Cameron Miranda
The US tax code is a complex and ever-changing landscape, with new laws and adjustments being made regularly. One of the most significant recent changes was the passage of the One Big Beautiful Bill Act in July 2025, which made permanent aspects of the 2017 Tax Cuts and Jobs Act (TCJA) and introduced a range of other adjustments. These changes are expected to have a substantial impact on individuals, businesses, and nonprofits, affecting their tax planning, business strategies, and long-term financial goals. With tweaks to tax brackets, deductions, credits, and exemptions, it's important for taxpayers to stay informed about these changes to make effective financial decisions and take advantage of potential tax savings. This act also includes a new 1% excise tax on certain electronic transfers to foreign countries and terminates several clean energy tax incentives.
Explore related products
What You'll Learn
The One Big Beautiful Bill Act
Key Provisions of the One Big Beautiful Bill Act
Tax Brackets
The Act establishes seven permanent federal tax brackets: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. These brackets will be adjusted for inflation, with each bracket increasing its range of income.
Deductions and Credits
The standard deduction has increased for single taxpayers, married individuals filing separately, married couples filing jointly, and heads of households. Additionally, there is now a new "bonus" deduction for older adults. The child tax credit has also increased to $2,200 per qualifying child.
The alternative minimum tax (AMT) exemption thresholds have been reduced, with an increased phaseout rate of 50%. The Act introduces a new, temporary 100% deduction for investment in certain structures associated with the tangible production of goods in the US.
Business Tax Provisions
The Act includes several provisions impacting businesses:
- Section 199A Deduction: The 20% deduction for qualified business income (QBI) is now permanent.
- Interest Deduction (Section 163(j)): Businesses can compute adjusted taxable income without subtracting depreciation, amortization, or depletion, resulting in an increased allowable interest deduction.
- Excess Business Loss Limitation: The limitation on excess business losses for non-corporate taxpayers is now permanent.
- Qualified Small Business Stock (QSBS): The gain exclusion under Section 1202 has been expanded for QSBS acquired after July 4, 2025, with tiers for stock held for three, four, and five or more years.
- Manufacturing Bonus Depreciation: A new 100% bonus depreciation is available through 2029 for "qualified production property" (QPP), which includes nonresidential real property used for qualified production activities.
Other Changes
The Act introduces a new type of tax-exempt savings account, known as "Trump accounts," for children's qualified expenses, with initial government funding of $1,000 for children born between 2025 and 2029. It also eliminates personal exemptions and increases the estate and gift tax exemption amounts.
Additionally, the Act imposes a 1% federal excise tax on certain electronic transfers of money from the US to foreign countries when using cash, money orders, or similar instruments. It also terminates several clean energy tax incentives.
Welding Wonders: When Your Brother-in-Law Can Help
You may want to see also
Explore related products
Tax Cuts and Jobs Act
The Tax Cuts and Jobs Act (TCJA) of 2017 made significant changes to the US tax code, including deductions, depreciation, expensing, tax credits, and other items affecting businesses and individuals. The TCJA was expected to lower taxes across the board, with the top 20% of Americans by income receiving about 65% of the savings. However, by 2019, it was estimated that 72% of taxpayers would be adversely affected if the tax cuts resulted in separate spending cuts.
The TCJA simplified the tax code for some but not for others. It lowered corporate debt and brought money back from overseas without a corresponding increase in business activity. In 2018, more than 90 Fortune 500 companies paid no federal taxes, and major firms did not increase hiring or investment despite their tax savings. While business investment increased that year, relatively little could be attributed to lower taxes.
The TCJA included a variety of miscellaneous tax provisions, some benefiting specific special interests. For example, it maintained a provision deferring capital gains taxes on "like-kind exchanges" of real property while repealing it for other property types. It also provided a tax break for citrus growers and extended "full expensing" for film and television production companies.
The TCJA made several changes that impacted businesses and self-employed individuals. It altered deductions, depreciation, and expensing rules, affecting business taxes. It also introduced Opportunity Zones, designed to encourage economic development and job creation in struggling communities.
