Major federal tax law changes are on the horizon in 2025. With key provisions of the Tax Cuts and Jobs Act (TCJA) set to expire at the end of the year and the recent passage of the “One Big Beautiful Bill” (OBBB) in the House, taxpayers and businesses alike can expect a wave of updates that may significantly impact financial planning.
The full scope of the changes is not yet final due to ongoing negotiations between both chambers of Congress and President Trump. Additional proposals and potential revisions could still reshape the final version of the bill this summer. A wide range of issues such as tax adjustments, individual tax brackets and deductions, and shifts in corporate tax policy remain on the table.
This update outlines the major differences in the provisions currently included in the version of the OBBB passed by the Senate Finance Committee (SFC) on June 16, 2025, and what you can do now to stay informed and prepared. Whether you’re an individual filer, small business owner, or corporate taxpayer, the coming months may bring critical decisions with long-term consequences.
Key Extensions from the TCJA
Many provisions in the OBBB passed by the House of Representatives (House) and included in the Senate Finance Committee (Senate) proposal seek to extend, update, or permanently codify select temporary tax laws first introduced by the TCJA of 2017. These include:
House and Senate:
- Making the current individual tax brackets (10%, 12%, 22%, 24%, 32%, 35%, and 37%) permanent
- Elimination of personal exemptions
- Permanently increasing the Alternative Minimum Tax exemption and threshold amounts
- Maintaining the lower cap on the mortgage interest deduction
- Continuing the disallowance of miscellaneous itemized deductions
- Allowing rollovers from qualified tuition programs to ABLE accounts
- Limitation on the casualty loss deduction
Senate:
- Permanently treat mortgage insurance premiums as qualified residence interest and deductible
Additional Adjustments to Individual Provisions
Standard Deduction:
House:
- Extended through 2028 and adjusted annually Married Filing Jointly: +$2,000/year Head of Household: +$1,500/year Single/Married Filing Separately: +$1,000/year
Senate:
- The Senate Finance Committee approves the same changes, but the increase would not go into effect until 2026
State and Local Tax (SALT) Deduction:
House:
- Increased from $10,000 to $40,000, with a phase-out beginning at $500,000 Modified AGI for joint filers ($250,000 for married filing separately)
Senate:
- The Senate Finance Committee’s proposed bill would keep the SALT deduction limited to $10,000
Child Tax Credit:
House:
- Raised to $2,500 through 2028, reverting to $2,000 (adjusted for inflation) after; the refundable portion remains capped at $1,400
Senate:
- The Senate Finance Committee raises the credit to $2,200, subject to annual inflation adjustments
Estate Tax Exemption:
House and Senate:
- Increased to $15 million, adjusted for inflation, and made permanent
New Individual Provisions Introduced in the OBBB
Tips and Overtime Pay:
House:
- Despite campaign discussions, both tips and overtime remain taxable, but taxpayers may take deductions for each. These provisions would expire after 2028
Senate:
- The Senate Finance Committee agrees with the deduction but caps the tips deduction at $25,000 and the overtime pay deduction at $12,500 with a phase-out to further limit the deduction.
Itemized Deduction Limitation:
House and Senate:
- Reintroduced for taxpayers in the 37% bracket
Auto Loan Interest Deduction:
House and Senate:
- Deductible up to $10,000 for vehicles purchased after 2024 (2025–2028); available to both itemizers and non-itemizers
“Trump Accounts”:
House and Senate:
- $1,000 automatically deposited by the U.S. Treasury for every child born between Jan. 1, 2025, and Jan. 1, 2029, with qualifying Social Security criteria
Scholarship Donations:
House and Senate:
- A new tax credit for contributions to scholarship-granting organizations
Expanded 529 Plan Use:
House and Senate:
- Now permitted for elementary, secondary, and homeschooling expenses
Charitable Deduction for Non-Itemizers:
House and Senate:
- Reinstated deduction for non-itemizers
Key Business Provisions
Bonus Depreciation:
House and Senate:
- Restored to 100% for qualifying purchases made after January 19, 2025, through 2029
Research & Development:
House:
- Deduction reinstated for R&D expenses from 2025–2029; amortization remains an option
Senate:
- The Senate Finance Committee agrees with the proposal and additionally allows small businesses, with average annual gross receipts of $31M or less, to claim deductions retroactively dating to 2022
Qualified Business Income Deduction (QBID):
House:
- Made permanent and increased from 20% to 23%
Senate:
- The QBID would be permanent with a deduction cap at 20%, but with additional modifications to the limitations and qualifications
Section 179 Deduction:
House and Senate:
- Increased limitations starting in 2025
International Tax Provisions:
House and Senate:
- FDII, GILTI, and BEAT made permanent with slight adjustments to tax rates and deduction levels (Both the House and the Senate Finance Committee agree with this proposal)
Sunset of Green Energy Credits
To help offset the cost of the tax cuts, the house and senate finance committee eliminates several energy-related credits, including:
- Previously Owned Clean Vehicle Credit
- Clean Vehicle Credit
- Qualified Commercial Clean Vehicle Credit
- Alternative Fuel Refueling Property Credit
- Energy Efficient Home Improvement Credit
- Residential Clean Energy Credit
- New Energy Efficient Home Credit
Final Thoughts
Federal tax changes are coming—and soon. The OBBB as currently proposed by the house and senate finance committee would extend, revise, and introduce major tax provisions for both individuals and businesses. However, these versions of the bill are not the final bill. Additional proposals and negotiations are expected to continue throughout the summer.
The best strategy to navigate these changes is to stay informed and consult with your trusted advisors. In periods of legislative change, proactive planning is essential. At 1RDG, we’re monitoring developments closely and will continue providing timely guidance to help you make informed financial decisions. We’re here to support you through the transition.