Gop Tax Law: What's In Store?

The GOP tax law, also known as the One Big Beautiful Bill Act or the 2025 Republican Tax Law, was signed into law by President Trump on July 4, 2025. The law addresses the expirations of the 2017 Tax Cuts and Jobs Act (TCJA) and makes additional changes to US tax policy and spending. The GOP tax law includes provisions such as increasing the standard deduction, lowering the corporate tax rate, and providing tax credits for dependents. However, it has also been criticized for ignoring the stagnation of working-class wages and worsening income and wealth inequality. The Congressional Budget Office (CBO) estimated that the law would add $1.9 trillion to deficits over 10 years.

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The 2025 Republican Tax Law

For businesses, the 2025 Republican Tax Law establishes 100% bonus depreciation for business investments in machinery, equipment, and other short-lived assets from January 19, 2025, onwards. It also restores full expensing for businesses' domestic research and development investments, retroactive from January 1, 2025, onwards, with a special provision for small businesses.

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The 2017 Tax Cuts and Jobs Act (TCJA)

• Increasing the standard deduction for individuals from $6,500 to $12,000, and for those filing jointly from $13,000 to $24,000. This reduced the number of individuals who benefited from itemized deductions.
• Altering the deduction for interest on home mortgages and equity by reducing the mortgage limit to $750,000 and limiting eligible home equity.
• Capping state and local tax (SALT) deductions at $10,000.
• Eliminating miscellaneous tax deductions, such as workplace expenses for employees.
• Reducing the corporate tax rate from 35% to a 21% flat tax rate.
• Changing flow-through taxation and increasing depreciations.
• Making fundamental changes to taxing international income, including exempting foreign earned dividends from US income tax for those owning over 10% of the foreign corporation.
• Increasing the child tax credit.
• Allowing a tax credit for employers that provide paid family and medical leave to employees.

The TCJA was expected to lower taxes by an average of $1,600 in 2018 and 2025, with the top 20% of Americans by income receiving about 65% of the tax savings. However, the Congressional Budget Office (CBO) estimated that the TCJA would add $1.9 trillion to deficits over 10 years, and there was little evidence of changes in real economic activity. Critics of the TCJA argue that it worsened income and wealth inequality, failing to benefit low- and moderate-income households as claimed.

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The One Big Beautiful Bill Act

The Senate Finance Committee introduced its reconciliation tax legislation on June 16, 2025, followed by the release of a new version of the legislative text for the One Big Beautiful Bill (OBBB) on July 1, 2025. After minor adjustments, the Senate passed the OBBB on July 1, and the House of Representatives passed the identical bill on July 3, 2025.

The Child Tax Credit (CTC) is also impacted by the Act, with a permanent extension of the $2,000 per child credit amount from the TCJA, which was scheduled to revert to $1,000 per child after 2025. It provides a temporary boost of $500 per child from 2025 to 2028 and sets the per-child amount to grow with inflation from 2029 onwards. Additionally, the refundable amount of the CTC is permanently extended at $1,700 per child and adjusted for inflation annually. The Act also requires Social Security numbers for the claimant parent and qualifying children.

The Act has been criticized for ignoring the stagnation of working-class wages and worsening income and wealth inequality. Critics argue that the tax cuts primarily benefit high-income filers and large businesses, while typical small businesses and low- to moderate-income households may not see significant gains.

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Changes to individual tax rates

The GOP tax law, also known as the One Big Beautiful Bill Act, was signed into law by President Trump on July 4, 2025. The law addresses the expirations of the 2017 Tax Cuts and Jobs Act (TCJA) and makes significant changes to individual tax rates and US tax policy.

One of the key changes made by the GOP tax law is the permanent extension of lower individual income tax rates and thresholds from the TCJA, which were set to expire after 2025. This includes an extra inflation adjustment for the bottom two brackets in 2026, resulting in lower tax bills for low- and middle-income taxpayers. The law also permanently doubles the standard deduction from the TCJA, providing an additional $750 deduction for single taxpayers and $1,500 for married couples in 2025, with ongoing adjustments for inflation.

The GOP tax law also makes changes to personal exemptions, which acted as additional deductions based on family size. Under the new law, personal exemptions are permanently repealed, and they are expected to be valued at $5,300 in 2026 if the TCJA expires without extension. Additionally, the law introduces an additional standard deduction of $6,000 for taxpayers over 65 from 2025 to 2028, phasing out at a 6% rate for higher-income taxpayers.

Furthermore, the GOP tax law permanently extends the Child Tax Credit (CTC) at $2,000 per child, adjusted for inflation annually. It also raises the income thresholds for the CTC phase-out to $200,000 for single taxpayers and $400,000 for married taxpayers. The law requires Social Security numbers for the claimant parent and qualifying children, whereas previously only the child needed to provide one.

The GOP tax law has been criticized for benefitting high-income filers and failing to provide economic gains that "trickle down" to low- and middle-income households. It is estimated to add $1.9 trillion to deficits over ten years and worsen income and wealth inequality. However, it is projected to increase long-run GDP by 1.2% and reduce federal tax revenue by $5 trillion over the next decade.

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Changes to business tax provisions

The 2025 Republican Tax Law, also known as the One Big Beautiful Bill Act, includes several changes to business tax provisions. Here are the key details:

Bonus Depreciation and Full Expensing

The law establishes 100% bonus depreciation permanently for business investments in machinery, equipment, and other short-lived assets from January 19, 2025, onwards. This provision costs $363 billion from FY2025-2034.

Research and Development (R&D) Expensing

The law permanently restores full expensing for businesses' domestic R&D investments, retroactive from January 1, 2025, onwards. Since 2022, domestic R&D investments had to be amortized over five years. This provision allows retroactivity to the beginning of 2022 for small businesses with average annual gross receipts of $31 million or less.

Pass-Through Deduction

The law permanently extends the 20% deduction for pass-through business income, which was scheduled to expire after 2025. This deduction is also referred to as 199A or the Qualified Business Income (QBI) deduction. Starting in 2026, it provides a minimum $400 deduction for taxpayers with at least $1,000 in QBI from actively running a trade or business.

Net Operating Losses for Pass-Throughs

The law makes permanent the Tax Cuts and Jobs Act's (TCJA) limits on net operating losses for pass-through businesses. The limit is $313,000 for single taxpayers in 2025 and $626,000 for married couples, adjusted for inflation. It applies excess business losses carried over from one year to the next within the specified limits.

NCTI Deduction

The law lowers the NCTI deduction, formerly the GILTI deduction, from 50% in 2025 to 40% from 2026 onwards. This change results in an effective 12.6% tax rate on GILTI, which can increase to 14% when incorporating the 10% foreign tax credit (FTC) haircut for NCTI.

Energy Tax Provisions

The law includes changes to energy tax provisions, costing a combined $44 billion from FY2025-2034. It removes the tariff de minimis exemption for commercial shipping imports and creates new civil penalties for violating trade laws using the de minimis exemption, effective July 1, 2027.

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