This article, originally published June 24, has been updated to reflect that the One Big Beautiful Bill Act became law on July 4, 2025.
With the One Big Beautiful Bill Act (OBBBA) signed into law, changes to the tax code bring significant implications for individual taxpayers starting in 2025. Key tax changes that individuals should pay attention to involve the following provisions:
The One Big Beautiful Bill Act (OBBBA), signed into law on July Fourth, enacts sweeping changes to the U.S. tax code that will significantly impact individual taxpayers starting in 2025.
While many provisions build on the Tax Cuts and Jobs Act of 2017 (TCJA), the OBBBA introduces new rules, thresholds and limitations that individuals should closely monitor. From deductions and income thresholds, to opportunity zones and estate planning, the legislation reshapes the landscape of personal tax planning.
The OBBBA resolves the uncertainty surrounding the future of the QBI deduction. Under the TCJA, eligible business owners could deduct up to 20% of their QBI—a provision originally set to expire after 2025. The OBBBA makes permanent the 20% QBI deduction, offering long-term certainty for pass-through business owners.
Planning point: With the QBI deduction now permanent at 20%, business owners can shift their focus from preparing to lose the deduction to maximizing their eligibility. This includes reviewing your business structure, income thresholds, and the nature of your services, especially if you operate in a specified service trade or business (SSTB).
Strategic restructuring, income smoothing, or reclassification of activities may help you continue to access the deduction and optimize your overall tax position.
The TCJA imposed a $10,000 cap ($5,000 married filing separately) on the deduction for SALT for individuals, including property and income taxes, expiring after 2025. In response, many states introduced PTET regimes allowing pass-through entities to pay state taxes at the entity level, effectively bypassing the SALT cap for owners.
The OBBBA increases the SALT deduction cap to $40,000 ($20,000 married filing separately), indexed for inflation through tax year 2029, after which the limitation would revert to $10,000 ($5,000 married filing separately).
The limitation is phased down for taxpayers with modified gross income over $500,000—under this phasedown, the $40,000 limitation is reduced by 30% of the excess modified adjusted gross income over the threshold amount, not to be reduced below $10,000.
Crucially, the final legislation preserves the full PTET deductibility for all pass-through entities, including specified service trades or businesses (SSTBs), such as law, health care, accounting, and investment management firms. This marks a departure from a preliminary proposal approved by the House of Representatives that would have excluded SSTBs from PTET benefits.
Planning point: With the SALT deduction cap expanded and PTE eligibility preserved, individuals—especially those in high-tax states or with pass-through business income—should revisit their state tax strategy and entity structure. Key considerations include:
Under the TCJA, many individuals stopped itemizing deductions due to the increased standard deduction and new limitations on SALT and mortgage interest deductions. The TCJA also suspended miscellaneous itemized deductions and raised the adjusted gross income (AGI) limit for charitable contributions of cash from 50% to 60%. Those provisions were set to expire after 2025.
The OBBBA makes several permanent changes to itemized deductions and charitable contribution rules, building on and modifying provisions introduced under the TCJA.
The bill permanently increases the standard deduction, setting it at $15,750 for single filers, $23,625 for heads of household, and $31,500 for joint filers, with inflation adjustments beginning in 2026.
Additionally, the OBBBA:
Planning point: With the standard deduction permanently increased and new limitations on itemized deductions for high earners, individuals should reassess their deduction strategy
The overall limitation on itemized deductions is an additional limitation to what high-income taxpayers currently experience; however, it is likely a better situation than a reinstatement of pre-TCJA limits.
The additional 0.5% annual limitation on charitable contributions may cause many taxpayers to consider bunching charitable contributions. This can have two effects for taxpayers:
Those considering bunching of itemized deductions could also consider the use of donor advised funds or other vehicles to allow the deduction in the current year without making a final decision as to the charity that will benefit from the funds.
The QSBS exclusion under the status quo allowed eligible investors to exclude up to 100% of capital gains on the sale of certain stock held for more than five years, subject to limits, such as the $10 million per-issuer cap and a $50 million gross asset test. The TCJA made no changes to the QSBS exclusion.
The OBBBA however, introduces significant enhancements to the QSBS exclusion, mainly the following three changes expanding the benefit and scope of section 1202, applicable to QSBS issued after July 4, 2025:
Planning point: With these enhancements now law, investors should be careful to assess the timing and applicability to current or future investments.
For new acquisitions of existing companies, consider timing to align with the proposed acquisition, holding period, and acquisition value thresholds. Documenting acquisition dates and basis now can help preserve future tax benefits if the Senate’s enhancements are enacted.
For existing enterprises with values close to or below the gross asset value limitation, it may mean reexamining your choice of entity. Lower corporate tax rates and potential protection from capital gains taxes upon exit may make a taxpaying C corporation a better option than flow-through taxation.
The TCJA created the QOZ program to encourage investment in economically distressed communities. Investors could defer capital gains by reinvesting them into qualified opportunity funds (QOFs), with the potential for partial exclusion—and full exclusion of post-investment appreciation if held for at least 10 years. The original program was scheduled to sunset at the end of 2026.
The OBBBA permanently extends and modifies the QOZ program, including modified definitions, criteria, investment incentives and reporting requirements.
Changes include:
Planning point: With a deferred implementation date to allow the original program to reach maturity, taxpayers have time to plan for this provision. Investors should evaluate whether upcoming capital gains should be deferred, and a portion of the gain excluded, by investing into QOFs under the new rules.
Estate and gift tax exemption: The OBBBA permanently increases the estate and gift tax exemption to $15 million per individual starting in 2026, with annual adjustments for inflation. This provides long-term certainty for high-net-worth individuals engaged in estate planning and wealth transfers.
Even with this certainty, it will be important for individuals to continue evaluating whether their current plan fits their needs and whether anything needs to be done to limit their estate tax exposure.
Excess business loss (EBL) limitation: Both the House and Senate initially proposed to make the EBL limitation permanent and require that disallowed losses remain subject to the limitation in future years, rather than converting to net operating losses (NOLs). The Senate proposals went further by extending the EBL rules to estates and trusts, and by applying attribute reduction rules—such as those triggered by debt discharge or bankruptcy—to EBL carryovers. This would add complexity and potential limitations for affected taxpayers.
However, the final version of the OBBBA makes permanent the existing EBL limitation rules. Disallowed losses will continue to carryforward as NOLs.
With the OBBBA now law, individuals face a transformed tax landscape—one that blends long-awaited certainty with new layers of complexity. Provisions like the permanent QBI deduction and expanded QSBS benefits offer clarity, while evolving rules around SALT, charitable giving, and pass-through taxation demand renewed attention.
Now is the time to revisit your strategy, recalibrate your approach, and stay ahead of the curve. In this new era of tax reform, informed and intentional planning will be key to unlocking opportunities.
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