2025 Tax Act
Public Law 119-21, commonly referred to as the “One Big Beautiful Bill Act” (OBBBA), made significant changes to the Internal Revenue Code (IRC). Some changes were permanent, and some were modifications. It also created new sections, introduced some temporary provisions, and altered or terminated many energy credits.
Below are some important changes made by the OBBBA:
• The increased standard deduction is made permanent, with further temporary increases for tax years 2025-2028.
• The current tax rates are made permanent, with the top rate remaining at 37%.
• Personal exemptions are permanently suspended.
• The qualified business income deduction is made permanent, with a new minimum deduction of $400 for taxpayers with at least $1,000 of qualified business income.
• An above-the-line deduction of $1,000 ($2,000 if married filing jointly) is created for charitable contributions made by non-itemizers.
• A .5% AGI threshold is introduced that individual taxpayers must exceed before they can deduct their charitable contributions.
• The mortgage interest deduction limitation is made permanent.
• Miscellaneous itemized deductions are permanently disallowed.
• The state and local tax (SALT) deduction limitation is made permanent and temporarily increased to $40,000 for tax years 2025-2028, subject to AGI limitations.
• The 60% AGI limitation on the charitable deduction for cash contributions is made permanent, but new restrictions on charitable deductions are introduced.
• A new limitation on the value of itemized deductions for taxpayers who are in the highest tax bracket could reduce the amount of allowable itemized deductions.
• The increased Alternative Minimum Tax (AMOUNT) exemptions are made permanent but are decreased from 2025 levels due to a change in the date of inflation adjustments.
• The limitation on excess business losses for non-corporate taxpayers is made permanent, and the limitation is reduced from 2025 levels due to a change in the inflation adjustment.
• The Child Tax Credit is permanently increased to $2,200.
• OBBBA revives 100% bonus depreciation for property placed in service after January 19, 2025.
• For tax years beginning after December 31, 2024, IRC Sec. 179 limits are increased to $2.5 million, with the phase-out threshold increased to $4 million.
• The increased estate and gift tax exemption amount is made permanent and further increased to $15 million.
• The Clean Vehicle and Used Clean Vehicle Credits were terminated for vehicles purchased after September 30, 2025.
• The Energy Efficient Home Improvement and Residential Clean Energy Credits will be terminated after December 31, 2025.
• The New Energy Efficient Home and Alternative Vehicle Refueling Credits will be terminated after June 30, 2026.
The following new provisions are temporary for tax years 2025-2028:
• A $6,000 deduction for everyone over the age of 65 years, subject to AGI limitations, available for both itemizers and non-itemizers.
• A deduction for both itemizers and non-itemizers of up to $12,500 ($25,000 if married filing jointly) for qualified overtime compensation, subject to AGI limitations.
• A deduction for both itemizers and non-itemizers of up to $25,000, regardless of filing status, for qualified tip income, subject to AGI limitations.
• A deduction for interest paid for a loan on a vehicle that was assembled in the U.S., subject to AGI limitations.
Below are some important changes made by the OBBBA:
• The increased standard deduction is made permanent, with further temporary increases for tax years 2025-2028.
• The current tax rates are made permanent, with the top rate remaining at 37%.
• Personal exemptions are permanently suspended.
• The qualified business income deduction is made permanent, with a new minimum deduction of $400 for taxpayers with at least $1,000 of qualified business income.
• An above-the-line deduction of $1,000 ($2,000 if married filing jointly) is created for charitable contributions made by non-itemizers.
• A .5% AGI threshold is introduced that individual taxpayers must exceed before they can deduct their charitable contributions.
• The mortgage interest deduction limitation is made permanent.
• Miscellaneous itemized deductions are permanently disallowed.
• The state and local tax (SALT) deduction limitation is made permanent and temporarily increased to $40,000 for tax years 2025-2028, subject to AGI limitations.
• The 60% AGI limitation on the charitable deduction for cash contributions is made permanent, but new restrictions on charitable deductions are introduced.
• A new limitation on the value of itemized deductions for taxpayers who are in the highest tax bracket could reduce the amount of allowable itemized deductions.
• The increased Alternative Minimum Tax (AMOUNT) exemptions are made permanent but are decreased from 2025 levels due to a change in the date of inflation adjustments.
• The limitation on excess business losses for non-corporate taxpayers is made permanent, and the limitation is reduced from 2025 levels due to a change in the inflation adjustment.
• The Child Tax Credit is permanently increased to $2,200.
• OBBBA revives 100% bonus depreciation for property placed in service after January 19, 2025.
• For tax years beginning after December 31, 2024, IRC Sec. 179 limits are increased to $2.5 million, with the phase-out threshold increased to $4 million.
• The increased estate and gift tax exemption amount is made permanent and further increased to $15 million.
• The Clean Vehicle and Used Clean Vehicle Credits were terminated for vehicles purchased after September 30, 2025.
• The Energy Efficient Home Improvement and Residential Clean Energy Credits will be terminated after December 31, 2025.
• The New Energy Efficient Home and Alternative Vehicle Refueling Credits will be terminated after June 30, 2026.
The following new provisions are temporary for tax years 2025-2028:
• A $6,000 deduction for everyone over the age of 65 years, subject to AGI limitations, available for both itemizers and non-itemizers.
• A deduction for both itemizers and non-itemizers of up to $12,500 ($25,000 if married filing jointly) for qualified overtime compensation, subject to AGI limitations.
• A deduction for both itemizers and non-itemizers of up to $25,000, regardless of filing status, for qualified tip income, subject to AGI limitations.
• A deduction for interest paid for a loan on a vehicle that was assembled in the U.S., subject to AGI limitations.