A landmark tax overhaul: Key highlights

INTEL: Special edition

This special edition of INTEL highlights key elements of newly enacted legislation. While the One Big Beautiful Bill Act, or OBBBA, covers a broad range of spending initiatives, this briefing focuses specifically on tax policy changes—an area with a significant impact on your financial planning.

Signed into law on July 4, 2025, the OBBBA marks a major legislative milestone. At its core, it permanently extends many provisions of the 2017 Tax Cuts and Jobs Act, or TCJA, which were previously set to expire at the end of 2025. But OBBBA is more than just an extension of the TCJA. Instead, it represents a significant overhaul of the federal tax code.

Who is impacted

Nearly all taxpayers will be affected by OBBBA, with targeted changes for:

• Middle- and high-income individuals
• Small business owners and partners
• Large corporations
• Industries tied to defense, energy and border enforcement

In the months ahead, we'll take a closer look at the bill's key provisions. In the meantime, the list below—while not exhaustive—highlights some of the most broadly applicable tax changes.

Permanent extensions of the TCJA

Tax rates extended

TCJA-era tax rates, originally set to expire at the end of 2025, are now permanent. This leaves individual marginal tax rates ranging from 10% to 37%, depending on income and filing status. The tax rate for businesses remains 21% for all C corporations.

Standard deductions increased

For 2025, the standard deduction will rise to $15,750 for individuals, $23,625 for heads of household and $31,500 for married couples filing jointly. These amounts are now permanent and will be adjusted annually for inflation.

Estate and gift tax exemptions increased

Starting in 2026, the lifetime exemption rises to $15 million for single filers and $30 million for married couples filing jointly. These exemption amounts are now permanent and will be adjusted annually for inflation.

Home mortgage interest limit retained

The $750,000 principal limit for deducting home mortgage interest is now permanent.

Temporary tax cuts

SALT deduction cap increase

The cap on the state and local tax, or SALT, deduction rises to $40,000 per household, with annual inflation adjustments through 2029 and a gradual phase-out for taxpayers with income exceeding $500,000. In 2030, the deduction reverts to the $10,000 cap.

Senior deduction

From 2025 through 2028, individuals age 65 and older may claim a $6,000 personal deduction, and $12,000 for joint filers. The deduction phases out completely at an income of $175,000 for individual taxpayers and $250,000 for joint filers.

Deductions for overtime pay and tips

From 2025 through 2028, eligible workers may deduct up to $12,500 from taxable income in overtime pay—$25,000 for couples—and up to $25,000 in tips. The deduction for tips is limited to certain occupations, and both gradually phase out for workers with gross income exceeding $150,000 for individuals—$300,000 for joint filers.

Deduction for new car loan interest

OBBBA allows individuals and businesses to deduct up to $10,000 in interest for new vehicles—but only for vehicles purchased in 2025 or later and those undergoing final assembly in the US.

New or enhanced benefits for individuals

Children's savings accounts created

OBBBA establishes tax-advantaged savings accounts for children, with some restrictions on the timing for contributions and distributions. In addition, a temporary tax credit of $1,000 is available for contributions made to the accounts on behalf of children born between 2024 and 2028.

Charitable deduction for nonitemizers expanded

Nonitemizers can now claim a charitable deduction of up to $1,000—or $2,000 for joint filers.

Expanded use of 529 savings plans

Tax-free distributions can now be used for additional educational expenses, including qualified postsecondary credentialing expenses.

Family tax credits increased

Starting in 2025, the child tax credit rises to $2,200, with ongoing adjustments for inflation. The bill also enhances the adoption credit, the child and dependent care credit, and the income exclusion amount for dependent care assistance programs.

Tax savings for pass-through owners and small business investors

QBI deduction extended and expanded

The 20% qualified business income, or QBI, deduction is now permanent, with eligibility changes that broaden access.

SALT workaround preserved for pass-throughs

The bill maintains an existing loophole that allows owners of pass-through businesses to fully deduct state and local taxes, or SALT, by paying the taxes through their companies—an option currently allowed in a majority of states.

New QSBS exclusion formula

A tiered system now applies to gains from the sale of qualified small business stock, or QSBS, acquired after July 4, 2025, which enables earlier exits. The bill allows for a 50% exclusion from taxable income after holding the stock for at least 3 years, a 75% exclusion after 4 years and a 100% exclusion after 5 years. The new law also increases the cap on this exclusion from $10 million to $15 million and is indexed for inflation from 2027 onwards. The new law also raises the gross assets test from $50 million to $75 million for shares acquired after its passage.

Investment-focused tax cuts for businesses

Section 179 deduction limits increased

OBBBA raises the cap on immediate expensing for eligible property under Section 179 to $2.5 million—with a phasedown if the total cost of equipment acquisitions exceeds $4 million. Both limits will be adjusted annually for inflation.

Bonus depreciation restored and expanded

Businesses may once again fully expense qualifying capital assets. The bill also broadens eligibility to include more asset types.

Full R&D expensing allowed

Domestic research and experimental program costs incurred in 2025 and beyond can now be fully expensed. Small businesses may apply the change retroactively to tax years beginning in 2022.

Depreciation deduction for qualified production property

Businesses may temporarily claim a 100% depreciation deduction for qualifying real property used in manufacturing. Eligibility depends on the timing of construction and placement in service.

Cash flow-focused tax changes for businesses

Interest deductions expanded

Interest expense deductions will now be based on earnings before interest, taxes, depreciation and amortization, or EBITDA, rather than just EBIT. This change generally allows for larger deductions in the near term.

Paid family and medical leave credit extended

The employer tax credit under Section 45S for offering a minimum level of paid family and medical leave is now permanent.

New small business child care credit

A separate credit is introduced for employer-provided child care specifically aimed at small businesses. The credit will adjust for inflation over time.

Key provisions that may increase taxes

• De minimis entry privilege repealed: Imports under $800 will no longer qualify for duty-free treatment.
• Clean energy tax credits eliminated: The bill repeals many renewable energy incentives, including those for solar, wind and electric vehicles.
• Stricter foreign tax credit rules: The bill limits the ability to offset US tax liability using foreign tax credits by tightening rules on expense allocation, income sourcing and eligible taxes.
• Excess business loss cap extended: The bill continues the cap on the amount of business losses that noncorporate taxpayers—like individuals, sole proprietors and partners—can deduct annually. Losses above the limit must be carried forward as net operating losses, or NOLs. Previously set to expire after 2028, the cap is now permanent.
• Limits to itemized deductions introduced: For taxpayers in the top bracket, the bill caps itemized deductions at 35 cents for every dollar.
• AMT parameters reset: While the bill makes the TCJA's higher exemption thresholds for the alternative minimum tax, or AMT, permanent, it also resets them to 2018 levels and provides for faster phase-outs. As a result, more income may be subject to the AMT than if the TCJA were simply extended.

What action is required—and when

The implementation of many OBBBA provisions could be challenging, especially in the near term. A mid-year report from the National Taxpayer Advocate warns that IRS staffing cuts—more than 21% in taxpayer services alone—may strain return processing and support during the next filing season.

Now is the time for individuals and businesses to revisit their existing tax strategies. For example, those claiming capital or R&D deductions should work closely with advisors to confirm eligibility and ensure proper documentation under the new rules. Early planning can help reduce risks as IRS guidance evolves.

Who should you talk to now

This new legislation reshapes the tax landscape in significant and far-reaching ways. Speak with your tax advisor and your First Citizens Wealth Consultant to understand how these changes may affect your personal and business tax strategies.