2025 Tax Changes Every Business and Individual Should Know
What Is the One Big Beautiful Bill Act?
The One Big Beautiful Bill Act (OBBBA) is a sweeping tax reform package introducing permanent tax rate reductions, higher standard deductions, expanded credits, and generous business expensing rules. While it offers significant tax relief, it also adds layers of complexity—making professional tax planning essential.
In this guide, we break down the top OBBBA tax changes for individuals, businesses, and international operations, plus key strategies to take full advantage.
1. Individual Income Tax Changes Under the OBBBA
- Lower Tax Rates & Higher Standard Deduction (Permanent)
The reduced tax brackets and higher standard deduction from the 2017 Tax Cuts and Jobs Act (TCJA) are now permanent, with further increases coming. - Expanded SALT Deduction Limit
The state and local tax (SALT) deduction cap is temporarily raised to $40,000 ($20,000 if married filing separately) until 2029, with a phase-down for high earners. In 2030, it drops back to $10,000. - Child Tax Credit Boost
Permanently increased to $2,200 per child, with inflation indexing and tighter eligibility rules. - Senior Tax Deduction
A new $6,000 deduction for seniors is available through 2028, subject to income thresholds. - Estate and Gift Tax Exemption
Permanently raised to $15 million per decedent, indexed for inflation. - Temporary Deductions (2025–2028)
Deductions for tips, overtime pay, and car loan interest—each with income phaseouts.
2. Business Tax Benefits in the OBBBA
- 100% Bonus Depreciation—Permanent
Businesses can fully expense most qualified property in the year purchased. - Higher Section 179 Expensing Limit
Deduct up to $2.5M in equipment purchases, with a $4M phaseout threshold. - Immediate Domestic R&D Expensing
Domestic research and development costs can be expensed immediately and permanently. - Increased Business Interest Deduction
Now based on 30% of EBITDA, allowing greater deductions. - Permanent 20% Qualified Business Income Deduction (QBI)
Higher phase-in threshold and $400 minimum deduction for active business income.
3. International Tax Changes
- GILTI and FDII Adjustments
Reduced deduction percentages mean higher effective U.S. tax rates on certain foreign earnings. - Improved Foreign Tax Credit Rules
Reduced haircut and simpler expense allocation. - Permanent Look-Through Rule for related controlled foreign corporations.
- Permanent BEAT Rate at 10.5% with technical changes.
- New Sourcing Rules: Up to 50% of certain inventory income sold via a foreign branch is treated as foreign-source income.
4. Energy and Green Credit Updates
- Early repeal of many clean vehicle and alternative fuel tax credits.
- Restrictions for foreign-influenced entities and prohibited supply chains.
- Clean Fuel Production Credit extended through 2029 with North American feedstock requirements.
5. Other Key OBBBA Provisions
- Above-the-Line Charitable Deduction for non-itemizers.
- New tax-advantaged “Trump Accounts” for children.
- 1% Excise Tax on certain cash remittances outside the U.S.
- Higher reporting thresholds for 1099-MISC, 1099-NEC, and third-party payment networks.
6. Tax Planning Strategies for the OBBBA Era
- Maximize Standard Deduction Benefits: Many taxpayers will no longer itemize, so structure giving and expenses accordingly.
- Front-Load Business Investments: Take advantage of permanent full expensing.
- Leverage R&D Deductions: Shift qualifying research costs to the U.S. when possible.
- Evaluate SALT Deduction Timing: Consider prepayment strategies before the cap reverts in 2030.
- Model International Tax Exposure: Adjust entity structures and profit flows to minimize GILTI impact.
- Act on Temporary Deductions: Use tip, overtime, and car loan interest deductions before they expire in 2028.
Why Work With Pocket CPAs on OBBBA Tax Planning
The OBBBA creates both opportunities and pitfalls. At Pocket CPAs, we help you:
- Identify hidden tax savings
- Implement IRS-compliant strategies backed by code citations
- Optimize for permanent and temporary benefits before they expire
Schedule your Tax Savings Blueprint Call today to see how the OBBBA can put thousands back in your pocket.
Disclaimer: This article is for informational purposes only and does not constitute legal or tax advice. Tax laws and proposals are subject to change. Always consult a licensed tax professional before acting on legislative developments.
