As shared by our affiliate, Gray, Gray & Gray, LLP
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The One Big Beautiful Bill Act (OBBBA), signed into law by President Trump on July 4, 2025, represents the most significant tax legislation since the 2017 Tax Cuts and Jobs Act. This comprehensive reform package permanently extends and expands numerous tax provisions while introducing new benefits specifically targeting individual taxpayers, high net worth individuals, business owners, and estate planning strategies.
Core Individual Tax Provisions
- Permanent Extensions: The legislation makes permanent the expiring provisions of the 2017 TCJA, including the seven-bracket tax structure with rates ranging from 10% to 37%, the enhanced standard deduction, and the elimination of personal exemptions. The standard deduction amounts are set at $16,000 for single filers, $24,000 for heads of household, and $32,000 for joint filers, with inflation adjustments beginning in 2026.
- Temporary Enhancements (2025-2028): Several time-limited provisions provide immediate relief, including exemption from taxes on tips and overtime pay, with deductions capped at $25,000 for tipped income and $12,500 for overtime income ($25,000 for joint filers). A senior deduction of $6,000 is available for taxpayers age 65 and older, phasing out at $75,000 AGI for single filers and $150,000 for joint filers.
- Child Tax Credit: The Child Tax Credit increases to $2,200 per child starting in tax year 2025 and becomes permanent, with inflation adjustments thereafter.
High Net Worth Individual Benefits
- State and Local Tax (SALT) Relief: The SALT deduction cap increases to $40,000 for certain taxpayers but is scheduled to return to $10,000 in 2030. Notably, the Senate version allows unlimited SALT deductions through pass-through entity tax (PTET) workarounds for service industries and white-collar firms.
- Qualified Small Business Stock (QSBS): The legislation expands QSBS benefits under Section 1202, providing significant tax advantages for entrepreneurs and investors in qualifying small businesses.
- Itemized Deduction Limitations: For taxpayers in the top bracket, itemized deductions are limited by subtracting 2/37th from each dollar deducted over the threshold.
Business Owner Advantages
- Section 199A Deduction: The 20% qualified business income deduction becomes permanent, providing substantial tax relief for pass-through entities, including sole proprietorships, partnerships, and S corporations.
- Bonus Depreciation: The legislation reinstates 100% first-year depreciation for qualified property acquired and placed in service after January 19, 2025, making this provision permanent.
- Business Interest Deduction: The more favorable EBITDA-type calculation for business interest deduction limits is restored permanently for tax years beginning in 2025.
Estate Planning Implications
- Increased Exemptions: The lifetime gift and estate tax exclusions increase to $15 million for single filers and $30 million for married couples filing jointly, with inflation indexing to take effect going forward. This represents a significant increase from the current thresholds of $13.99 million and $27.98 million.
- Permanent Structure: The enhanced estate and gift tax exemptions are permanent, preventing the automatic sunset that would have occurred on January 1, 2026, providing long-term certainty for wealth transfer planning.
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