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Client Alert: One Big Beautiful Bill Act Enacted into Law: How Its Tax Provisions May Affect You

Date: July 8, 2025
On July 4, 2025, President Trump signed H.R. 1-119th Congress (2025-2026), titled the “One, Big, Beautiful Bill Act” (the “Act”), a budget bill that, among other things, addresses sunsetting provisions of the Tax Cuts and Jobs Act of 2017, Public Law 115-97 (the “TCJA”) while further modifying U.S. tax policy. It is important to note that the President signed the Senate version of the Act. Whiteford has provided updates throughout the legislative process to keep individuals, businesses, and their advisors informed of potential tax changes. This client alert discusses the select tax provisions that made it into law.

Key TCJA Provision Extenders and Amendments
 
The Act makes many changes and extends several TCJA provisions for both individuals and businesses.
 
Individual Taxpayers
 
  • Individual Income Tax Rate Reductions (Section 1(j)): The Act permanently extends the lower tax rates and thresholds for individuals, estates, and trusts established by the TCJA, setting the highest marginal ordinary income tax rate at 37%. The effective date of this provision will be January 1, 2026.
  • Child Tax Credit (Section 24(h)): The Act permanently extends the child tax credit, with an increase from $2,000 to $2,200 per qualifying child starting in 2025.
  • Standard Deduction (Section 63(c)(7)): The TCJA’s standard deduction changes are increased to $15,750 for single filers and to $23,625 for heads of household. These changes are effective starting with the 2025 tax year.
  • SALT Deduction Cap (Section 164(b)(6)): The Act increases the cap on individuals’ state and local tax (“SALT”) deductions to $40,000 for a five-year period ending 2029, after which the limitation reverts to $10,000 ($5,000 for married separate filers). The increased cap is phased down for taxpayers with modified adjusted gross income over $500,000 (with increases in future years). Under this phase-down, the $40,000 cap is reduced by 30% of the excess of the taxpayer’s modified adjusted gross income (“AGI”) over the threshold amount, but not below $10,000. For tax years after 2029, the limitation returns to $10,000.
  • Mortgage Interest Deduction (Section 163(h)): The Act permanently disallows mortgage interest deductions for home equity indebtedness and generally permits interest deductions for acquisition indebtedness up to $750,000.
  • Alternative Minimum Tax (“AMT”) Exemption (Section 55(d)): The Act permanently extends the increased AMT exemptions and thresholds at the 2018 levels of $500,000 ($1,000,000 for joint filers), adjusting for inflation starting in 2027.
  • Qualified Opportunity Zones (Sections 1400Z, 6039K, 6039L, 6726): The Act provides for a new round of Opportunity Zone (“OZ”) investment and increased limitations on statewide area income by establishing a permanent OZ policy that expands the original OZ structure. The Act creates rolling, 10-year OZ designations beginning on January 1, 2027. Definitions of low-income community (“LIC”) are updated, and the Act eliminates the ability for contiguous tracts that are not LICs to be designated as OZs. LIC qualifications are narrowed, and the Act expands the tax benefits and allows investors to receive incremental reductions in gain starting on the first anniversary of the investment. The Act establishes special rules for investments in qualified rural opportunity funds. It also adds reporting requirements for the OZ program and provides funding to the IRS to carry out the requirements. However, it does not require a specific set aside for rural OZs like the House bill initially proposed.
  • Estate and Gift Tax Exclusion Thresholds (Section 2010(c)(3)(C)): The Act increases the estate and gift tax exclusion thresholds to $15 million for single filers and $30 million for married couples starting in 2026.
 
Business Taxpayers
 
  • Pass-Through Business Income Deduction (Section 199A): The Act makes permanent the 20% deduction for qualified business income from pass-through entities (i.e., S corporations and entities taxed as partnerships). This is effective for tax years beginning after December 31, 2025.
  • Limitation on Excess Business Losses of Noncorporate Taxpayers (Section 461(l)): The Act makes permanent the disallowance of a deduction for excess business losses and applies to losses arising in tax years after 2025.
  • Interest Deduction Limits (Section 163(j)): The Act permanently modifies the 30% cap calculation of “adjusted taxable income” to the pre-2022 methodology beginning in 2025. Furthermore, the Act provides specific rules for how the business interest expense limitation interacts with other tax provisions that capitalize interest.
  • Bonus Depreciation for Qualified Property (Section 168(k)): The Act permanently reinstates 100% bonus depreciation for qualified assets in the year put into service for property acquired beginning January 20, 2025.
  • R&E Expensing (Sections 174 and 174A): The Act suspends the current requirement to capitalize and amortize domestic-only research and experimental (“R&E”) expenditures for amounts paid or incurred after 2024 but before 2030. The Act allows for immediate expensing of domestic research costs, while providing an ability to accelerate the remaining unamortized amounts of previously capitalized research costs incurred in 2022 through 2024. The provision is permanent. It also provides that taxpayers with gross receipts below $31 million may retroactively benefit from expensing back to 2022.
  • Taxable Real Estate Investment Trust Subsidiaries (“TRS”) (Section 865(c)): The Act increases the percentage of a REIT’s total assets that may be represented by securities of one or more TRSs from 20% to 25%. This provision is effective after December 31, 2025.
 
