2025 OBBB Tax Update

Changes affecting Individuals

• Make the expiring rate and bracket changes permanent.
• Make the expiring standard deduction increase permanent.
• Temporarily add a deduction of $6,000 for each qualifying senior individual that phases out when modified adjusted gross income exceeds $75,000, available from 2025 through 2028.
• Make the expiring child tax credit permanent with an increased maximum of $2,200 in 2026, inflation adjusted thereafter.
• Make the $750,000 principal limit for the home mortgage interest deduction permanent.
• Temporarily increase the cap on the itemized deduction for state and local taxes (SALT) to $40,000 for 2025 and increase the cap by 1 percent from that level through 2029, subject to a phaseout for taxpayers with incomes above $500,000, reducing the cap to a flat $10,000 thereafter.
• Make other changes and limitations to itemized deduction permanent, including the limitation on personal casualty losses, termination of the miscellaneous itemized deduction (except for educator expenses), and certain moving expenses (except for active-duty members of the armed forces and members of the intelligence community).
• Make the increase in the alternative minimum tax (AMT) exemption permanent; revert AMT exemption phaseout thresholds to $500,000 for single filers and $1 million for joint returns, indexed for inflation thereafter.
• Create a 0.5 percent minimum allowance on itemized deductions for cash-based charitable contributions.
• Create a permanent $1,000 above-the-line deduction for cash charitable contributions ($2,000 for joint filers).
• Repeal Inflation Reduction Act green energy tax credits primarily aimed at individuals, such as electric vehicle (Sept 30, 2025) and residential energy efficiency credits (Dec 31, 2025).
• Temporarily make up to $25,000 of tip income deductible for individuals in traditionally tipped industries for tax years 2025 through 2028; deduction phases out at a 10 percent rate when adjusted gross income exceeds $150,000 ($300,000 for joint filers).
• Temporarily allow up to $12,500 ($25,000 for joint filers) of the premium portion of overtime compensation deductible for itemizers and non-itemizers for tax years 2025 through 2028; the deduction phases out at a 10 percent rate when adjusted gross income exceeds $150,000 ($300,000 for joint filers).
• Temporarily make auto loan interest deductible for itemizers and non-itemizers for new autos with final assembly in the United States for tax years 2025 through 2028; deduction limited to $10,000 and phases out at a 20 percent rate when income exceeds $100,000 for single filers and $200,000 for joint filers.
• Make the Section 199A (QBI) pass-through deduction permanent; increase phase-in range of limitation by $50,000 for non-joint returns and $100,000 for joint returns; create a minimum deduction of $400 for taxpayers with $1,000 or more of qualified business income (QBI) for material participants.
• Expand the Section 179 expensing cap to an inflation-adjusted $2.5 million with a phasedown starting when the cost of qualifying property exceeds an inflation-adjusted $4 million; applies after Dec. 31, 2024.
• Change rules for premium tax credits (PTCs) and the earned income tax credit (EITC).

Estate Tax Change

• Permanently increase the estate and lifetime gift tax exemption to an inflation-indexed $15 million for single filers and $30 million for joint filers beginning in 2026.

Business Tax Changes

• Permanently restore immediate expensing for domestic research and development (R&D) expenses; small businesses with gross receipts of $31 million or less can retroactively expense R&D back to after 12/31/21; all other domestic amortized R&D between 12/21/21 and 1/1/25 can accelerate remaining deductions over a one- or two-year period.
• Permanently reinstate the EBITDA-based limitation on business net interest deductions.
• Permanently restore 100 percent bonus depreciation for short-lived investments.
• Temporarily provide 100 percent expensing of qualifying structures, with the beginning of construction occurring after Jan. 19, 2025, and before Jan. 1, 2029, and placed in service before Jan. 1, 2031.
• Make the Section 199A (QBI) pass-through deduction permanent; increase phase-in range of limitation by $50,000 for non-joint returns and $100,000 for joint returns; create a minimum deduction of $400 for taxpayers with $1,000 or more of qualified business income (QBI) for material participants.
• Implement a 1 percent minimum on deduction of charitable contributions made by corporations.
• Eliminate clean electricity production credit and investment credit for projects placed in service after 2027, except for qualifying project.x
• Expand the Section 179 expensing cap to an inflation-adjusted $2.5 million with a phasedown starting when the cost of qualifying property exceeds an inflation-adjusted $4 million; applies after Dec. 31, 2024.