Major Tax Overhaul: What the One Big Beautiful Bill Means for You

President Trump signed into law major tax legislation on July 4, 2025.

This tax legislation will materially affect both individuals and businesses. Here's what you need to know about key legislative provisions in the tax bill.

Extension of Current Tax Rates and Other Individual Tax Items

The Tax Cuts and Jobs Act of 2017 (TCJA) temporarily reduced individual income tax rates, decreasing, for example, the top individual rate from 39% to 37%. These rate reductions, originally set to expire at the end of the 2025 tax year, are now permanent.

There are also now temporary deductions and exemptions for overtime pay, tips, and auto loan interest (all subject to certain limitations).

One Hundred Percent Bonus Depreciation (Full Expensing)

The 2025 tax legislation restores 100% bonus depreciation, allowing businesses to immediately deduct the full cost of qualifying property in the year it is placed in service. This reverses the phase-down schedule that began after 2022 under the Tax Cuts and Jobs Act.

Effective dates: Property acquired and placed in service after January 19, 2025.

Eligible property includes:

• Tangible personal property with a recovery period of 20 years or less
• Computer systems, machinery, and equipment
• Certain improvements to nonresidential property

New or used property meeting certain acquisition requirements.

This provision encourages capital investment, especially for businesses planning new construction, property acquisitions, large equipment purchases, or facility upgrades.

Section 179 Expensing – Expanded Limits

The tax bill increases the Section 179 deduction limit to $2.5 million, with a phase-out threshold starting at $4 million. These amounts will be indexed for inflation starting in 2026.

Key items include:

• Selective expensing, meaning you can choose which assets to expense
• It applies to both new and used properties
• It includes certain improvements to nonresidential real estate, such as HVAC, roofs, and security systems

Qualified Production Property

A new property category was introduced, known as Qualified Production Property under Section 168(n). The legislation provides full expensing for Qualified Production Property, nonresidential property used in qualified production activities.

To qualify, property must be:

• U.S.-based
• Original use (new construction or new conversion to production activities)
• Placed in service between January 20, 2025, and January 1, 2031

Eligible activities include:

• Manufacturing
• Agricultural processing
• Chemical production
• Substantial transformation of tangible personal property

Research & Development & Section 174A

The bill restores the ability for businesses to immediately deduct domestic R&D expenses, reversing the requirement to amortize those costs over five years. The change applies to tax years beginning after December 31, 2024.

Further, businesses can fully expense the costs of developing new products, software, and processes in the same year those expenses are incurred, provided the work is performed in the United States.

The bill also introduced a new Section 174A, which provides flexibility in how companies treat their qualified research costs, including:

• Companies may immediately deduct eligible domestic R&D expenses, or
• Elect to amortize them (not less than 60 months).

Foreign R&D expenses are not eligible for immediate expensing and must still be amortized over 15 years.

Qualified Business Income Deduction

A 20% deduction for Qualified Business Income (QBI), introduced by the TCJA, can lower the effective rate paid by owners of pass-through businesses (partnerships, S corporations, and sole proprietors) from 37% to 29.6%. This 20% QBI deduction, originally set to expire at the end of the 2025 tax year, is now permanent.

SALT CAP

Perhaps the most contentious issue debated by the House and Senate is the treatment of State and Local Tax (SALT) deductions. A $10,000 SALT deduction cap was introduced by the TCJA, and since then House members from states with higher income taxes have advocated for a larger cap.

Ultimately, a $40,000 SALT deduction cap now applies, subject to certain taxable income phaseouts (for example, a married couple with taxable income above $500k could have their SALT deduction cap reduced from $40,000 to $10,000). This $40K SALT deduction is not permanent, though, and expires after the 2029 tax year.

And so-called pass-through entity taxes, where certain states allow partnerships and S corporations to elect to pay income taxes at the entity level, allowing for a full entity level deduction, are not subject to this $40k SALT limitation.

Energy Credits

Many of the energy credits introduced as part of the Inflation Reduction Act of 2022 are phased out and eliminated. The transferability of energy credits, though, is retained until these credits are phased out.

International

An often debated “retaliatory tax”, aimed at certain foreign governments and businesses, wasn not included in this legislation, but there are other changes to the international tax regime, including an increase in the tax on global intangible low-taxed income (GILTI) and a reduction in the deduction for foreign-derived intangible income (FDII).

Opportunity Zones

The TCJA incentivized investments into economically distressed areas (known as Opportunity Zones) by allowing for certain gain deferrals and gain exclusions for qualifying investments. Originally proposed to expire in 2026, the Opportunity Zone investment program is now permanent.

The legislation now allows investors deferring gains after the 2026 tax year to adopt a rolling 5-year gain deferral period.

There will also be a 10% reduction to the deferred gains for investments (made after the 2026 tax year) held for five years, and an enhanced 15% reduction for qualified investments into certain “rural” zones held for five years.

After the 2026 tax year, new OZ areas will be designated based upon updated criteria (with new designations every 10 years).

The basic framework for opportunity zone investment remains unchanged. Investors still defer gains by investing in Qualified Opportunity Funds (QOFs) and QOF investments must be held for at least 10 years to achieve full gain exclusion upon a sale, assuming all other requirements are met. QOFs in turn generally invest into Qualified Opportunity Zone Businesses (QOZBs) and follow various eligibility requirements to avoid penalties and maximize investor tax benefits.

Estate and Gift Tax

The estate and lifetime gift tax exemption is set to $15 million per individual, indexed for inflation.

Qualified Small Business Stock Gain Exclusion

The gain exclusion for the sale of section 1202 qualified small business stock is enhanced, and the definition of a qualifying business has been increased as well.

Next Steps for Tax Legislation

The Treasury Department (and the Internal Revenue Service) are currently implementing forms and instructions and updating regulatory guidance.

This process continues to extend into the 2026 tax year (and beyond) meaning there will likely be debates and unanswered questions concerning the nuances of these various provisions for years to come.

Our National Tax team will continue to review the implications of this tax legislation and help you make sense of what it means for your organization and situation.