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New Tax Law Overhauls Business and Individual Tax Landscape

Written by Brian Stidd, CPA on . Posted in 2025, Business, Business Support Services, Featured, Financial, July, Newspaper, Payroll.

A landmark piece of tax legislation, colloquially known as the “One Big Beautiful Bill Act,” was signed into law on the 4th of July, enacting sweeping changes for businesses and individuals across the nation. The bill, which passed the House and Senate in the days leading up to the holiday, makes permanent many of the core provisions of the 2017 Tax Cuts and Jobs Act (TCJA) that were scheduled to expire at the end of 2025, while also introducing a range of new tax policies.

Major Wins for Businesses

Local businesses will see significant changes, largely aimed at promoting investment and simplifying tax strategy.

  • Permanent 100% Bonus Depreciation: In a major development, the Act permanently sets bonus depreciation at 100% for qualified property acquired after January 19, 2025. This reverses the scheduled phase-down, which was set to reduce the deduction to 40% in 2025.
  • Immediate R&E Expensing Reinstated: The legislation permanently restores the ability of businesses to fully deduct domestic research and experimental (R&E) expenditures in the year they are incurred, effective for costs after 2024. This removes the unpopular requirement to amortize these costs over several years. Small businesses with annual gross receipts of $31 million or less may also elect to apply this change retroactively to 2022.
  • Qualified Business Income (QBI) Deduction Secured: The 20% deduction for income from pass-through entities (Code Sec. 199A), a critical provision for many small and medium-sized businesses, has been made a permanent part of the tax code and expanded.
  • Other Key Business Provisions: The Act also increases the deduction limitations for Section 179 expensing after 2024 and modifies the low-income housing credit.

Significant Changes for Individuals and Families

The new law solidifies the individual tax framework established by the TCJA and introduces new, targeted relief.

  • TCJA Framework Made Permanent: The individual tax rates of 10%, 12%, 22%, 24%, 32%, 35%, and 37% are now permanent, along with the higher standard deduction. For 2025, the standard deduction is increased to $31,500 for joint filers, $23,625 for heads of households, and $15,750 for single filers.
  • New Deductions for Tip and Overtime Income: As promised during the 2024 campaign, the bill creates new deductions for tip and overtime income for tax years 2025 through 2028. The deduction for tips is capped at $25,000, while the overtime deduction is capped at $12,500 ($25,000 for joint filers). Both are available to non-itemizers but phase out at higher income levels.
  • SALT Cap Temporarily Increased: The State and Local Tax (SALT) deduction cap of $10,000 has been one of the most contentious parts of the TCJA. The new law increases the cap to $40,000 for 2025. The cap will then increase by one percent each year through 2029 before returning to the $10,000 limit in 2030. During this time, the cap is reduced by 30% for individuals with a modified adjusted gross income over $500,000.
  • Child Tax Credit and Estate Tax: The Child Tax Credit is permanently increased to a base amount of $2,200 per child, subject to inflation. The estate tax basic exclusion amount will be increased to a new base of $15 million in 2026, also adjusted for inflation.
  • Automobile Loan Interest: Previously, interest on an individual auto loan was treated as a nondeductible personal expense.  The Act allows an individual to deduct up to $10,000 for interest paid on an auto loan for an auto purchased after 2024. The deduction is available for tax years 2025 through 2028.
  • Trump Accounts: Children born in 2025 through 2028 will be eligible for a “Trump Account.” The federal government will make an initial deposit of $1,000 into each account. These accounts are designed to be long-term investment vehicles. Families, friends, and other private sources can contribute up to an additional $5,000 per year to a child’s account.
  • Itemized Deduction Limitation: Beginning in 2026 itemized deductions will be limited for taxpayers in the 37% tax bracket.
  • Additional Provisions: 529 Plans have been expanded to include elementary, secondary, and home schooling expenses.

Paying for the Changes: Green Energy Credits Curtailed

To offset the cost of these tax reductions, estimated at $5 trillion over ten years, the Act terminates numerous green energy credits enacted in the Inflation Reduction Act of 2022. Consumer-focused credits set to be eliminated after 2025 include those for new and previously owned clean vehicles, the energy efficient home improvement credit, and the residential clean energy credit.

IRS Program Changes

The legislation also directs the IRS to terminate its Direct File program within 30 days of the bill’s passage. Additionally, it imposes new penalties on fraudulent promoters of employee retention credit (ERC) schemes. 

Brian Stidd, CPA, is a seasoned tax professional and the founder of Stidd CPA, a trusted accounting firm based in New York. With over 20 years of experience, Brian specializes in providing personalized tax planning, preparation, and advisory services to individuals, families, and small businesses. His expertise spans complex tax code changes, estate planning, and business tax strategies, helping clients navigate the ever-evolving financial landscape. Brian is committed to delivering clear, actionable insights, as demonstrated in his analysis of recent tax legislation. For more information or to connect with Brian, visit stiddcpa.com.