International Tax Provisions
 
  • GILTI (Section 951A) and FDII (Section 250(a)): The Global Intangible Low-Taxed Income (“GILTI”) is renamed to net CFC tested income (“NCTI”). Its effective tax rate was currently set to rise from 10.5% to 13.125% in 2026. Likewise, the Foreign-Derived Intangible Income (“FDII”) will now be known as foreign-derived deduction-eligible income (“FDDEI”). Its effective tax rate was set to increase from 13.125% to 16.406%. The Act extends the lower effective tax rates and slightly modifies the percentage deductions related to a U.S. taxpayer’s NCTI inclusion and its FDDEI income. The Act permanently sets the NCTI deduction at 40% and the FDDEI deduction at 33.34%, creating an effective rate of 14% for both NCTI and FDDEI. It also reduces the discount on foreign taxes paid on net CFC-tested income from 20% to 10%. There are two modifications to the treatment of intangible income under this tax regime. First, the Act eliminates the calculation that attempts to tie benefits to intangible income by subtracting a measure of tangible income from total eligible income. And second, the Act denies FDDEI benefits for the export of intangible property, benefiting companies that are exporters of goods and services. These changes apply to tax years after December 31, 2025.
  • Base Erosion & Anti-Abuse Tax Rate (Section 59A): The Act permanently changes the BEAT tax rate to 10.5%. Additionally, the Act maintains the current base erosion threshold on deductible-related party payments of 3%. The final version of the Act dropped taxpayer-friendly BEAT changes that it had proposed, like the high-tax jurisdiction exemption and the treatment of capitalized interest expenses as base erosion payments. The amendments take effect after December 31, 2025.
  • Look-Thru Rule Extension (Section 954(c)(6)): The Act makes permanent the Look-Thru Rule rules for related party payments. This applies to tax years after December 31, 2025.
  • Downward Attribution Limit Restoration (Section 958(b)): The Act would reinstitute restrictions on downward attribution of stock ownership, which generally prohibits downward attribution from a foreign person for purposes of determining U.S. shareholder and CFC status. However, it also would enact section 951B, allowing downward attribution in limited circumstances. Here, a foreign-controlled U.S. shareholder of a CFC must apply CFC inclusion rules. A “foreign-controlled U.S. shareholder” is a U.S. person that would be a U.S. shareholder if the definition of U.S. shareholder applied with a threshold of more than 50% (rather than 10% or more). This applies to tax years after December 31, 2025, and taxable years of U.S. persons in which or with which such taxable years of foreign corporations end.
  • Pro Rata Shares Rules (Section 951): The Act holds that when a U.S. shareholder owns stock in a CFC, the shareholder must include the pro rata share of the corporation’s subpart F income for the CFC tax year in gross income. The Act also coordinates Section 951A and Section 951 pro rata rules to reflect the new income sourcing and ownership timing calculations. This applies to tax years after December 31, 2025, and taxable years of U.S. persons in which or with which such taxable years of foreign corporations end.
 
New Tax Provisions
 
The Act also enacts several new provisions that were not originally part of TCJA.
 
Individual Taxpayers
 
  • No Tax on Qualifying Tips and Overtime (Sections 224 and 225): The Act includes a deduction of up to $25,000 for properly reported tips and a deduction of up to $12,500 for overtime pay. Both deductions would expire in 2028.
  • No Tax on Car Loan Interest (Section 163(h)(4)): The Act sets a $10,000 deduction for interest paid on qualified car loans related to personal use vehicles that are made in the United States. This deduction also expires at the end of 2028.
  • Enhanced Deduction for Seniors (Section 63(f)): The Act includes an increased deduction for seniors (age 65 or older) of $6,000 per eligible filer with a modified adjusted gross income that does not exceed $75,000 for single filers ($150,000 for married filing jointly). The deduction also expires in 2028.
 
