes affecting both businesses and individuals. The bill contains several provisions from the Tax Cuts and Jobs Act, such as maintaining current tax brackets, preserving the 20% Qualified Business Income Deduction for pass-through entities, and raising the standard deduction to $31,500 for married filing jointly. Below is a summary of the notable changes contained in the bill which can apply to you individually and for business purposes. As a caveat, additional provisions may also apply depending on individual circumstances.
Individual Changes for Consideration:
Extending Tax Rates for Individuals
OBBB permanently establishes the seven individual income tax brackets introduced by the Tax Cuts and Jobs Act (TCJA). These individual tax rates are set at 10%, 12%, 22%, 24%, 32%, 35%, and 37%. It also further introduces a modest modification for the 10% and 12% brackets for inflation adjustments.
Extending and Increasing the Standard Deduction
For 2025 under the One Big Beautiful Bill (OBBB), the standard deduction is $15,750 for single filers, $23,625 for heads of household, and $31,500 for married joint filers. These amounts will be adjusted annually for inflation. The OBBB also provides a temporary $6,000 "Senior Bonus Deduction" for taxpayers aged 65+ from 2025 to 2028, with phaseouts for higher earners.
State and Local Tax (SALT) Deduction Cap
There is a $40,000 limit; however, this amount is gradually reduced once adjusted gross income (AGI) exceeds $500,000. The phaseout spans $100,000, so by an AGI of $600,000, the deduction reverts to the standard $10,000. As a result, taxpayers with AGIs between $500,000 and $600,000 lose the additional $30,000 SALT deduction entirely.
Extension and Modification of Limits on Gambling Losses
Gambling losses may be applied to offset gambling winnings; however, current regulations permit deduction of only 90% of such losses. It is crucial to maintain comprehensive documentation for all gambling-related losses. Furthermore, for certain states and for purposes related to the individual Alternative Minimum Tax (AMT), these deductions are fully disallowed, which can significantly impact taxpayers subject to these provisions.
Charitable Deduction for Non-Itemizers
OBBB permanently extends the universal charitable deduction for non-itemizers starting in 2026. Non-itemizers can deduct up to $1,000 (single filers) or $2,000 (joint filers) in cash gifts to 501(c)(3) public charities. Deductions do not apply to contributions made to donor-advised funds, private foundations, or supporting organizations. This measure encourages more taxpayers, especially middle-income households, to support nonprofits.
Deduction of Vehicle Loan Interest
The vehicle must be a new car purchased in 2025 or later. There is a $10,000 interest limit and an adjusted gross income (AGI) limit of $200,000 for individuals or $100,000 for other filers. Eligible vehicles include passenger cars and motorcycles that are assembled in the United States.
Trump Accounts
An initial contribution of $1,000 is provided to establish accounts for children born between 2025 and 2028. If parents do not initiate the account, it will be opened automatically on their behalf. The account permits annual contributions of up to $5,000. While its tax treatment is similar to that of a nondeductible IRA, potentially limiting its unique advantages, this account may benefit high-income families who have already maximized contributions to more preferential accounts.
Estate Tax Exemption
Before this bill, the estate tax exemption was $13.61 million in 2024 and set to drop to about $5 million after 2025. The new law permanently raises the exemption to $15 million for single filers ($30 million for joint) in 2026, with future adjustments for inflation. Legislators can change it again. Estate planning will now mainly address asset protection and beneficiary support, unless state estate or inheritance taxes apply.
Business Changes for Consideration:
Extension of Qualified Business Income Deduction
The 20% rate remains unchanged. The SSTB income phaseout for joint filers has been adjusted from $100,000 to $150,000, resulting in a slower phaseout. In addition, taxpayers with at least $1,000 of qualified income now receive a minimum $400 QBI deduction. Although several significant changes were considered, only minimal modifications were made in this area.
Permanent 100% Bonus Depreciation
The bill has permanently reinstated 100% bonus depreciation for qualifying property placed in service on or after January 19, 2025. This includes equipment, vehicles, and certain improvements to nonresidential real property. This means companies can fully expense the cost of equipment, vehicles, and qualifying property in the year placed in service, providing greater certainty in long-term planning and freeing up cash flow for working capital purposes.
Expanded Section 179 Expensing
Effective for tax years beginning after December 31, 2024, the bill increases the maximum Section 179 deduction to $2.5 million, with a phase-out threshold of $4 million, both amounts indexed for inflation. This allows businesses to immediately expense the full cost of qualifying equipment, software, and certain improvements to nonresidential real property.
1099-NEC - Increased Reporting Threshold
The reporting threshold for Form 1099-NEC, which is used to report non-employee compensation, will increase from $600 to $2,000. This change is effective for payments made after December 31, 2025. Starting in 2027, the $2,000 threshold will be indexed annually for inflation. This means that the threshold will be adjusted each year to reflect changes in the cost of living. These changes aim to reduce the number of 1099-NEC forms that businesses need to issue, simplifying the reporting process for both businesses and individuals.
No Tax on Overtime
Individual taxpayers can claim a $12,500 deduction if their MAGI is under $150,000 ($300,000 for joint filers), but only for the overtime premium (e.g., $10 if base pay is $20/hr and overtime is $30/hr). Overtime is defined by the FLSA, so check your state's rules. Employers must report overtime wages on W-2s with a new notation. For 2025, any reasonable method can be used to track overtime pay, but standardized reporting will be mandatory in 2026.
No Tax on Tips
There is a $25,000 limit per return, applicable whether the filing status is single or joint. The adjusted gross income (AGI) limit is set at $150,000 for single filers and $300,000 for joint filers, with an additional phaseout range of $250,000 beyond these thresholds. Tips must be reported in Box 7 of the W-2 form. There are no restrictions preventing owners from claiming tip deductions.
Enforcement Provisions for Employee Retention Credits (ERC)
Penalty amounts have been increased, and there is an updated definition of a COVID promoter. There is now a six-year statute of limitations starting from the date a claim is filed or paid. Claims submitted after January 31, 2024, will not be eligible for the third and fourth quarters of 2021. Please refer to the three IRS FAQs released in March 2025, which are summarized in a blog post on the website. The impact of the penalties is reduced since they are enforced prospectively.
In summary, the recent legislative changes represent a shift in the tax landscape, introducing higher reporting thresholds, expanded deductions, and more generous exemptions that promise tangible benefits for both individuals and businesses. While these new provisions offer welcome relief and opportunities for strategic financial planning, they also underscore the importance of proactive engagement with tax professionals and timely recordkeeping. By staying informed and adapting to these evolving regulations, taxpayers can position themselves to take full advantage of the law’s benefits.
About the Author
Becky Gibbs, CPA, is a partner with Boyum Barenscheer and serves as Head of the Audit Department. Her past experience in accounting, documenting and implementing internal controls, and acquisition assistance has added value to her attest engagements. Becky’s audit work focuses primarily on industries niches including construction, factoring, leasing, non-profits, and private equity businesses.
The views expressed in the Commercial Factor website are those of the authors and do not necessarily represent the views of, and should not be attributed to, the International Factoring Association.