One Big Beautiful Bill Act (H.R. 1)
As always, our goal is to keep you informed and prepared. This summary reflects our current understanding of the bill’s key provisions and potential impacts. We know that new legislation often comes with many questions — and we’re here to help. As additional guidance is released and details become clearer, we’ll continue to update this page so you have the most accurate, up-to-date information.
This Act makes significant and wide-ranging changes to the Internal Revenue Code, affecting individual, business, and international tax provisions, as well as trade and enforcement rules. Below is a summary of the key provisions and their implications, based on the most current legislative text and authoritative summaries:
1. Individual Income Tax Provisions
- Permanent Extension of Lower Individual Tax Rates: The reduced individual tax rates from the 2017 Tax Cuts and Jobs Act (TCJA) are made permanent, preventing the scheduled reversion to higher pre-2018 rates after 2025 [1].
- Standard Deduction: The increased standard deduction is made permanent and further increased (e.g., $23,625 for heads of household, $15,750 for singles, effective after 2024) [2].
- Personal Exemptions: Remain suspended, except for a new $6,000 deduction for seniors (age 65+), phased out at higher incomes, through 2028 [2].
- Child Tax Credit: Increased to $2,200 per child, made permanent, with inflation adjustments and stricter Social Security number requirements [2].
- State and Local Tax (SALT) Deduction: Cap increased to $40,000 ($20,000 MFS) for 2025, with a phase-down for high incomes, reverting to $10,000 after 2029 [2].
- Temporary Deductions for Tips, Overtime, and Car Loan Interest: New deductions for up to $25,000 in tips, $12,500 ($25,000 joint) in overtime, and $10,000 in car loan interest for new U.S.-assembled vehicles, all phased out at higher incomes and generally available for 2025–2028 [2].
- Social Security Benefits: There is no change in how Social Security Benefits are taxed, however a new temporary bonus tax deduction is in place for seniors aged 65 and older. This income based deduction—up to $6,000 for individuals and $12,000 for married couples—can reduce taxable income enough that some seniors may owe no federal income tax on their Social Security benefits.
2. Business Tax Provisions
- Qualified Business Income Deduction (Section 199A): The phase-in threshold is increased, and a $400 minimum deduction is established for active business income, with inflation adjustments [2].
- Full Expensing (Bonus Depreciation): 100% expensing for qualified business property is made permanent [2].
- Section 179 Expensing: The limit is increased to $2.5 million, with a phaseout at $4 million, both indexed for inflation [2].
- R&D Expensing: Domestic research and experimental expenditures can be fully expensed immediately; foreign R&D remains amortized over 15 years [2].
- Business Interest Deduction: EBITDA add-back is restored permanently, increasing allowable business interest deductions [2].
3. International Tax Provisions
- GILTI and FDII: The deduction for GILTI (now renamed “net CFC tested income”) is reduced, increasing the effective tax rate slightly; the FDII deduction is also reduced [4].
- Foreign Tax Credit: Certain deductions (e.g., interest, R&D) are not allocated to foreign source net CFC tested income for FTC purposes [2].
- Section 899 (Retaliatory Tax): Imposes higher U.S. tax rates on investments from countries that enact “unfair” taxes (such as digital services taxes or the OECD’s UTPR) targeting U.S. companies, overriding treaty rates and increasing withholding and other taxes by up to 20 percentage points [4].
4. Enforcement and Compliance
- Employee Retention Credit (ERC): The Act nullifies ERC claims filed after January 31, 2024, increases penalties for so-called ERC promoters, and extends the IRS assessment period for ERC claims to six years [3].
- Third-Party Litigation Funding: Imposes a new tax on proceeds from litigation funding agreements [1].
5. Other Notable Provisions
- Charitable Deductions: Above-the-line charitable deduction is increased and made permanent; new floors are imposed on itemized and corporate charitable deductions [2].
- Education and Family Benefits: Expands 529 account uses, increases dependent care assistance limits, and enhances the adoption credit [2].
- Energy and Trade: Terminates or restricts many clean energy credits and deductions, and makes significant changes to trade rules, including eliminating the de minimis customs duty exemption for low-value imports [4].
6. Permanent Increase in Estate and Gift Tax Exemption Amounts
- The Act amends IRC Section 2010©(3) to permanently increase the basic exclusion amount for estate and gift tax purposes to $15,000,000, indexted for inflation, with a base year of 2025.
- This replaces the previous law, under which the exclusion amount would have reverted to $5,000,000 (indexed from 2010) after 2025.
- Effective Date: The New $15,000,000 base amount applies to estates of decedents dying and gifts made after December 31, 2025.
Conclusion The One Big Beautiful Bill Act represents a sweeping overhaul of the U.S. tax system, with permanent extensions of many TCJA provisions, new temporary and targeted tax breaks, and significant changes to international, business, and enforcement rules. The law is highly favorable to higher-income individuals and business owners, and it introduces new complexities in international tax and trade policy.
If you have questions about specific provisions or need detailed analysis of how the Act affects a particular taxpayer or transaction, please specify the area of interest.
Cited sources:
[1] Excerpts Available of Final Text of H.R. 1 (One Big Beautiful Bill Act, OBBBA): https://app.askbluej.com/
[2] Blue J Resource: One Big Beautiful Bill Act Summary: https://app.askbluej.com/
[3] Practice Articles: ERC Enforcement Under the One Big Beautiful Bill Act: Third Time’s the Charm?: https://www.taxnotes.com/lr/
[4] News Analysis: One Big (Not So) Beautiful Way to Discourage International Investment: https://www.taxnotes.com/lr/
[5] News Stories: Make More Than $200K? New Tax Bill Is More Generous Than TCJA: https://www.taxnotes.com/lr/
Additional relevant sources:
Publication 5409 (6/2020): https://app.askbluej.com/
News Analysis: Unrefunded Billions Part of IRS TCJA Struggles: https://www.taxnotes.com/lr/