Tax Impacts of The One, Big, Beautiful Bill

On July 4, 2025, President Trump signed the much anticipated “The One, Big, Beautiful Bill Act” (“2025 Tax Act”) after months of drafting and deliberations in the House and Senate. Below is a summary of several key provisions affecting both individual and business taxes. Many of the changes contain important nuances such as income thresholds, eligibility criteria, and effective dates, with some provisions already in effect as of January 2025. As a result, thoughtful tax planning will be essential this year.

Based on these new provisions, Hungerford can help develop efficient tax strategies aligned with your specific financial goals. We look forward to teaming with you and providing you with guidance and insight as to how this new 2025 Tax Act impacts you.

Business Tax

• Many of the provisions from the Tax Cuts and Jobs Act were extended or updated in the 2025 Tax Act
  • Bonus depreciation – additional first year depreciation expense permanently extended to 100% for qualifying property acquired and placed into service on or after January 19, 2025.
  • Research & development expenses (Section 174) – allows taxpayers to immediately expense domestic research and experimental costs starting in 2025, with certain small businesses allowed to apply retroactively to years beginning after 12/31/2021.
  • Business interest limitation (Section 163(j)) – adjusted taxable income used to calculate the interest limitation reverts back to EBITDA basis, so before depreciation and amortization deduction.
• New provisions included in the 2025 Tax Act
  • Special depreciation allowance for qualified production property – additional first-year depreciation equal to 100% for qualifying nonresidential real property used in manufacturing.
  • Section 179 expensing – maximum amount of additional depreciation expense allowed in year placed into service for qualifying property increased to $2.5 million. Beneficial when bonus depreciation does not apply.
  • Advanced manufacturing investment credit rate increases to 35%.
  • Paid family and medical leave credit – employer credit is made permanent.
  • Employer provided childcare credit – increases the amount of qualified childcare expenses to determine the credit to 40% (from 25%).
  • New markets tax credit has been made permanent.
  • Qualified small business stock – bill increases the exclusion from income of 75% of the gain from qualified stock.
  • Excess business losses -the limitation on excess business losses of noncorporate taxpayers is now permanent.
  • The bill terminates many of the clean energy tax incentives.
  • 1099 reporting threshold for payment of services is increased to $2,000 (from $600).
  • Trump accounts – new IRAs can be set up for the exclusive benefit of individuals under 18 years old. Employers can contribute to these Trump accounts and these contributions would not be included in W-2 wages of the employee.

Individual Tax

• Many of the provisions from the Tax Cuts and Jobs Act were extended or updated in the 2025 Tax Act
  • Reduced individual tax rates (10%-37%) made permanent, with additional year of inflation adjustment.
  • Increased standard deduction amounts made permanent (retroactive to include 2025) – Single $15,750 and Married Filing Jointly $31,500.
  • State and Local Tax (SALT) cap – temporarily increases the limit on the federal deduction for state and local taxes to $40,000 (from $10,000).
  • Child tax credit increases to $2,200 per child beginning in 2025. Makes the $1,400 refundable child tax credit permanent.
  • Qualified Business Income (QBI) /199A deduction – deduction for individuals, trusts and estates related to qualifying activities of flow-through entities that they have ownership in. This provision was made permanent and keeps the qualified business income deduction rate at 20%.
  • Estate tax exemption and lifetime gift tax exemption amounts permanently increased to $15M for single filers and $30M for married filing jointly.
  • Mortgage interest deduction – permanently extends the provision limiting qualified residence interest deduction to the first $750,000 in home mortgage acquisition debt.
• New provisions included in the 2025 Tax Act
  • Senior deduction – Provides a temporary (2025-2028) $6,000 deduction for individuals who are age 65 or older.
    • Note that there was no provision to eliminate tax on or provide a deduction for Social Security Income.
  • No tax on tips – temporary deduction of up to $25,000 for qualified tips, whether you claim the standard deduction or itemize deductions.
  • No tax on overtime – temporary deduction of up to $12,500 single/$25,000 joint filer for qualified overtime compensation during a given tax year.
  • Car loan interest – excludes qualified passenger vehicle loan interest from the definition of personal interest. A taxpayer can deduct up to $10,000 for interest paid on automobile loans for a car purchased after 2024 and with final assembly in the US.
  • Dependent care assistance programs – maximum amount excludible from income increases to $7,500.
  • Child and dependent care credit – permanently increases the amount of the child and dependent care tax credit from 35% to 50% of qualifying expenses.
  • Section 529 Plan – allows tax-exempt distributions from Section 529 plans to also be used for elementary or secondary schools and for “qualified post-secondary credentialing expenses”.
  • Charitable contributions – allows a charitable contribution deduction for taxpayers that use the standard deduction amount instead of itemizing – up to $1,000 single and $2,000 married filing jointly.
  • Casualty loss deduction – bill expands to increase certain state-declared disasters.

If you have any questions or if you would like to talk specifically about how the new bill impacts you and/or your company, please contact us here or reach out to your Hungerford team to discuss further.