“The One, Big, Beautiful Bill Act”: Key Tax Provisions Explained

In a narrow 215–214 vote, the U.S. House of Representatives passed a sweeping tax and spending bill, formally titled The One, Big, Beautiful Bill Act (OBBBA). The legislation aims to extend key provisions from the 2017 Tax Cuts and Jobs Act (TCJA) that are set to expire at year-end, while also introducing several new tax breaks. Among the most headline-grabbing changes are exemptions from income tax on tips and overtime, a central promise from President Trump’s campaign platform.

The bill now heads to the Senate, where lawmakers are expected to revise it. Some Senators have already expressed opposition to specific provisions, signaling that substantive amendments may be necessary before a final vote.

Here’s a closer look at the bill’s major tax provisions, beginning with those affecting businesses.

The bill would restore 100% first-year bonus depreciation for eligible property acquired and placed in service between January 19, 2025, and December 31, 2029. Under current law, this deduction is scheduled to continue phasing down, reaching 0% by 2027.

The Section 199A deduction, set to expire after 2025, would be made permanent. In addition, the deduction amount would increase from 20% to 23% starting in 2026. This would benefit owners of pass-through entities like S corporations, partnerships, sole proprietorships, and LLCs.

The bill reinstates a full deduction for domestic research and development costs incurred after 2024 and before 2030. Businesses would be permitted to elect whether to deduct these expenses immediately or amortize them, temporarily suspending the current amortization requirement.

The expensing limit under Section 179 would increase to $2.5 million, and the phaseout threshold would rise to $4 million for property placed in service after 2024. Both limits would continue to be adjusted annually for inflation.

The limitation on excess business losses for noncorporate taxpayers, previously extended through 2028 by the Inflation Reduction Act, would become permanent. These rules cap the amount of business losses that can offset other forms of income in a given year, with any excess carried forward. The carryforwards of excess losses would be treated as business losses in subsequent tax years, rather than net operating loss carryforwards, which could significantly limit the ability of some taxpayers to utilize loss carryforwards.

The bill would make permanent the TCJA’s reduced tax rates, including the 37% top rate. Without legislative action, the top rate will revert to 39.6% after 2025.

The repeal of the Pease limitation would be made permanent. However, starting in 2026, a new cap on itemized deductions would apply to taxpayers in the 37% income bracket.

The increased standard deduction amounts under TCJA would be made permanent. Additionally, from 2025 through 2028, standard deduction amounts would temporarily increase: $2,000 for joint filers, $1,500 for heads of household, and $1,000 for single filers. Additionally, qualifying seniors age 65 or older could claim an extra $4,000 standard deduction during these years.

The bill proposes to permanently extend the CTC and increase it to $2,500 per child for the 2025–2028 period. It would also maintain the higher income phaseout thresholds and retain the requirement for a child’s Social Security number. Starting in 2029, the credit would revert to $2,000 and be indexed for inflation. A new requirement would also mandate that the taxpayer claiming the credit have a valid SSN.

The current $10,000 cap on the SALT deduction would be raised to $40,000 for 2025, with a phaseout for taxpayers earning over $500,000 ($20,000 cap, $250,000 phase out for married filing separate). After 2025, the cap would increase by 1% each year through 2033.

The suspension of miscellaneous itemized deductions—such as unreimbursed employee expenses and certain professional fees—would be made permanent, continuing a key element of the TCJA.

Beginning in 2026, the federal estate and gift tax exemption would increase to $15 million and be indexed annually for inflation. This would provide significant estate planning opportunities for high-net-worth individuals.

Tipped workers would be able to deduct tip income from taxable income without itemizing. A valid Social Security number would be required to claim the deduction. This provision would expire after 2028.

Overtime pay would be treated similarly to tips, allowing taxpayers to deduct it from income without itemizing. The deduction would also expire after 2028 and require a valid SSN.

Taxpayers could deduct up to $10,000 in interest on car loans for vehicles assembled in the U.S., applicable to tax years 2025 through 2028. Income limitations would apply, but both itemizers and nonitemizers would be eligible.

The bill would allow a new charitable deduction of $150 for single filers and $300 for joint filers who do not itemize, offering a limited but welcome benefit to donors outside of higher income brackets.

While these provisions form a substantial part of the House version of the OBBBA, the bill is expected to evolve significantly as it moves through the Senate. Lawmakers remain divided not only over the tax measures but also over certain spending cuts embedded in the broader legislation.

Regardless of how the bill changes, it’s clear that tax reform will remain a central issue throughout 2025. Organizations and individuals alike should stay informed and lean on your CSH tax advisor, or contact us, to understand the how the implications of any final legislation affects your unique position.