On July 4, 2025, fireworks were not the only things lighting up the sky— The president signed the One Big Beautiful Bill Act, a sweeping reform poised to reshape personal and business tax planning. Whether you are a small business owner, or just someone trying to figure out if your car loan interest is now deductible, this bill delivers meaningful updates. Here is a summary of what you need to know.

Note: This summary highlights major provisions impacting individuals and businesses. It is not a complete list. Stay tuned for deeper dives in upcoming posts.

Individual Income Tax Changes

Permanent & Expanded Deductions:

• Income Tax Rates: Current individual tax rates are permanently extended.
• Standard Deduction (2025):
  • $15,750 Single
  • $31,500 Married Filed Jointly
  • Indexed for inflation beginning in 2026.
• Senior Deduction (2025–2028):
  • $6,000 additional deduction for individuals age 65+ years of age.
  • $12,000 additional deduction for couples if both are 65+ years of age.
  • Phases out at adjusted income above $75,000 ($150,000 Married Filed Jointly).
• Auto Loan Interest (2025 – 2028):
  • Deduct up to $10,000 of interest on new loans for U.S.‐assembled vehicles.
  • Phases out for incomes above $100,000 single ($200,000 Married Filed Jointly).
• SALT (State and Local Tax) Deduction Cap (2025 – 2029):
  • Increased to $40,000 through 2029, indexed for inflation.
  • Begins to phase down for adjusted income over $500,000.
  • Minimum deduction floor of $10,000 remains.
  • Reverts to $10,000 cap in 2030.

Charitable Contributions (2025 forward):

• Nonitemizers: Deduction up to $1,000 (single) or $2,000 (married filed jointly).
• Itemizers: Subject to a new 0.5% of an adjusted income floor on deductions.

Family & Child Tax Relief:

• Child Tax Credit (2025 forward):
  • Increased to $2,200 per child (indexed for inflation).
  • Makes $1,400 refundable portion permanent.
  • Maintains higher phase‐out thresholds: $200,000 single ($400,000 married filed jointly).
• Other Dependents: $500 nonrefundable credit for qualifying non‐child dependents.
• Child Credit Expansion: Additional credit for families under $100,000, retroactive to Jan. 1, 2025, more details to follow.

Temporary Targeted Wage Deductions (January 1, 2025 – December 31, 2028):

• No Tax on Overtime:
  • Deduction up to $12,500 (single) or $25,000 (married filed jointly).
  • Begins to phase out at income levels above $150,000 ($300,000 married filed jointly).
  • Income remains subject to Social Security and Medicare Tax.
• No Tax on Tips:
  • Deduct up to $25,000 for qualified tip income.
  • Begins to phase out at income levels above $150,000 ($300,000 married filed jointly).
  • Income remains subject to Social Security and Medicare Tax.

Other Personal Tax Provisions:

• Moving Expense Deduction (current):
  •  Eliminated permanently, except for military and certain intelligence personnel.
• Gambling Losses (2026 forward):
  • Losses deductible only up to 90% of reported gambling winnings.
• Clean Energy Credits:
  • Most vehicle credits will expire after September 30, 2025.
  • Most home energy credits will expire after December 31, 2025.
• Trump Accounts for Minors (2025 forward):
  o New IRA‐style accounts for minors (nicknamed ‘Trump Accounts’), details forthcoming.
• Federal School Voucher Program (2027 forward)
  • 100% tax credit (up to $1,700) to individuals who donate to approved scholarship
    organizations that fund K–12 private education. Essentially a 1 to 1 trade, tax for a
    charitable contribution(s).
  • Scholarships are available to families earning up to 300% of their area’s median income,
    but participation depends on whether each state opts into the program, more detail to
    follow as regulations are to be written at a future date.

Estate & Gift Tax (2026 forward):

• Exemption rises to $15 million individual / $30 million married filed jointly.
• Indexed for inflation going forward.

Business & Corporate tax Changes

Depreciation & Expensing:

• Bonus Depreciation:
  • 100% of qualified property acquired and placed in service on or after January 19, 2025.
• Section 179 Expensing:
  • Limit increased to $2.5 million starting January 1, 2025.
  • Begins phase‐out at $4 million in qualifying property.
• Interest Expense Deduction:
  • Section 163(j) EBITDA Limitation:
    • Reinstated for tax years beginning after December 31, 2024.
    • May allow larger interest deductions than current law.
• Research & Development Expensing (2025 forward):
  • Small business can retroactively expense R&D costs starting in 2022.
  • Contact us for assistance if this may apply to your business.
• Information Reporting:
  • Form 1099 Threshold (2026 forward):
  • Increased from $600 to $2,000 for certain business/service payments.

The One Big Beautiful Bill Act is more than just a tax overhaul—it is an opportunity. With enhanced
deductions, retroactive tax credits, and fresh incentives across the board, proactive tax planning can unlock significant tax savings. But every provision has its nuances. If you want personalized insights or help navigating the new landscape, contact us—we are ready to help you make the most of the changes ahead.

Please contact your Polk Relationship Manager with questions on how these updates might affect your specific tax planning strategy.

Polk & Associates

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