Breaking Down the One Big Beautiful Bill Act: What You Need to Know

The Tax Cuts and Jobs Act of 2017 (TCJA) included lower federal income tax brackets, bigger standard deductions, and higher gift and estate tax exemptions, among other provisions. The law stipulated that some of those tax breaks would sunset at the end of 2025. If that were allowed to happen, the Tax Foundation estimated that more than 60% of tax filers would face increased taxes.¹

Uncertainty around future taxes has been discussed for the past few years, impacting financial strategy considerations among individuals, families, and small business owners. However, legislation signed into law in July 2025 made many of the TCJA provisions permanent, lifting some of the uncertainty and adding a degree of clarity to future tax policy.

In addition to making many of the 2017 tax cuts permanent, the 887-page legislation included many other tax provisions, such as a senior “bonus,” larger state and local tax deductions, higher estate and gift tax exemptions, as well as breaks for tip income, overtime pay, and auto loans. It also created a new tax-advantaged savings account for children.²

Now that we have all had some time to digest the legislation signed on July 4, we would like to provide you with an overview of the tax changes included in the new law. Keep in mind that this article is for informational purposes only and is not a replacement for real-life advice. Consult your tax, legal, and accounting professionals before modifying your tax strategy.

Changes for Individuals

• Tax Rates and Brackets²
  The newly passed legislation generally makes the tax rates from the TCJA permanent. The bill adds a year of inflation adjustment for determining the dollar amounts at which any rate bracket higher than 12% ends and at which any rate bracket higher than 22% begins.
• Estate & Gift Tax Exemption³
  The legislation permanently increases the estate tax exemption and lifetime gift tax exemption to $15 million for single filers ($30 million for married filing jointly) in 2026. The exemption amount will then be indexed for inflation.
• Standard Deduction³
  The law permanently increases the TCJA’s standard deduction amounts. Starting in 2025, the standard deduction increases to $15,750 for single filers, $23,625 for heads of household, and $31,500 for married individuals filing jointly. The standard deduction will be adjusted for inflation in the future, and the changes have been made retroactive to include 2025.
• Bonus Deduction for Older Adults⁴
  The new law includes a temporary $6,000 “bonus” for Americans ages 65 and over. The full deduction is available to individuals with up to $75,000 in modified adjusted gross income ($150,000 for married couples filing jointly)—the bonus phases out for taxpayers who are above those thresholds. A temporary senior deduction is in place for tax years 2025–2028. Some speculated that this provision is in place of eliminating taxes on Social Security, since changes to Social Security are generally not permitted in reconciliation legislation.
• State and Local Tax Deduction (SALT)⁴
  The state and local tax deduction (SALT) applies to those who itemize their taxes and provides a federal deduction for state and local income and property taxes. Before 2018, there were no limits on the SALT deduction, but the TCJA introduced a $10,000 SALT deduction cap. This measure was unpopular in higher-taxed states and became an issue during negotiations on the current law. The agreed-upon legislation temporarily lifts the SALT cap to $40,000 starting in 2025 and phases out for taxpayers with more than $500,000 in income. The cap and income figures will increase by 1% yearly through 2029. If not extended, the SALT limit will revert to $10,000 in 2030.
• Alternative Minimum Tax Exemption³
  The law permanently extends the TCJA’s increased individual alternative minimum tax (AMT) exemption amounts and reverts the exemption phaseout thresholds to their 2018 levels of $500,000 ($1 million for married couples filing jointly). These amounts will be indexed for inflation. However, the law increases the phaseout of the exemption amount from 25% to 50% of the amount by which the taxpayer’s AMT income exceeds the threshold amount.
• Child Tax Credit⁴
  The child tax credit is intended to benefit families with qualifying children under age 17 with a valid Social Security number. The TCJA temporarily doubled the maximum child tax credit to $2,000 from $1,000. As with several other provisions of the 2017 law, the increase would have sunsetted after 2025. The new legislation permanently raises the top credit limit to $2,200 starting in 2025 and indexes it for inflation starting next year. The higher refundable portion of the child tax credit was also made permanent and would adjust for inflation. This part is known as the additional child tax credit.

