Major Tax Updates from the One Big Beautiful Bill Act

10/16/2025

The recently passed One Big Beautiful Bill Act (OBBBA) introduces sweeping tax changes beginning in 2025. Below is a breakdown of the most relevant updates for individuals and businesses, along with key planning considerations to help you prepare for the coming year.

For Individuals

Qualified Business Income (QBI) Deduction
Previously scheduled to expire in 2025, the QBI deduction is now permanent with higher income thresholds beginning in 2026.
Planning Action: Review your business structure and projected income to remain under the new thresholds, especially if you operate a service-based business.

State and Local Tax (SALT) Deduction
The deduction cap increases from $10,000 to $40,000 ($20,000 for married filing separately) for tax years 2025 through 2029, before reverting back to $10,000.
Planning Action: Time your state and local payments strategically. Business owners may benefit from electing the Pass-Through Entity Tax (PTET) in high-tax states.

Standard Deduction and Itemized Deductions
The standard deduction increases to $31,500 for joint filers, while miscellaneous itemized deductions remain permanently eliminated.
Planning Action: Revisit your deduction strategy. Combining SALT and charitable contributions may make itemizing beneficial again.

Charitable Contributions
A new 0.5% AGI floor now applies for itemizers. Non-itemizers can deduct up to $1,000 ($2,000 for joint filers). Carryforwards are limited.
Planning Action: Consider donor-advised funds or bunching donations into one tax year to maximize deductions.

Estate and Gift Tax Exemption
The exemption increases from $13.99 million to $15 million per person (indexed) in 2026. Maryland and DC levels remain near $5 million.
Planning Action: Reassess estate plans and lifetime gifting strategies to take advantage of the increased exemption.

Other Key Changes for Individuals

Tiered exclusions introduced for Qualified Small Business Stock (QSBS): 50% exclusion at 3 years, 75% at 4 years, 100% at 5 years.
Qualified Opportunity Zones (QOZ) made permanent with updated benefits.
Temporary deductions (2025–2028) for tips, overtime, and senior taxpayers, subject to phaseouts.
New deduction for car loan interest up to $10,000 on U.S.-assembled vehicles, with income limitations.
Several clean energy credits set to expire on September 30, 2025.

For Businesses

Full Expensing and Bonus Depreciation
Full expensing for qualifying property acquired after January 19, 2025, is now permanent.
Planning Action: Evaluate capital purchases and consider accelerating investments while benefits remain maximized.

Research and Development (R&D) Expenses
Immediate expensing has been restored for domestic R&D, while foreign R&D remains amortized over 15 years.
Planning Action: Shift or expand R&D activity within the U.S. to take advantage of immediate deductions.

Charitable Contributions by Corporations
Corporate charitable deductions are now only available when contributions exceed 1% of taxable income, with a 10% cap still in place.
Planning Action: Plan contributions strategically to ensure they meet the new threshold.

Information Reporting (1099s)
Thresholds increase from $600 to $2,000 for 1099-MISC and 1099-NEC starting in 2026. The 1099-K threshold reverts to $20,000 and 200 transactions, retroactive to 2022.
Planning Action: Update vendor records and internal reporting systems to stay compliant.

Pass-Through Entity Tax (PTET)
The PTET remains available for all pass-through entities, including service-based businesses.
Planning Action: Evaluate whether electing the PTET could reduce your federal tax burden, particularly in high-tax states.

Other Key Changes for Businesses

Special rules for expensing certain plants and production property.
Updated recordkeeping and phaseout provisions for multiple business credits.

Next Steps

With these changes taking effect, timing and structure are more important than ever. We recommend reviewing your 2025 and 2026 tax projections to identify new opportunities and ensure your strategy aligns with the updated law.

Our team can help you:

Project future tax positions under the new rules.
Maximize available deductions and credits.
Update estate, charitable, and business planning strategies for the year ahead.

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