In 2025, the "One Big Beautiful Bill Act" made permanent several aspects of the TCJA that were initially set to expire that year. These included the seven federal tax brackets, increased standard deductions, and an increased child tax credit. The tax year 2025 also saw adjustments for inflation, impacting tax brackets, deductions, and credits.
Who is My Brother-in-Law's Brother to Me?
You may want to see also
Explore related products
![[OLD VERSION] TurboTax Deluxe 2024 Tax Software, Federal & State Tax Return [PC/MAC Download]](https://m.media-amazon.com/images/I/71UbHaUeeUL._AC_UL320_.jpg)
![H&R Block Tax Software Deluxe + State 2024 with Refund Bonus Offer (Amazon Exclusive) Win/Mac [PC/Mac Online Code]](https://m.media-amazon.com/images/I/51+fonAXhPL._AC_UL320_.jpg)
![[OLD VERSION] TurboTax Home & Business 2024 Tax Software, Federal & State Tax Return [PC/MAC Download]](https://m.media-amazon.com/images/I/71b5aAzdXOL._AC_UL320_.jpg)
Marginal rates
For the 2025 tax year, there are seven federal income tax brackets: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. The top marginal income tax rate of 37% applies to single taxpayers with incomes greater than $626,350 and married couples filing jointly with incomes above $751,600. The 35% rate applies to incomes over $250,525 for individuals and $501,050 for married couples filing jointly. The next marginal rate of 32% is for incomes over $197,300 for individuals and $394,600 for married couples.
The marginal tax rates continue to decrease as income levels lower. The 24% rate applies to incomes over $103,350 for individuals and $206,700 for married couples. The 22% rate is for incomes over $48,475 for individuals and $96,950 for married couples. The 12% rate applies to incomes over $11,925 for individuals and $23,850 for married couples. Finally, the 10% rate is for incomes of $11,925 or less for individuals and $23,850 or less for married couples.
These marginal rates and tax brackets are subject to annual inflation adjustments, which can cause bracket creep. Bracket creep occurs when inflation pushes taxpayers into higher tax brackets, resulting in a higher proportion of their income being taxed at the higher rate. To address this, the IRS uses the Chained Consumer Price Index (C-CPI) to adjust income thresholds, deduction amounts, and credit values accordingly.
Contract Law: Editions and Evolution
You may want to see also
Explore related products
![[OLD VERSION] TurboTax Premier 2024 Tax Software, Federal & State Tax Return [PC/MAC Download]](https://m.media-amazon.com/images/I/71yj6wGqynL._AC_UL320_.jpg)
$114.99
$13.9 $25
![H&R Block Tax Software Premium 2024 Win/Mac with Refund Bonus Offer (Amazon Exclusive) [PC/Mac Online Code]](https://m.media-amazon.com/images/I/51tob7UDgCL._AC_UL320_.jpg)
Itemized deductions
Prior to 2018, around 30% of taxpayers, typically those with higher incomes, opted for itemized deductions. However, increases in the standard deduction and limitations on itemized deductions since 2018 have significantly reduced the number of itemizers. In 2020, only 10% of taxpayers chose to itemize their deductions.
The most common itemized deductions include state and local taxes, mortgage interest, charitable contributions, and medical and dental expenses. For example, taxpayers can deduct state and local income or sales taxes, real property taxes, personal property taxes, mortgage interest, disaster losses, and gifts to charities. These deductions can offer substantial tax savings, but they require careful documentation and understanding of the applicable rules.
The Tax Cuts and Jobs Act (TCJA) of 2017 played a pivotal role in shaping itemized deductions. The TCJA substantially increased the standard deduction while restricting or eliminating certain itemized deductions for the years 2018 through 2025. Notably, it imposed an annual cap of $10,000 on the deduction for state and local taxes. The TCJA's impact is evident in the decline in itemizers, with 31% of individual income tax returns having itemized deductions in 2017, compared to just 9% in 2020.
