Proposed Legislation: 2025 Tax Reform – “The One, Big, Beautiful Bill”

On May 22, 2025, the U.S. House of Representatives passed H.R. 1, or “The One, Big, Beautiful Bill,” (the Bill), a comprehensive budget reconciliation piece of legislation that extends many of the expiring provisions of the 2017 Tax Cuts & Jobs Act (TCJA). As currently drafted, the tax bill would impact many key individual and business provisions, which will be discussed below.

While the Bill has now passed the House, it must still be considered and passed by the Senate, where the bill may undergo changes due to differing priorities and strict reconciliation rules. Only after both the House and Senate approve identical legislative text will the Bill be sent to the President for signature or veto, at which point it can become law.

Individual Tax Provisions

Below are highlights of the individual tax provisions included in the Bill:

• The Bill makes the 37% top marginal income tax rate permanent for individuals. Additionally, the tax rate schedule for individuals, estates, and trusts are made permanent, including an inflation adjustment for all brackets, with the exception of the 37% top marginal bracket which is excluded from the inflation adjustment.
• The standard deduction that was increased under the TCJA is now made permanent. For tax years 2025 through 2028 there is a temporary increase by $2,000 for joint filers, $1,500 for head of household filers, and $1,000 for all other filers. The Bill also adds a senior bonus amount of $4,000 for 2025 through 2028 that phases out for seniors with income above certain thresholds.
• The Bill makes the personal exemption elimination permanent.
• The Bill makes the $750,000 limitation on home acquisition indebtedness and the exclusion of interest on home equity loans for the home mortgage interest deduction permanent.
• The limitation on personal casualty losses and wagering losses and the termination of miscellaneous itemized deductions are made permanent.
• Itemized deductions are still permitted and made permanent, but a new limitation replaces the “Pease rule,” reducing deductions for higher-income taxpayers (35 cents on the dollars).
• The requirement that personal casualty loss deductions exceed 10% of adjusted gross income for taxpayers to benefit from deductions is now waived for qualified disasters that occurred between December 2019 until 2025 (exact date is TBD as the Bill states it goes until ‘‘the date of the enactment of this Act”).
• The estate and gift tax exemption is permanently increased to $15 million for individuals and $30 million for married couples starting in 2026. Annual inflation adjustments would begin to apply in 2027.
• For private foundations, the 1.39% excise tax is replaced with a tiered system: foundations with assets between $250 million and $5 billion will pay a 5% tax, and those with $5 billion or more will pay 10%. When calculating asset size, certain related organizations’ assets are included.
• The child tax credit is made permanent, and the maximum child tax credit is temporarily increased to $2,500 (from $2,000) from 2025 to 2028 (subsequent years will be $2,000).
• Qualified Opportunity Zones (QOZs) get another round beginning in 2027. Specifically, for taxable years 2027 through 2033, with similar benefits in temporary deferral of capital gains taxes, basis step-up, and exclusion of taxable income on new gains. The first round of QOZs is still set to expire in 2026.
• Repeals several Inflation Reduction Act (IRA) green tax subsidies primarily aimed at individuals, such as electric vehicle and residential energy efficiency credits.
• Taxpayers who earn $160,000 or less in 2025 (with this limit increasing for inflation in future years) can deduct cash tips they receive from jobs where tipping is a common practice. The deduction applies only if the tips reported exceed the costs and expenses related to that work. This tax break is available for tax years 2025 through 2028. The Bill also includes provisions allowing for certain deductions for overtime compensation.
• From 2025 through 2028, taxpayers can deduct up to $10,000 in interest paid on car loans, whether or not they itemize deductions. This deduction is gradually reduced for single filers earning over $100,000 and for joint filers earning over $200,000.
• The Bill creates a new tax-deferred savings account, “Trump Accounts,” providing every baby who is a U.S. citizen born between 2025 and 2028 with a $1,000 federally funded investment account. Starting in 2026, parents can contribute up to $5,000 per year for each eligible child until the child turns 8. At age 25, accountholders may withdraw any amount up to the full balance of the account for these limited purposes. At age 30, account holders have access to the full balance of the account for any purpose
• There is currently no provision in the Bill affecting carried interest.
• The Bill increases the state and local tax deduction (SALT) cap to $40,000 per household for incomes under $500,000, with the cap and income threshold set to grow 1% each year. The cap gradually decreases to $10,000 for individuals at specific AGI thresholds.
• The legislation would disallow a deduction to certain pass-through entities for entity-level state income taxes (PTET) except for certain “excepted taxes.” The result is that individuals working in fields like law, accounting, consulting, financial services, and asset management can no longer claim PTET deductions for state and local taxes.

Provisions Affecting Businesses

Below are highlights of the business-related provisions included in the “One Big, Beautiful Bill.” These changes are designed to extend and expand many of the key provisions from the TCJA, with some modifications.

• The qualified business income (QBI) deduction for pass-through entities (including law firms and partnerships) is made permanent. The QBI deduction is also increased from 20% to 23%, with modifications to the phase-in rules and inflation adjustments.
• The Bill extends key TCJA business tax benefits—including 100% bonus depreciation, favorable interest expense deductions under Section 163(j), and immediate expensing for R&D costs under Section 174—through 2029.
• The Bill increases the Section 179 expensing limit from $1 million to $2.5 million, with the phase-out threshold raised to $4 million. These amounts will be adjusted for inflation for tax years beginning after 2025.
• The Bill makes the excess business loss limitation for noncorporate taxpayers permanent, with losses above the annual inflation-adjusted threshold ($313,000 for single filers and $626,000 for joint filers in 2025) carried forward to future tax years as business losses (not NOLs) and subject to the business loss limitation again each year.
• Limits the 15-year amortization deduction for professional sports franchises and related intangible assets to 50% of the asset’s adjusted tax basis, effective for assets acquired after the new tax law is enacted.

Conclusion

While the House has now passed “The One, Big, Beautiful Bill,” this legislation must still clear several hurdles before becoming law. As mentioned above, the Senate will now review and may amend the Bill, and any differences between the House and Senate versions will need to be reconciled through the legislative process. Only after both chambers agree on final language and the President signs the bill will these provisions take effect.

If you have questions about how these proposed changes may impact your individual or business tax situation, please contact your Topel Forman tax adviser.

Author Will Hendrick