President Trump signed H.R. 1, the One Big Beautiful Bill Act (OBBBA) on July 4, 2025. The OBBBA includes significant tax changes impacting individuals, businesses, estates and trusts, and tax-exempt organizations. After each section below are links to charts detailing key tax changes.

Key Provisions

Individual Income Tax

• Lower Tax Rates: Makes the lower TCJA income tax rate schedules for individuals permanent.
• QSBS Exclusion: Changes the Sec. 1202 qualified small business stock (QSBS) exclusion percentage to a tiered structure, ranging from a 50% exclusion after a three-year holding period to a 100% exclusion after five years. Increases the per-issuer dollar cap to $15 million and increases the corporate-level asset ceiling to $75 million. Primarily applicable to stock acquired after July 4, 2025.
• SALT Cap: Increases the state and local tax (SALT) deduction to $40,000 (adjusted) for 2025 to 2029, begins phasing out for taxpayers with incomes above $500,000 (adjusted).
• Alternative Minimum Tax: Permanently maintains increased AMT exemption amounts and phase-out thresholds.
• New Limit on Itemized Deductions: Caps the value of itemized deductions for taxpayers in the 37% bracket to $0.35 per dollar for taxable years beginning after December 31, 2025.
• Floor on Charitable Deduction: Imposes a 0.5% floor on charitable contributions for individuals and permanently extends the increased contribution limitation (60%) for cash gifts made to qualified charities.

For additional information regarding the tax treatment of individuals, see this chart.

Estate and Gift Tax

• Higher Exclusion Amount: Permanently increases the federal estate and gift tax unified credit basic exclusion amount to $15 million (with inflation adjustments) per person. Accordingly, the generation-skipping transfer (GST) tax exemption is also permanently increased to $15 million (with inflation adjustments beginning in 2026). Married couples receive a $30 million exemption. Effective for taxable years beginning after December 31, 2025.
• Lower Tax Rates for Estates and Trusts: Makes the income tax rate schedules for estates and trusts from the TCJA permanent.

For more details on the tax changes impacting estate and gift tax, see this chart.

Pass-Through Business

• Qualified Business Income: Makes permanent the Sec. 199A deduction for qualified business income.
• Excess Business Losses: Makes permanent the limitation on the excess business loss of a taxpayer other than a corporation (Sec. 461(l)) with current law treatment of a carryforward as a net operating loss.
• Carried Interest: No change.
• Pass-Through Entity Tax (PTET) Workarounds:  No change.

General Business

• Domestic R&D Expensing: Permanently allows expensing for domestic R&D amounts paid or incurred in tax years beginning after December 31, 2024. Special transition elections apply. Allows taxpayers to recover capitalized domestic research expenditures recovered upon disposition, retirement, or abandonment.
• Bonus Depreciation: Permanently reinstates 100% bonus depreciation for property acquired after January 19, 2025.
• Business Interest Expense Limitation (163(j)): Permanently reinstates the EBITDA (earnings before interest, taxes, depreciation, and amortization) limitation for the calculation of the deduction for taxable years beginning after December 31, 2024.
• Opportunity Zones: Establishes a permanent Opportunity Zone (OZ) policy building off current law. Creates a rolling 10-year, OZ designations beginning on January 1, 2027.
• Charitable Deduction: Allows charitable deductions only to the extent that the contributions exceed 1% of the corporation’s taxable income and does not exceed 10% of the taxable income, effective for taxable years beginning after December 31, 2025.
• Clean Energy Credits: Accelerates the termination dates of various clean energy credits included in the Inflation Reduction Act.

For additional information regarding the tax changes impacting businesses, see this chart.

International Taxpayers

• BEAT: Increases the BEAT tax rate from 10% to 10.5% for all applicable taxpayers.
• GILTI and FDII: Changes the GILTI deduction to 40% (from current law 50%) (including the corresponding Sec. 78 gross-up amount). Changes the FDII deduction to 33.34% (from current law 37.5%). Effectively creates a 14% preferential rate for both. Effective for taxable years beginning after December 31, 2025.
• Excise Tax on Remittances: Imposes a 1% tax on natural persons for (primarily) electronic remittances of funds from the U.S. to recipients (individuals and certain entities) located in foreign countries. Effective for transfers made after December 31, 2025.

For additional information regarding the tax changes impacting international taxpayers, see this chart.

Compensation and Benefits

• Overtime: Offers an above-the-line federal tax deduction up to $12,500 ($25,000 for joint returns) equal to the qualified overtime compensation that an individual receives during the taxable year. The $12,500/$25,000 amounts phase out for incomes above $150,000 ($300,000 for joint returns). Applicable to tax years 2025 through 2028.
• Tips: Makes available an above-the-line federal income tax deduction of up to $25,000 for qualified tips properly reported whether as an employee or independent contractor. Qualified tips are cash tips received by an individual in an occupation that traditionally and customarily received tips on or before December 31, 2024. It is not allowed as part of Sec. 199A QBI deduction. Specified service trades or businesses (as defined in Sec. 199A) are not qualified trades or businesses. The $25,000 amount phases out for incomes above $150,000 ($300,000 for joint returns). Applicable to tax years 2025 through 2028.

For additional information regarding the tax changes impacting compensation and benefits, see this chart.

Tax-Exempt Organizations

• Higher Rates on College Endowment Investment Income: Introduces a new tiered rate structure on excise tax on applicable educational institutions. A rate of 1.4% applies in the case of an institution with a student-adjusted endowment (per student) over $500,000 and not over $750,000; 4% over $750,000 and not over $2 million; and 8% over $2 million. The school must have at least 3,000 tuition-paying students during the previous year. Effective for tax years beginning after December 31, 2025.
• Excess Compensation: For purposes of the 21% tax imposed on tax-exempt organizations where compensation to covered employees exceeds $1 million, expands the definition of “covered employee” to include any employee or former employee of an applicable tax-exempt organization or predecessor of such an organization. Effective for taxable years beginning after December 31, 2025.
• Private Foundations: No change to the excise tax rate on net investment income.

For additional information regarding the tax changes impacting tax-exempt organizations, see this chart.

The Takeaway

The OBBBA makes many temporary provisions of the TCJA permanent which will allow for longer range planning. In addition, many of the provisions that will benefit taxpayers are retroactive to the beginning of 2025, while provisions that trim deductions and other benefits do not begin until 2026 or later. Andersen can help you analyze your tax positions and consider opportunities for reducing tax paid overall over multiple years given the tax law changes and impact of different effective dates and transition rules.