On May 22, 2025, the House of Representatives passed H.R. 1, the One Big Beautiful Bill Act—a sweeping $3.8 trillion budget reconciliation package. This landmark legislation includes a wide range of federal tax provisions that could significantly impact individuals, businesses, and international taxpayers.
Although the bill is likely to be revised in the Senate, many of the core proposals provide early insight into the potential direction of tax policy. Read on for an AICPA overview of the most important tax-related elements of the bill as currently drafted and how they might influence your tax planning in the months ahead.
Individual income tax provisions
- Permanent extension of lower tax rates and brackets: The bill would make permanent the individual income tax rates and brackets established by the Tax Cuts and Jobs Act (TCJA), including lower individual tax brackets and the increased standard deduction.
- Standard deduction: The nearly doubled standard deduction would be made permanent, with an additional inflation adjustment and a temporary increase for 2025–2028 ($1,000 for single filers, $2,000 for joint filers).
- Child Tax Credit: The credit would increase from $2,000 to $2,500 per child and include a temporary enhancement for 2025–2028.
- Qualified business income deduction (Sec. 199A): The 20% deduction for qualified business income from pass-through entities is made permanent and increased to 23% for tax years after 2025.
- Estate and gift tax exemption: The increased exemption is made permanent and raised to $15 million per individual ($30 million for married couples) in 2026, indexed for inflation.
- SALT deduction cap: The state and local tax (SALT) deduction cap is increased to $40,000 per household with a $500,000 income cap.
- Charitable deduction for non-itemizers: A temporary above-the-line deduction for charitable contributions is reinstated for 2025–2028 ($150 for single filers, $300 for joint filers).
- No tax on tips and overtime: For 2025–2028, above-the-line deductions are created for qualified tips (in certain occupations) and for overtime premium pay, subject to income and occupation limitations.
- Enhanced deduction for seniors: For 2025–2028, a $4,000 deduction is available for seniors (age 65+) with income below $75,000 ($150,000 for joint filers).
- Car loan interest deduction: For 2025–2028, up to $10,000 of interest on loans for U.S.-assembled passenger vehicles may be deducted, subject to income phaseouts.
- Moving expense deduction: The bill permanently terminates the deduction except for Armed Forces.
- Other deductions and credits: The bill makes permanent or enhances several other deductions and credits, including the adoption credit, employer-provided childcare credit, paid family and medical leave credit, and education-related benefits.
Business tax provisions
- Bonus depreciation: 100% expensing (bonus depreciation) for qualified property is restored for property placed in service from Jan. 19, 2025, through Dec. 31, 2029.
- Sec. 179 expensing: The maximum amount a business may expense is increased to $2.5 million, with the phaseout threshold raised to $4 million, both indexed for inflation after 2025.
- Research and experimental expenditures: Allows full expensing of domestic R&D from Jan 1, 2025, through 2029; amortization resumes in 2030.
- Business interest deduction: For 2025–2029, the limitation is calculated using earnings before interest, taxes, depreciation and amortization (EBITDA), rather than EBIT.
- Low-Income Housing Tax Credit: The 9% credit allocation is increased for 2026–2029, the bond-financing threshold for the 4% credit is lowered, and Indian and rural areas are designated as "difficult development areas."
- Opportunity zones: A new round of opportunity zones is created for 2027–2033, with revised eligibility and incentives, including special rules for rural areas.
- Clean energy and IRS credits: The bill would terminate or phase out several clean energy credits from the Inflation Reduction Act (IRA).
- Pass-through state income tax deductions: The bill would eliminate the ability of specified service trades or businesses operating as pass-through entities to deduct state income tax payments at the entity level.
What's next?
The bill now heads to the Senate, where lawmakers have signaled that substantial changes are likely. Senate Finance Committee members have already made it clear that the House version won't be approved without revisions. As the legislative process continues, we'll be tracking developments and providing updates.
What you can do now
While nothing is final yet, this is a good time to start evaluating your current tax strategy in light of the proposed changes. Being proactive can help you stay ahead of any potential impacts—whether you're an individual taxpayer, a business owner, or managing international interests.
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.
