Key Tax Provisions for 2025 – Northwest Indiana Business Mag

TL/DR –

President Donald Trump signed the One Big Beautiful Bill Act into law on July 4, which includes a wide range of tax provisions that affect individuals, businesses, and international taxpayers. For individuals, key provisions include the permanent extension of lower tax rates, a nearly doubled standard deduction, an increase in the child tax credit, and no tax on tips and overtime from 2025-2028. For businesses, the act makes the qualified business income deduction permanent, restores 100% expensing for qualified property from 2025, and increases the maximum amount that businesses can expense for qualifying expenses to $2.5 million.

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The One Big Beautiful Bill Act: A Deep Dive into the Implications for Businesses and Individuals

On the 4th of July, the One Big Beautiful Bill Act (OBBBA) was officially signed into law by President Donald Trump. The OBBBA is a reconciliation package that contains numerous tax provisions, impacting individuals, businesses, and international taxpayers alike.

This article, with information provided by the American Institute of Certified Professional Accountants, aims to highlight key aspects of the Act and provide insights into how these may influence your tax planning.

Provisions in Individual Income Taxes

• Lower tax rates and brackets introduced in the Tax Cuts and Jobs Act of 2017 are made permanent by the OBBBA. It also includes an additional year of inflation adjustment for determining thresholds of the 12% and 22% rate brackets.
• The standard deduction, which almost doubled, is made permanent. Effective from 2025, the amounts are as followed: $15,750 for single and married filing separately, $23,625 for head of household, and $31,500 for married filing jointly (all indexed).
• Notably, the nonrefundable child tax credit is set to rise to $2,200 per child starting in 2025, indexed for inflation.
• The estate and gift tax exemption is made permanent, with an increase to $15 million per individual ($30 million for married couples) in 2026, indexed for inflation.
• Further provisions detail changes to deductions on charitable contributions, tips and overtime, senior taxpayers, car loan interest, moving expenses, home mortgage interest, personal casualty losses, and more.

Business Tax Provisions

• The qualified business income deduction is made permanent, maintaining the deductible amount for each qualified business at 20%.
• 100% expensing (bonus depreciation) for qualified property is reinstated for property placed in service after January 19, 2025.
• The maximum amount a business may expense for qualifying expenses under Section 179 is increased to $2.5 million, with the phaseout threshold raised to $4 million, both indexed for inflation after 2025.
• Other changes affect the rules on research and experimental expenditures, excess business loss, business interest deduction, foreign derived intangible income and global intangible low-taxed income, base-erosion and anti-abuse tax rate, and more.

Tips for Preparing for OBBBA

Dealing with the implementation of the OBBBA will require a phased approach to planning. This will allow tax professionals to provide tailored strategic advice at each stage of the Act’s implementation:

• Short-term planning should focus on immediate actions and compliance considerations for tax provisions that are already in effect or will take effect soon.
• Mid-term planning will need to address transitional provisions and opportunities that will arise over the next 12 to 18 months.
• Long-term planning should aim to position for sustained success by anticipating future changes and aligning financial goals with the broader tax policy environment.

Engaging a tax professional who will closely monitor developments and provide timely updates and guidance as new details emerge is crucial. Their role should be to ensure clients stay informed, prepared, and supported throughout the process.

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