Recent legislation, dubbed the “One Big Beautiful Bill Act” (OBBBA), has brought a wave of significant tax law updates. Signed into law on July 4, 2025, this comprehensive bill touches on various aspects of the U.S. economy, with a particular focus on tax reforms. Here is a summary of the most relevant and important tax law changes:
Business & Corporate Tax Changes:
- Introduction of new Section 174A for R&D Expenditures: Businesses can take full deduction of domestic R&D expenses starting in 2025, retroactive full expensing for small businesses back to 2022, and flexibility to deduct unamortized 2022–2024 R&E costs fully in 2025 or over two years, while foreign R&E remains amortized over 15 years, with conforming changes to coordinate R&D deductions and credits.
- Restored 100% Bonus Depreciation: Businesses can once again immediately write off 100% of the cost of qualifying equipment and research and development (R&D) expenses.
- Increased Section 179 Expensing: The limit for Section 179 expensing, which allows businesses to deduct the full purchase price of qualifying equipment, has been increased to $2.5 million with a phase-out threshold of $4 million.
- Permanently extends the 20% QBI deduction: If you operate as a pass-through entity (S-corp, partnership, sole proprietor) the bill locks in the 20% QBI deduction permanently, and it no longer sunsets at the end of 2025, raises phase-out income limits, and introduces a safety‑net minimum deduction — all of which are advantageous for pass-through entities.
- Changes to International Tax Provisions: The bill modifies the Global Intangible Low-Taxed Income (GILTI) and Foreign-Derived Intangible Income (FDII) provisions, including renaming them to Net CFC Tested Income (NCTI) and Foreign-Derived Deduction Eligible Income (FDDEI) respectively, and removes the tangible asset exclusion.
- Termination of Clean Energy Credits: Several clean energy tax credits established by the Inflation Reduction Act (IRA) are being phased out or terminated. This includes credits for wind and solar projects, energy-efficient home improvements, and clean vehicles.
- Increased Excise Tax on University Endowments: The excise tax on the net investment income of certain private colleges and universities has been increased.
Individual & Family Tax Changes:
- Permanent Extension of Tax Cuts and Jobs Act (TCJA) Rates: The individual income tax rates of 10%, 12%, 22%, 24%, 32%, 35%, and 37%, originally set to expire after 2025, have been made permanent.
- Increased Standard Deduction: The standard deduction has been permanently increased. For 2025, the new amounts are $15,750 for single filers, $31,500 for married couples filing jointly, and $23,625 for heads of household. Additionally, under the OBBB, eligible seniors will receive a temporary extra deduction of $6,000 per individual (or $12,000 for a couple), subject to income thresholds and phase-out limits.
- Enhanced Child Tax Credit: The Child Tax Credit has been increased to $2,200 per child for 2025 and is set to be adjusted for inflation in subsequent years.
- Increased State and Local Tax (SALT) Deduction Cap: The cap on the deduction for state and local taxes has been raised from $10,000 to $40,000. This higher cap will be in effect through 2029, with a 1% annual increase, before reverting to $10,000 in 2030.
- New Deductions for Tip and Overtime Income: For a limited time, a deduction of up to $25,000 for tip income and up to $12,500 ($25,000 for joint filers) for overtime income will be available through 2028.
- Permanent Repeal of Personal Exemption: The personal exemption, which the TCJA suspended, has been permanently repealed.
- Increased Estate Tax Exemption: The estate tax exemption, which was set to decrease in 2026, has been permanently raised to $15 million and will be indexed for inflation.
This summary highlights the most significant changes in the “One Big Beautiful Bill Act.” Taxpayers are encouraged to consult with a tax professional to understand how these updates may affect their specific financial situation.
Most of the major tax-law changes in the One Big Beautiful Bill (OBBBA) take effect for tax years beginning in 2025, with some timing differences depending on the provision:
- Retroactive to January 1, 2025: 100% bonus depreciation, Section 179 expensing increase, permanent 20% QBI deduction, and extension of 2017 TCJA rate brackets—all apply starting with the 2025 tax year
- Later-start provisions: Certain investment-focused sections (like updated REIT rules, expanded opportunity-zone rules, and ACA premium-credit changes) begin for taxable years starting after December 31, 2025
Official Sources and References: https://www.congress.gov/bill/119th-congress/house-bill/1/text
Details of the new Section 174A for R&D Expenditures
- Immediate Dedication for Domestic R&E- For tax years beginning after December 31, 2024, domestic research and experimentation expenses are fully deductible immediately, reversing the prior 5‑year amortization requirement.
- Retroactive Relief for Small Businesses – Eligible small businesses (≤ $31M average gross receipts) can retroactively apply full expensing to domestic R&E costs dating back to 2022, with amended returns permitted
- Flexibility for Unamortized R&E Costs – Taxpayers with remaining capitalized R&E from 2022–2024 can choose to deduct them fully in 2025 or spread the deduction over two years
- Foreign R&E Still Amortized – R&E expenses for activities outside the U.S. remain subject to amortization over 15 years
- Conforming Changes for R&D Credits – Adjustments to Section 41(d) and Section 280C(c) ensure proper coordination between R&E deductions and R&D credits for domestic expenditures
FAQ:
1. What is the One Big Beautiful Bill Act?
The One Big Beautiful Bill Act (OBBBA) is a comprehensive tax reform law signed on July 4, 2025, introducing major changes to individual, business, and international tax provisions, effective primarily from tax year 2025 onward.
2. When do these tax changes take effect?
Most provisions, including 100% bonus depreciation, Section 179 increases, and the permanent 20% QBI deduction, apply retroactively from January 1, 2025. Some investment-focused provisions start for tax years after December 31, 2025.
3. How can these changes benefit my business?
- Accelerated deductions lower taxable income and improve cash flow for reinvestment.
- Permanent QBI deduction ensures continued tax relief for pass-through entities.
- R&D expensing relief retroactively unlocks refunds or reduces future tax bills.
4. Do I need to take action now?
Yes. We recommend reviewing your 2025 investment plans and prior R&D filings to maximize deductions and explore potential amended returns for 2022–2024 if eligible. Schedule a consultation with us now.
5. Where can I find official details? You can read the full bill text here.
6. Who should I contact with questions?
Please reach out to your inDinero tax advisor to discuss how these changes specifically impact your tax strategy and planning for 2025 and beyond.