In 2025, the IRS announced that there would be no limitation on itemized deductions for that tax year, reversing the restrictions imposed by the TCJA. This change provides taxpayers with greater flexibility in their tax planning strategies. However, it is important to stay informed about the latest adjustments and seek guidance from tax professionals or the IRS website when navigating the complex world of itemized deductions.
The Ancient Lawmakers: Who Created the Rules?
You may want to see also
Explore related products
![[OLD VERSION] TurboTax Business 2024 Tax Software, Federal Tax Return [PC Download]](https://m.media-amazon.com/images/I/71NKT0cDwnL._AC_UL320_.jpg)
Child tax credits
The Child Tax Credit is a tax break intended to help families with qualifying children. The credit was passed in 1997, and until 2017, any child living in the United States was eligible for it. However, Trump's tax cuts package in 2017 changed the eligibility criteria to require that the child have a Social Security number. Their parents could still file taxes using an Individual Taxpayer Identification Number (ITIN) and receive the credit.
In 2021, the American Rescue Plan expanded the scope of the Child Tax Credit. Firstly, it allowed 17-year-olds to qualify, whereas previously only children aged 16 and younger were eligible. Secondly, it made the credit fully refundable, meaning that low-income households could receive the full credit benefit. Finally, the plan extended the credit permanently to Puerto Rico and the US Territories.
In 2025, the Child Tax Credit was increased to $2,200 per qualifying child, and indexed to inflation so that it grows over the years. However, new eligibility criteria were introduced, requiring that children and at least one of their parents or guardians have a Social Security number. This change will prevent an estimated 2.7 million American children from receiving the credit.
Red Flag Laws: Constitutional or Not?
You may want to see also
Frequently asked questions
The One Big Beautiful Bill Act is a comprehensive legislative package that was passed in July 2025. It establishes many new tax laws that became effective immediately, including making permanent aspects of the 2017 Tax Cuts and Jobs Act (TCJA) that were set to expire at the end of 2025.
Some key changes include:
- Increased standard deductions for single taxpayers, married individuals filing separately, married couples filing jointly, and heads of households.
- The top tax rate of 37% remains the same for individual single taxpayers with incomes greater than $626,350 ($751,600 for married couples filing jointly).
- Increased child tax credit to $2,200 per qualifying child.
- Increased estate and gift tax exemption to $15 million for individuals and $30 million for married couples.
- Created a new type of tax-exempt savings account for children, known as "Trump accounts," with initial government funding of $1,000 for children born between 2025 and 2029.
The changes in the One Big Beautiful Bill Act are expected to affect everyone, but not equally. It touches nearly every corner of the tax code and will result in reduced taxes for most individuals and businesses. It's important to consult with a tax professional to understand how these changes may impact your specific situation.
![[OLD VERSION] TurboTax Deluxe 2024 Tax Software, Federal Tax Return [PC/MAC Download]](https://m.media-amazon.com/images/I/71QcK4dsRbL._AC_UL320_.jpg)
![H&R Block Tax Software Premium & Business 2024 Win with Refund Bonus Offer (Amazon Exclusive) [PC Online code]](https://m.media-amazon.com/images/I/51yZ-hIg8vL._AC_UL320_.jpg)
![H&R Block Tax Software Deluxe 2024 Win/Mac with Refund Bonus Offer (Amazon Exclusive) [PC/Mac Online Code]](https://m.media-amazon.com/images/I/512dhP2BIfL._AC_UL320_.jpg)
![[Old Version] TurboTax Deluxe 2023, Federal & State Tax Return [PC/Mac Disc]](https://m.media-amazon.com/images/I/71Eulvi6neL._AC_UL320_.jpg)
![H&R Block Tax Software Basic 2024 with Refund Bonus Offer (Amazon Exclusive) Win/Mac [PC/Mac Online Code]](https://m.media-amazon.com/images/I/5181AWwUanL._AC_UL320_.jpg)
