Cameron Miranda
On July 4, 2025, President Trump signed the One Big Beautiful Bill Act into law. The Act, passed by both chambers of Congress, addresses the expirations of the 2017 Tax Cuts and Jobs Act (TCJA) and makes additional changes to US tax policy and spending. The tax cuts are partially offset by significant cuts to healthcare and nutrition programs, such as Medicaid and the Supplemental Nutrition Assistance Program (SNAP). Preliminary analysis of the Act estimates that it would increase long-run GDP by 1.2% and reduce federal tax revenue by $5 trillion over the next decade.
| Characteristics | Values |
|---|---|
| Name of the Bill | One Big Beautiful Bill Act |
| Date signed into law | July 4, 2025 |
| Signed by | President Trump |
| House of Representatives vote | 218-214 |
| Senate vote | 51-50 |
| Increase in GDP | 1.2% |
| Reduction in federal tax revenue | $5 trillion |
| Increase in deficit | $3.8 trillion |
| Individual income tax rates | Lowered |
| Standard deduction | Doubled |
| Personal exemptions | Permanently repealed |
| Senior deduction | Additional |
| Child tax credit | $2,200 |
| Pass-through deduction | 20% |
| HSA contribution limits | Doubled |
| Bonus depreciation | Extended |
| Social Security numbers | Required for parent, spouse, and children |
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What You'll Learn
The One Big Beautiful Bill Act
On July 4, 2025, President Trump signed the One Big Beautiful Bill Act into law. The Act, also known as H.R. 1, extends the 2017 Tax Cuts and Jobs Act (TCJA) and makes additional changes to US tax policy and spending.
The Act introduces a minimum $400 deduction for taxpayers with at least $1,000 in qualified business income, with both figures adjusted for inflation after 2026. It also includes a 20% pass-through deduction for qualified business income, with a higher rate of 23% for high-income taxpayers. The child tax credit is increased to $2,200, up from the current $2,000, and the cap on the state and local tax deduction is raised from $10,000 to $40,000 for five years.
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TCJA extensions
The 2017 Tax Cuts and Jobs Act (TCJA) introduced sweeping reforms to the US tax code, including reduced corporate tax rates, new deductions, and changes to global tax provisions. However, many of its key provisions were set to expire at the end of 2025, creating a potential "tax cliff" that could significantly impact corporations and individuals.
In 2025, President Trump signed the One Big Beautiful Bill Act into law, which included extensions and amendments to the TCJA. Here are some key TCJA extensions included in the new legislation:
Individual Income Tax Rates and Thresholds
The new law permanently extends the lower individual income tax rates and thresholds from TCJA, preventing a potential tax increase for 62% of taxpayers. This extension is estimated to cost $2.2 trillion from fiscal years 2025-2034.
Standard Deduction
The law also permanently doubles the standard deduction from TCJA, which was scheduled to revert to its previous amount after 2025. This provision is expected to add $1.2 trillion to the deficit.
Pass-Through Deduction
The 20% deduction for pass-through business income, also known as the qualified business income (QBI) deduction, has been permanently extended and expanded to 23%. This provision is designed to benefit small businesses and pass-through entities.
Child Tax Credit (CTC) Phase-Out
The law permanently extends the CTC phase-out, which starts at $200,000 for single taxpayers and $400,000 for married taxpayers. This provision is expected to cost $817 billion from fiscal years 2025-2034.
Bonus Depreciation
The TCJA's 100% bonus depreciation for business investments in machinery, equipment, and other short-lived assets has been extended from January 19, 2025, through 2029. This allows businesses to fully expense these investments for tax purposes.
Health Reimbursement Arrangements (HRAs)
The law codifies into law the individual choice health reimbursement arrangements (ICHRAs) established during the Trump administration, allowing individuals to purchase health insurance on individual exchanges. It provides employer credits for employees enrolled in CHOICE arrangements.
These TCJA extensions are estimated to significantly impact the federal budget, with projections suggesting an increase in the deficit of $3.8 trillion to $5 trillion over the next decade. However, the extensions are intended to provide tax relief and support economic growth, with projected increases in long-run GDP of 1.1% to 1.2%.
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QSBS tax exclusion
On July 4, 2025, President Trump signed the One Big Beautiful Bill Act into law. The Act includes a number of tax provisions, one of which is an amendment to the tax exclusion for Qualified Small Business Stock (QSBS).
QSBS refers to shares in a qualified small business that are subject to special capital gains tax rules. A qualified small business is defined as a company that is incorporated as a US C corporation, with gross assets of $75 million or less at all times, and with at least 80% of its assets actively used in a qualified trade or business.
