On May 22, the House of Representatives passed H.R. 1, the "One Big Beautiful Bill," with sweeping tax changes that will affect individuals, businesses, and energy policy. The bill must still pass the Senate and will likely change, but given the breadth of the tax changes, prospective planning is worth considering.
Individual Tax Provisions
Qualified Business Income (QBI) Deduction. The bill permanently extends the §199A deduction for pass-through owners, increases the deduction rate from 20% to 23%, and amends income limits. It also expands eligibility to certain interest dividends of qualified business development companies.
Estate and Gift Tax Exemption. The exemption amount is permanently increased to $15 million beginning in 2026, indexed for inflation.
State and Local Tax (SALT) Deduction. The SALT tax deduction cap is increased to $40,000 ($20,000 for married filing separately) for 2025, with an income-based phaseout. For tax years between 2026 and 2033, the limits increase by 1% per year. State-level SALT cap workaround strategies are also targeted and limited.
Deduction for Tips and Overtime Income. Creates a deduction for qualified tips and overtime pay for 2025 to 2028. Excludes highly compensated employees and is available to itemizers and non-itemizers.
Auto Loan Interest Deduction. Auto-loan interest is deductible for certain taxpayers, for auto loans beginning in 2024 and ending in 2028, subject to income-based phaseouts.
Business Tax Provisions
Bonus Depreciation. The Tax Cuts and Jobs Act (TCJA) 100% bonus depreciation is reinstated for property acquired after Jan. 19, 2025, and placed in service after Jan. 19, 2025, but before 2030.
Section 179 Expensing. Limits are increased to $2.5 million (from $1 million) and phase-out thresholds to $4 million (from $2.5 million) for property placed in service after Dec. 21, 2024.
Carried Interest. No provision affects carried interest.
Exclusion for Employer Payments of Students Loans. Employer payments of student loans under educational assistance programs are now permanently excluded, subject to previous limitations.
R&D Deduction. Immediate deduction of domestic research expenditures is reinstated, with an option to amortize certain costs. Amortization is suspended through 2029.
Qualified Opportunity Zones. A second round of Opportunity Zones — initially provided by the TCJA — is created for 2027 to 2033. This second round has some modifications from the first, such as increased reporting requirements and an increased focus on rural areas.
International Provisions. Three international tax provisions added by the TCJA are modified:
- The BEAT standard rate increased to 10.1%.
- The FDII rate decreases from 37.5% to 36.5%.
- GILTI deduction decreases from 50% to 49.2%, which eliminates the previously scheduled 2026 decrease in the deduction.
Repeal or Phase Out of Several Energy Credits
- Energy Efficient Home Improvement Credit – Eliminated for property placed in service after 2025.
- Residential Clean Energy Credit – Eliminated after 2025.
- Previously-Owned Clean Vehicle Credit – Eliminated after 2025.
- Clean Vehicle Credit – Eliminated for certain manufacturers in 2026 and for all vehicles after 2026.
- Zero-Emission Nuclear Power Production Credit – Eliminated after 2031. Repeals transferability with respect to electricity produced and sold after 2027 and places restrictions on foreign entities.
- Clean Hydrogen Production Credit – Eliminated for facilities beginning construction after 2025.
- Commercial Clean Vehicle Credit – Eliminated after 2025 with an exception for certain contracts entered before May 12, 2025.
- Advanced Manufacturing Production Credit – Phased out beginning in 2029 and eliminated by 2031. Eliminated for wind energy components after 2027. Repeals transferability with respect to certain components sold after 2027 and places restrictions on foreign entities.
- Clean Electricity Production & Investment Credits – Eliminated for facilities that begin construction 60 days after the bill is enacted or placed in service after 2028. Prohibits certain leasing arrangements and places restrictions on foreign entities.
- Clean Fuel Production Credit – Extended credit through 2031 from the sunset of 2027. Repeals transferability with respect to fuel produced after 2027. Excludes feedstock produced outside the U.S., Mexico, or Canada.
This update is part of Taft's White House Toolkit. Please reference the toolkit for additional cross-practice coverage of federal legislative and regulatory activity that may affect businesses or organizations.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
