On July 4th, 2025, a major piece of federal legislation, officially titled the Big Beautiful Bill Act was signed into law. The name may sound lighthearted, but the content of this bill is anything but casual. It’s a sweeping and ambitious tax-and-budget package that touches nearly every corner of the tax code: individual income taxes, business incentives, energy policy, safety net spending, and more.
We know many of our clients are high-income earners, business owners, investors, or retirees with complex filing needs. Rather than framing this as “good” or “bad,” we want to walk you through what’s in the law, what it might mean for you, and what decisions may be worth revisiting between now and the end of the year.
For Individuals
Familiar Ground, With a Few New Wrinkles:
- Extension of Current Income Tax Rates: Maximum individual marginal tax rate of 37% is made permanent.
- AMT Permanent Cap: The Bill makes permanent the TCJA’s increased AMT exemption amounts ($137,000 for MFJ; $88,100 for single filers) and phases out for income over $1,000,000 for MFJ; $500,000 for single filers.
- SALT Deduction Cap Increased: The deduction for state and local taxes increases from $10,000 to $40,000, increasing by 1% each year, through 2029, after which it returns to $10,000.
- Estate, Gift and Generation Skipping Transfer Tax Increased: The Bill permanently raises the Lifetime Exemption amount to $15M ($30M for a married couple) and will be indexed for inflation.
- Higher Standard Deduction made Permanent: The Bill increases and makes permanent the TCJA’s higher standard deduction ($31,500 in 2025 for MFJ taxpayers and $15,750 for most other filers).
- New Senior Deduction: Beginning in 2026, taxpayers aged 65 and older can take an additional $6,000 deduction, intended to offset some Social Security taxation and medical expenses. This may shift your RMD or Roth conversion planning depending on your broader income mix.
- No Tax on (some) Tips and Overtime Pay:
- The Bill allows an above-the-line deduction of up to $25,000 annually for qualified tips received by an individual (employee or contractor) in an occupation that customarily and regularly receives tips.
- The Bill allows an above-the-line deduction of up to $12,500 annually ($25,000 for MFJ) for “qualified overtime compensation” received by an individual. The amount of “qualified overtime compensation” is determined under standards set forth in Section 7 of the FLSA of 1938.
- These deductions begin to phase out above $150,000 MAGI, $300,000 for MFJ couples. These deductions are temporary, in place from 2025 through 2028.
For Businesses and Investors
Larger Deductions, Long-Term Certainty, and Subtle Shifts
- Bonus Depreciation Preserved, but narrowed: The bill restores 100% bonus depreciation, but only for certain types of production and manufacturing property. If your business falls outside those categories, you’ll still rely on standard MACRS schedules or Section 179. If you’re unsure whether your equipment qualifies, we can help categorize those assets.
- Section 179 Expensing Doubled: The bill raises the Section 179 expensing cap from $1.25 million to $2.5 million, allowing businesses to immediately deduct the full purchase cost of qualifying equipment, software, and other capital assets. This is a major opportunity for firms investing in office buildouts, machinery, or vehicles, particularly if you’re already budgeting large CapEx projects.
We recommend reviewing planned purchases for 2025-2026. Timing your acquisitions to take advantage of the new limits could result in significant year-one tax savings. Remember: the phase-out threshold also increased proportionally, which broadens access for medium-sized businesses. - Permanent QBI Deduction: The 20% Qualified Business Income (QBI) deduction, originally due to sunset in 2026, is now permanent. This locks in one of the most valuable provisions for S Corps, partnerships, and sole proprietorships. But it doesn’t eliminate the importance of good planning, especially around reasonable compensation, aggregation rules, and specified service business limits. If your income level has shifted or if you’ve changed entity type recently, it may be worth revisiting your QBI strategy.
- R&D Deduction Restored: Under the Bill, domestic research and experimental (R&E) expenditures are immediately deductible. Under the TCJA, the immediate deductibility of R&E expenses expired at the end of 2021 and had been replaced a requirement to capitalize and amortize these expenses over 5 years. Businesses with average annual gross receipts of $31 million or less will also be allowed to apply this provision retroactively to 2022 and all subsequent years.
- Qualified Opportunity Zones (QOZs) Restored: Favorable treatment of gains from investments in QOZs will become permanent. New OZs will be determined on July 1, 2026 and will take effect on Jan. 1, 2027, and will take place every 10 years. Gains invested in a qualified opportunity fund (QOF) are deferred for five years and receive a 10% basis step-up at year five, and all gains are excluded after a ten-year hold period is met.
- Section 1202 Stock Expanded: The Bill expands the holding period for qualifying stock to a 50% gain exclusion for stock held for at least 3 years, 75% gain exclusion for stock held more than 4 years, and full exclusion for stock held more than 5 years. The gain exclusion cap increases from $10M to $15M, adjusted for inflation beginning in 2027.
- Changes to ERC Claims: Under the Bill, the IRS will not issue refunds for Q3 2021 unless the taxpayer filed the claim on or before Jan. 31, 2024. The Bill also extends the period in which the IRS may challenge an ERC refund claim, to up to six years after the claim is filed.
Other Areas Impacted:
- Repeal of Green Energy Incentives: The Bill repeals or phases out many energy tax credits including:
-
-
- Phase out of credits for wind and solar projects after 2027
- Repeal of clean vehicle credits after 2025
- Repeal of residential clean energy credit after 2025
- Repeal of energy efficient home improvement credit after 2025
-
- Changes to Health Care Credits: Federal subsidies for Affordable Care Act (ACA) marketplace plans are scheduled to phase down beginning in 2026. This may lead to higher out-of-pocket premiums for some middle- and upper-middle-income households who currently receive income-based premium tax credits.
The Bottom Line
This bill brings welcome clarity to many of the provisions that were originally due to sunset in 2026 and creates some interesting, but sometimes temporary, opportunities for deduction planning, equipment purchasing, and family wealth management.
We’re still parsing through the technical details and IRS implementation guidelines, but here’s what we recommend for now:
- Individuals: Consider how the SALT cap expansion and senior deduction may affect your 2025 planning. If you give generously, own multiple homes, or live in a high-tax jurisdiction, this may be your best window to optimize deductions.
- Business Owners: Review your capital investment plans for the next 18 months. The increased Section 179 cap may open up accelerated deductions for upgrades or expansions.
- Everyone: Let’s talk. A new law this size means ripple effects-and every tax situation is different. We’ll be reaching out individually where we see planning opportunities, but don’t hesitate to reach out if you’d like to schedule a midyear check-in.
As always, we’re here to help you navigate the complexity with a calm and proactive approach that keeps your long-term goals in mind.
Additional Reading & Sources
- Tax Foundation – Pros and Cons of the Big Beautiful Bill
- Investopedia – 7 Things Taxpayers Need to Know About the Big Beautiful Bill
- MoneyWeek – What Does Trump’s ‘Big Beautiful Bill’ Mean for the US Economy?
- Business Insider – Larry Summers Slams the Big Beautiful Bill
- Committee for a Responsible Federal Budget (CRFB) – Breaking Down the Big Beautiful Bill
- White House Statement on the Big Beautiful Bill
- Fidelity – What the Big Beautiful Bill Means for You