The 2025 Republican Tax Law provides a more generous tax exclusion for QSBS. It allows a 50% exclusion for stock held for at least three years, a 75% exclusion for stock held for at least four years, and a 100% exclusion for stock held for at least five years. This is an increase from the previous exclusion of 100% only for stock held for at least five years. Additionally, the per-issuer cap on QSBS was increased from $10 million to $15 million, indexed to inflation from 2027 onwards.
To benefit from the QSBS tax exclusion, investors must meet specific criteria. They must acquire the stock at its original issue and hold it for the required period. If a company's QSB status is disqualified, it can impact shareholders' ability to gain the QSBS tax exclusion. Disqualification can occur if a company buyback of its own shares exceeds a certain threshold, if the company invests in non-cash deposit instruments, or if the company changes its business model to include non-qualifying activities.
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Health reimbursement arrangements
On July 4, 2025, President Trump signed H.R. 1, the One Big Beautiful Bill Act, into law. The Act, which was passed without a single Democratic vote, is expected to reverse many of the health coverage gains made under the Biden and Obama administrations.
One of the key provisions of the law relates to Health Reimbursement Arrangements (HRAs). The law codifies into law individual choice health reimbursement arrangements (ICHRAs) established during the first Trump administration as Custom Health Option and Individual Care Expense (CHOICE) arrangements, effective 2026. This allows individuals enrolled in CHOICE arrangements to purchase health insurance on individual exchanges. Furthermore, it provides a $100 per month employer credit for the first year an employee is enrolled in a CHOICE arrangement, and a $50 per month employer credit for the second year, with credit amounts adjusted for inflation from 2027 onwards.
The inclusion of ICHRAs in the Republican tax plan is expected to have a significant impact on health coverage for Americans. By allowing individuals to use ICHRAs to purchase health insurance on individual exchanges, the plan offers greater flexibility and choice for those seeking healthcare coverage. However, critics argue that the plan could lead to higher costs for taxpayers and increased fraud.
In addition to the provisions on HRAs, the Republican tax plan also includes several other changes to health policy. For example, the plan expands eligible Health Savings Account (HSA) expenses to include gym and fitness memberships, and allows individuals with direct primary care arrangements to contribute to HSAs if fees do not exceed $150 per month (adjusted for inflation). The plan also doubles the HSA contribution limits for certain taxpayers.
Overall, while the inclusion of ICHRAs in the Republican tax plan offers individuals more options for healthcare coverage, there are concerns about the potential impact on healthcare access and costs for millions of Americans.
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Child tax credits
The "One Big Beautiful Bill" Act, also known as the 2025 Republican Tax Law, was signed into law by President Trump on July 4, 2025. The Act includes several provisions related to child tax credits, which are outlined below:
The 2025 Republican Tax Law includes significant changes to child tax credits, which are a key component of the legislation's family tax policy. One of the most notable changes is the permanent extension of the Child Tax Credit (CTC) phase-out, starting at $200,000 for single taxpayers and $400,000 for married taxpayers. This represents a substantial increase from the previous threshold of $1,000 per child under the Tax Cuts and Jobs Act (TCJA) in 2017.
Additionally, the new law introduces a requirement for Social Security numbers (SSNs) for the claimant parent, spouse (if filing jointly), and qualifying children. This is a shift from the previous requirement, which mandated an SSN only for the child. The SSN requirement is expected to have a significant impact on families claiming tax credits.
The tax credit amount per child is set to increase permanently to $2,200 under the new law, which is $200 more than the current credit of $2,000. This enhancement reinforces the legislation's focus on providing additional financial support to families with children.
Furthermore, the 2025 Republican Tax Law addresses the issue of tip wages and overtime pay. It introduces a provision that allows individuals to deduct a certain amount of tip wages and overtime from their taxes. This provision is set to expire in 2028. Additionally, the law includes a "no tax on tips" provision, creating a new deduction for tipped workers, exempting them from federal income tax. However, tipped workers will still be subject to state and local income taxes, as well as payroll taxes.
The child tax credits included in the 2025 Republican Tax Law are designed to provide financial relief to families and enhance the overall well-being of children. These provisions reflect the Republican Party's commitment to supporting families and promoting economic growth.
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Frequently asked questions
Yes, President Trump signed the One Big Beautiful Bill Act into law on July 4, 2025.
The tax plan includes extending the 2017 Tax Cuts and Jobs Act (TCJA), making tax cuts permanent, increasing spending for border security, defence, and energy production, and significant cuts to healthcare and nutrition programs.
The tax plan is projected to increase long-run GDP by 1.2% and reduce federal tax revenue by $5 trillion over the next decade. It is also estimated to increase market incomes by 2.1% in 2025 and by 4.0% in 2026.