Business (and International) Taxpayers
 
  • New Markets Tax Credit Permanency (Section 45D): The Act makes permanent the New Markets Tax Credit, which had previously required reauthorization.
  • Partial Structure Expensing (Section 168(n)): The Act includes a permanent100% bonus depreciation deduction for qualified production property (“QPP”). QPP includes non-residential structures (such as commercial real estate) utilized as an integral part of qualified manufacturing, agricultural, chemical production, or refining of a qualified product. This provision became effective for property placed in service on the date of the Act’s passage.
  • Charitable Contribution Deduction (Section 170(b)): Creates a 1% floor on corporate charitable deductions, allowing deductions only for contributions exceeding 1% of taxable income. It also adds a 0.5% floor for individual itemizers. This provision becomes effective for taxable years after December 31, 2025.
  • Increased Small Business Expensing of Depreciable Assets (Section 179(b)): The Act also increases the prior cost limitation of qualifying property to $2.5 million and increases the limitation reduction amount under Section 179(b)(2) from to $4 million, for property placed in service in tax years beginning after December 31, 2024.
  • Curtailing SALT Deduction Cap (Section 164(b)(6)) Workarounds: The Act closes the workarounds on state and local tax (“SALT”) deductions for pass-through businesses.
  • Payments from Partnerships to Partners for Property or Services (Section 707(a)): The Act makes disguised sale rules applicable without regulations. Thus, allocations and distributions that are in substance payments for property or services are treated as payments for property or services rather than as allocations and distributions from a partnership to a partner. This provision became effective for services performed and property transferred after the passage of the Act.
  • U.S. Surtax on Certain Foreign Payments (Section 899): The Act ultimately did not include a section 899 surtax after the Department of the Treasury asked for its removal.
  • Qualified Small Business Stock (“QSBS”) (Section 1202): The Act expands the section 1202 benefit in that it (i) provides a tiered gain exclusion for QSBS, allowing a 50% exclusion for shares held more than three years, a 75% exclusion for shares held more than four years, and a 100% exclusion for shares held more than five years; (ii) Increases the per-issuer dollar cap from $10 million to $15 million (indexed to inflation beginning in 2027); and (iii) increases the corporate-level gross assets ceiling from $50 million to $75 million (indexed to inflation beginning in 2027). The proposed changes would be generally effective with regard to stock issued or acquired on or after the date of enactment.
  • Excise Tax on Remittance Transfers (Section 4475): The Act imposes a new 1% withholding federal excise tax on certain electronic transfers of money sent from within the U.S. to a foreign country where the sender provides cash, money order, cashier’s check or other similar physical instruments, with exception to tax for noncash transfers, such as those withdrawn from certain financial institutions or if such transfer is funded by a U.S.-issued debit or credit card. This is effective after December 31, 2025.
  • Inflation Reduction Act (“IRA”) Changes and Energy Credits: The Act phases out most IRA energy credits and terminates the Section 179D deduction for property beginning construction more than a year after enactment. The Act extends the Clean Fuel Producer Credit through December 31, 2029, with some modifications. It terminates the Clean Hydrogen Production Credit as of January 1, 2028. It terminates benefits to Wind and Solar Facilities brought into service after December 31, 2027. The Act also terminates the Energy Efficient Commercial Buildings Deduction (section 179D) with respect to property whose construction begins after June 30, 2026.
 
Tax-Exempt Organizations
 
  • Excise Tax on Private Colleges’ & Universities’ Investment Income (Section 4968): The Act replaces the endowment excise tax on applicable educational institutions with a new rate structure, effective for tax years beginning after December 31, 2025. The Act sets a tax range of 1.4% to 8%, based on student-adjusted endowment size. This provision is effective after December 31, 2025.
 
How Whiteford can help
 
Whiteford attorneys have experience working with the IRS and state authorities across a variety of tax issues. As we continue to study the implications of this Act and forthcoming IRS and U.S. Treasury guidance pertaining to these changes, Whiteford is uniquely positioned to provide counsel to individuals, businesses, and their advisors trying to understand how it affects their ongoing tax planning.
The information contained here is not intended to provide legal advice or opinion and should not be acted upon without consulting an attorney. Counsel should not be selected based on advertising materials, and we recommend that you conduct further investigation when seeking legal representation.