• Tax Break on Tips⁴
  For service workers, there is a temporary federal income tax deduction of up to $25,000 per year on qualified tip income. The tip deduction has an income limit of $150,000, or $300,000 for joint filers, and is in effect for tax years 2025–2028.
• Tax Break on Overtime⁴
  The legislation also provides a temporary tax break for overtime pay. It allows for a maximum $12,500 above-the-line deduction for overtime pay ($25,000 for married couples filing jointly) from 2025 to 2028. The tax break begins to phase out once earnings exceed $150,000 ($300,000 for joint filers).
• Auto Loan Interest Deduction⁴
  The new law creates a tax deduction for car loan interest. Qualified households could deduct up to $10,000 of annual interest on new auto loans from their taxable income. Once again, this deduction would be temporary, lasting from 2025 to 2028. The deduction’s value would start to decline for individuals whose annual income exceeds $100,000 ($200,000 for married couples filing jointly). To qualify, cars must also be assembled in the United States.
• 529 Modifications⁵
  The law expands allowable tax-free 529 withdrawals for expenses beyond K–12 tuition and applies to private, public, religious, and homeschool students. 529 withdrawals can now be used to cover the cost of curriculum materials, tutoring, or classes outside the home, educational therapies for students with disabilities, and testing fees. For credentials and licenses, the law also makes a range of non-college programs eligible for 529 withdrawals.
• Child Savings Account⁴
  The legislation includes a new savings account for children with a one-time deposit of $1,000 from the federal government for U.S. citizens born in 2025–2028. Parents can contribute up to $5,000 a year, with the account balance being invested in a fund that tracks a U.S. stock index. Employers can also contribute up to $2,500 to an employee’s account, which wouldn’t be counted as income to the recipient. Potential earnings would grow tax-deferred, and qualified withdrawals would be taxed as long-term capital gains.
• Charitable Deductions⁶
  Starting in 2026, the law allows for a new charitable gift deduction for taxpayers who do not itemize up to $1,000 for single filers or $2,000 for married couples filing jointly. Those who itemize can only claim a tax deduction if their qualified charitable contributions exceed 0.5% of their adjusted gross income.

Changes for Qualified Small Businesses
In addition to individual tax changes, the new legislation includes several provisions that may affect businesses. These include:

• Qualified Business Income (QBI) Deduction⁷
  The law makes the 20% deduction for qualified business income, which was set to expire at the end of the year, permanent. This is targeted at pass-through entities, such as sole proprietorships, partnerships, and S corporations.
• Increased Expensing Limits⁷
  The legislation raises the maximum amount a small business can expense for qualifying property from $1 million to $2.5 million. There is also a higher phaseout threshold and inflation adjustments. This provision is intended to allow small businesses to deduct more capital investments immediately, which might help cash flow and encourage growth.
• Estate Tax⁸
  The law increases the estate tax exemption for small business owners, which could influence decisions about passing businesses to the next generation.
• Restored Bonus Depreciation⁸
  The 100% bonus depreciation, which allows businesses to deduct the full cost of new equipment and facilities immediately, has been reinstated.

Potential Tax Concerns of New Legislation
While the passage of the new law has averted the consequences of tax rates and brackets reverting to pre-2017 levels, there are concerns about some of the details and economic implications of the sweeping legislation.

As detailed above, many of the new tax policies in the law were not made permanent, with most expiring in 2028. These limits were negotiated to reach an agreement in a closely divided Congress with divergent priorities. If a future Congress does not extend or make these policies permanent, taxpayers will see some or all of these breaks go away. That might put us back into the realm of uncertainty.

Tax Strategies Can Be Complicated
While there are many other aspects of the legislation, including elements that are more politically sensitive, we discuss taxes because a well-thought-out financial strategy often considers taxes.

Tax policy changes can impact your finances, investments, estate, and small businesses, but you do not have to figure it out on your own. As financial professionals, we can coordinate with your tax advisor, estate lawyers, and accounting professionals to help your tax strategy keep pace with evolving policies.  If you have questions, please contact our office at 219.465.6924.

Kotys Wealth Professionals

219.465.6924

info@kotyswealthpro.com

Sources1. CNBC, June 18, 2024
https://www.cnbc.com/2024/06/18/plan-for-expiring-trump-tax-breaks.html

2. CNBC, July 3, 2025
https://www.cnbc.com/2025/07/03/trump-big-beautiful-bill-tax-changes.html?msockid=37a2e58496ac672b39a4f4af9742667d

3. Journal of Accountancy, July 7, 2025
https://www.journalofaccountancy.com/news/2025/jun/tax-changes-in-senate-budget-reconciliation-bill/

4. CNBC, July 4, 2025
https://www.cnbc.com/guide/what-trumps-one-big-beautiful-bill-means-for-your-money/#trumps-2017-tax-cut-extensions

5. The Wall Street Journal, June 13, 2025
https://www.wsj.com/personal-finance/taxes/republican-tax-bill-529-college-savings-a035f7e7?mod=Searchresults_pos1&page=1

6. Fidelity, July 2025
https://www.fidelitycharitable.org/articles/obbb-tax-reform.html

7. Fortune, July 2025
https://www.msn.com/en-us/money/smallbusiness/how-the-big-beautiful-bill-is-rewriting-the-rules-for-small-business-success/ar-AA1IcHJM?ocid=BingNewsVerp

8. USA Today, July 1, 2025
https://www.usatoday.com/story/graphics/2025/07/01/winners-losers-trump-big-tax-bill-senate/84391469007/

This content is developed from sources believed to be providing accurate information, and provided by FMG Suites. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.

** Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Kotys Wealth Professionals (“KWP”), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from KWP. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. KWP is neither a law firm, nor a certified public accounting firm, and no portion of the newsletter content should be construed as legal or accounting advice. A copy of KWP’s current written disclosure Brochure discussing our advisory services and fees is available upon request. Please Note: If you are a KWP client, please remember to contact KWP, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. KWP shall continue to rely on the accuracy of information that you have provided or at www.kotyswealthpro.com. Please Note: IF you are a KWP client, please advise us if you have not been receiving account statements (at least quarterly) from the account custodian