News & Insights

Tax Update on the “One Big Beautiful Bill Act,” July 24, 2025

The “One Big Beautiful Bill Act” (OBBBA) was signed into law by President Donald Trump on July 4th, 2025. The initial bill, first approved by the House on May 22nd, passed through the Senate with minimal yet subtle changes, retaining the majority of its original blueprint. The final bill was approved by the House in a close 218-214 vote and encompasses nearly 900 pages.

In our last Tax Update, we shared a number of potential provisions that could impact the high-net-worth clients of GenCrest Capital Partners. Below are final results of those provisions, plus additional ones for tax planning awareness and consideration. At GenCrest Capital Partners, we recognize these potential impacts and are here with you every step of the way. Let’s navigate these changes together to help ensure financial success for you and future generations.

Key provisions:

  • 2017 Tax Cuts and Jobs Act (TCJA): OBBBA made permanent (with some modifications) many aspects of the TCJA otherwise set to expire at the end of 2025. These include lower tax brackets, increased standard deductions, termination of personal exemptions, increased estate and tax exemption, and retention of the QBI deduction.
  • Tax Brackets: The lowest bracket is retained at 10% with the highest bracket still at 37%. The income amounts for the 10%, 12%, and 22% brackets receive an additional year of inflation adjustment.
  • Personal Exemptions: The deduction for personal exemptions is permanently terminated. However, the law includes a temporary deduction of $6,000, through the 2028 calendar year, for individuals 65 years old and older. This deduction is phased out for seniors with modified adjusted gross income over $75,000 ($150,000 for those filing a joint return).
  • Standard Deduction: The OBBBA retains the increased standard deduction. Further, the inflation-adjusted standard deduction increased for 2025 to $31,500 (joint filers), $23,625 (head of household), and $15,750 (all other filers).
  • SALT Cap: The maximum itemized deduction for state/local taxes (also including property and vehicle taxes) has been expanded from $10,000 to $40,000 and is now indexed for inflation. There is a reduction for taxpayers with modified adjusted gross income exceeding $500,000, but not to be reduced below $10,000 (or $5,000 for those that are married filing separately). The $40,000 limit is temporary and will revert to the original $10,000 cap beginning in tax year 2030 – regardless of income level.
  • Charitable Contributions: Beginning in 2026, non-itemizers will receive a maximum of $1,000 deduction ($2,000 for joint returns) for qualified contributions. For itemizers, the deduction will only be allowed if total contributions are more than 0.5% of adjusted gross income for the taxable year.
  • 1099 Reporting: Effective starting with tax year 2026, the threshold for reporting payments to certain persons engaged in a trade/business and payments for services (Form 1099 MISC or NEC) has been raised from $600 to $2,000, to be indexed for inflation. Form 1099-K, which reports third-party network transaction income from settlement organizations (i.e. Paypal, Venmo), was originally scheduled to reduce its reporting threshold to aggregate payments exceeding $600 per payee, regardless of the number of  transactions. With the passing of OBBBA, the reporting threshold has increased to aggregate payments exceeding $20,000 per payee on more than 200 separate transactions in a tax period.
  • Qualified Business Income (QBI): The new law keeps the QBI deduction at 20%, makes the deduction permanent and adds a new minimum $400 deduction for taxpayers with at least $1,000 of QBI.
  • Education Accounts: 529 education savings plan withdrawals have been expanded from $10,000 to $20,000 per year for eligible K-12 qualified expenses. The law has expanded the definition of qualified expenses to include certain non-tuition costs, including online educational materials and tutoring outside the house.
  • Savings Program for Children: A new savings program has been created called “Money Accounts for Growth and Advancement” (MAGA), which can also be used for saving for a child’s education. Under the new law, up to $5,000 annually can be contributed to a MAGA account. For a child born between January 1, 2025, and January 1, 2029, the federal government will contribute a one-time amount of $1,000 to the account. Parents and relatives can both contribute to the savings account and the funds will grow tax- deferred until the child reaches age 18. Funds can be used for higher education, small business startup costs, or first-time homebuyer expenses, with withdrawals taxed at the long-term capital gains rate for qualified expenses. Non-qualified withdrawals are taxed as ordinary income with penalties. Any unused funds could be withdrawn for any reason after age 30.
  • Child Tax Credit: The bill makes permanent the increased child credit (and income phase-out). Further, the law increases the credit to $2,200 starting with the 2025 tax year, with an inflation adjustment for subsequent years. A social security number of at least one spouse is required to be included on a joint return to claim the credit. The child(s) social security number is also now required.
  • Clean Energy Credits: OBBBA accelerates the termination of many clean energy tax incentives including those for primary residences, commercial property, and new/used clean vehicles for personal and commercial use. Termination dates range from September 30, 2025, to December 31, 2027, with the residential clean energy credit, energy-efficient home improvement credit, and new/used clean vehicle credits terminated by year-end 2025.
  • Estate Tax: The bill retains the estate and gift tax exemption significantly increased by the TCJA. Starting in 2025 (and adjusting for inflation going forward), the exemption is $15 million for individuals and $30 million for married filing jointly. The portability election for surviving spouse is still in effect.
  • Capital Investment Expensing: OBBBA increases the maximum amount a taxpayer may expense under Section 179 to $2.5 million, reduced by the amount by which the cost of qualifying property exceeds $4 million. Bonus depreciation is permanently extended, with the allowance increased to 100% for property acquired and placed in service after January 19, 2025.
  • Qualified Opportunity Zones (QOZs): The incentive program created during TCJA has been made permanent and is also expanded with the initial QOZ program set to expire after December 31, 2026. The initial – and also newly created second program set to take effect in January 2027 – offer a 10-year rolling investment and provide investors with tax benefits for investing their unrealized capital gains into eligible distressed communities. Benefits include a temporary deferral on taxes, a step-up in basis of 10% if the QOZ investment is held for 5 years, and for investments held for at least 10 years – taxpayers receive a permanent exclusion of taxable income on gains resulting from their original investment.

For additional OBBBA information, check out this handy guide created by the Tax Accounting Group, which outlines key tax law changes for both individuals and businesses.

Sources: Duane Morris, Economic Innovation Group, Jackson Lewis, JDSupra, Keiter, Kiplinger, Michigan Chamber of Commerce, Reuters, Tax Foundation, USA Today

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