The 2025 Budget Reconciliation Bill Is Now Law
On July 4th, 2025, President Trump signed into law the so-called One Big Beautiful Bill a day after Congress narrowly passed it and sent it to the White House. The Bill has sweeping tax implications. Below is a summary of some of the more important tax provisions. However, keep in mind that the Bill is huge and the devil is in the details. Therefore, if you have specific questions, please see your WBL tax advisor who can address your particular situation.
The initial goal of the legislation was the extension of the 2017 Tax Cuts and Jobs Act. That was accomplished with some modifications, and included making some provisions "permanent".
Those include:
·
Individual
tax brackets - ranging from 10% up to 37%
·
Elimination
of personal exemptions (see below for a deduction for certain seniors)
· Elimination of miscellaneous itemized deductions
·
Lower
limitation on the deduction of mortgage interest (generally $750k of debt)
·
Increased
standard deduction (indexed for inflation)
·
Child
Tax Credit ($2,200, up from $2,000) for those under the income threshold
·
Qualified
business income deduction for individual owners of pass-through entities
·
Limitation
on excess business losses for noncorporate taxpayers
·
Most
international provisions in the 2017 Act with modifications
Other major provisions related to the 2017 Act include:
SALT Deduction: The $10,000 limit on the deduction for state and local taxes for individuals has been increased to $40,000 for tax years 2025 - 2029. However, the deduction gets phased out (but not below $10,000) for those with adjusted gross income in excess of $500k. It is unclear how states that have implemented "work arounds" for this limitation will adjust their laws for this change.
Deduction For Seniors: The 2025 Bill allows for a $6,000 deduction for taxpayers 65 years and older through 2028. However, the deduction phases out for those with modified adjusted gross income of more than $75k ($150k for joint filers).
Estate Tax Exclusion: Beginning in 2026, the estate tax exclusion (currently at $13.99 million for each U.S. person) will be $15 million and will be indexed for inflation. The exclusion would have been halved beginning in 2026 without this extension.
Bonus Depreciation: Under the 2017 Act, certain business property could be written off in its entirety in the first year placed in service. This so-called bonus depreciation began to be phased out under the 2017 Act. The 2025 Bill restores 100% bonus depreciation for property acquired after January 19, 2025 and is made "permanent".
Research and Experimental Expenses: Since 2022, businesses have had to capitalize and amortize R&E expenses generally over 5 years. The Bill reinstates the 100% deduction for domestic expenditures incurred after 2024 and makes it "permanent". Further, small businesses (generally with average gross income of $31 million or less) can elect to claim the deduction retroactive to 2022.
Opportunity
Zone Investment Benefits: For investments into Qualified Opportunity Zones
of capital gain proceeds made after 2026, there will be a 5-year deferral of
such gain and a 10% basis step-up after 5 years. The basis step up is 30% if
the investment is in a "rural" zone. This new rule is "permanent". However,
there are no changes for QOZ investments made prior to 2027 pursuant to the
2017 Act, and therefore those investors will have to recognize their deferred
gain on December 31, 2026.
Certain other provisions of interest include:
Deduction for Auto Loan Interest: A deduction of up to $10,000 is available through 2028 for interest paid on an automobile loan for a car purchased after 2024. This deduction is available even for those who claim the standard deduction and do not itemize.
Deduction For Tip Income: Those who receive tips in a business which "customarily and regularly" receives tips can claim a deduction for such on their personal tax return through 2028. The deduction is capped at $25k and begins to be phased out for those whose modified adjusted gross income exceeds $150k ($300k for joint filers). This deduction is available even for those who claim the standard deduction and do not itemize.
Deduction For Overtime Income: Those who get paid for overtime, can claim a deduction for such on their personal tax return through 2028. The deduction is capped at $12,500 and begins to be phased out for those whose modified adjusted gross income exceeds $100k ($200k for joint filers). Employers will need guidance from Treasury on how to report this. This deduction is available even for those who claim the standard deduction and do not itemize.
Itemized Deduction Limitation: Prior to the 2017 Act, the overall itemized deduction was subject to a phaseout at higher incomes. The Bill brings back this complicated limitation for taxpayers in the 37% income tax bracket beginning in 2026.
Elimination Of "Green Energy" Credits: Many of the tax credits and incentives that were introduced in the Inflation Reduction Act of 2022 related to alternative energy initiatives have been eliminated, generally after 2025. However, for electric vehicles, the credit will expire on September 30, 2025.
Limits on Gambling Expense Deductions: Gambling losses and expenses have historically been 100% deductible up to gambling income. Under the 2025 Bill, only 90% of such losses/expenses will be allowed to be deducted.
There were many other provisions in the 2025 Bill, including ones unrelated to taxes and therefore beyond the discussion here. We encourage everyone to take a deep dive as necessary. Give us a call this week. Your WBL advisors are available to dive in with you.