The One Big Beautiful Bill Act: What You Need to Know

A major new law, H.R.1, officially called the “One Big Beautiful Bill Act” (OBBA), just passed and was signed into law on July 4, 2025. This bill makes significant changes to the U.S. tax code, affecting nearly every American taxpayer and business owner.

At Calvetti Ferguson, we know tax changes can be confusing. We want to help you understand how this new law might affect your money, pointing out where you might save on taxes and where you might see new costs.

For Business Owners: Key Changes and Opportunities

H.R.1 includes several important provisions that will directly affect businesses, from startups to large corporations:

Research & Development (R&D) Expensing

This significant change affects innovation. Under the previous law, businesses had to spread out (amortize) their domestic R&D expenses over five years. H.R.1 permanently restores the ability for businesses to immediately deduct 100% of their domestic research and experimental expenditures for tax years beginning after December 31, 2024, and before January 1, 2030. This is a considerable tax saving and a powerful incentive for businesses to invest heavily in innovation and new technologies within the U.S. Keep in mind that foreign R&D expenses still need to be amortized over 15 years. The bill also includes provisions that allow certain businesses (those meeting the gross receipts test of Section 448(c), currently approximating $31 million or less in annual gross receipts) to elect to claim this deduction retroactively for expenditures incurred in taxable years beginning after December 31, 2021, by filing amended returns.

Permanent Full Expensing for Business Property (Bonus Depreciation)

The bill makes permanent the ability for businesses to immediately deduct 100% of the cost of eligible depreciable property acquired after January 20, 2025. In addition, the bill expands the scope of qualified assets to cover manufacturing buildings, but only for buildings placed in service before January 1, 2031.

Section 179 Deduction Limitations

The maximum amount a taxpayer can expense under Section 179 has been increased to $2.5 million, and the phase-out threshold (where the deduction starts to reduce) has increased to $4 million for tax years beginning after December 31, 2024. These amounts will be adjusted for inflation in later years. This change offers additional tax savings for businesses investing in qualifying equipment and software.

Modified Business Interest Deduction (Section 163(j))

The limit on deducting business interest expenses has changed. For tax years starting after December 31, 2024, the calculation for this limit will revert to using “EBITDA” (earnings before interest, taxes, depreciation, and amortization). This means many businesses can deduct more of their interest expenses than under the prior calculation method, offering potential tax savings, especially for companies that use debt to fund their operations.

Qualified Business Income (QBI) Deduction (Section 199A)

Under the TCJA, the QBI deduction was set to expire for tax years beginning after January 1, 2025. The OBBB makes the QBI deduction permanent with no change to the 20% deduction, but with expanded qualifications for the deduction.

Excise Tax on Executive Compensation (Tax-Exempt Organizations)

For certain tax-exempt organizations, the excise tax on “excess” compensation now applies to all current and former employees making over $1 million annually, not just the top five. This could result in increased tax costs for some larger tax-exempt entities.

For Individual Taxpayers: Understanding Your Savings and Costs

Many individual tax rules from the 2017 Tax Cuts and Jobs Act (TCJA), which were set to expire, are now permanent or have been changed by H.R.1. Here’s what individuals should know:

Income Tax Rates and Standard Deduction

The bill makes current individual income tax rates permanent. This means you’ll continue to benefit from the lower federal income tax rates that have been in place. The standard deduction has also been increased further and made permanent. This can lead to tax savings for many people who don’t itemize their deductions, potentially simplifying how they file their taxes.

Child Tax Credit

The Child Tax Credit (CTC) has seen important changes. The maximum credit of $2,000 per child is now permanent, and it includes a temporary increase of $200 per child, raising the maximum to $2,200 per child, effective in 2026. The credit’s refundable amount (the portion you can get back even if you don’t owe taxes) has also been made permanent and will be adjusted for inflation each year.

State and Local Tax (SALT) Deduction Cap

The current $10,000 limit on how much you can deduct for state and local taxes has changed. The SALT limitation is increased to $40,000 ($20,000 for married separate filers) and indexed for inflation through tax year 2029, after which the limitation would revert to $10,000 ($5,000 for married separate filers). This limitation is phased down for taxpayers with modified adjusted gross income over $500,000. While it’s not a complete removal of the cap, this higher limit offers potential tax relief for many homeowners and those living in states with high taxes by lowering their taxable income.

Auto Loan Interest Deduction

For a temporary period from 2025 through 2028, you may be able to deduct up to $10,000 per year in interest paid on qualified auto loans. This deduction is generally for loans on vehicles primarily assembled in the U.S. and phases out for single filers with adjusted gross income over $100,000 (or $200,000 for joint filers). This could mean notable tax savings for eligible car buyers.

Charitable Contributions for Non-Itemizers

For tax years 2025 through 2028, the bill brings back a limited charitable contribution deduction for those who do not itemize. This allows non-itemizers to deduct up to $150 for single filers and $300 for married couples filing jointly. While a modest amount, this encourages small-scale giving and offers a small tax saving.

Tax Credit for Contributions to Scholarship Granting Organizations

A new nonrefundable tax credit is now available for contributions to qualified scholarship-granting organizations.

Miscellaneous Itemized Deductions

The ability to deduct miscellaneous itemized expenses has been permanently repealed. This means certain unreimbursed employee expenses and investment expenses remain non-deductible. If you previously relied on these deductions, this could result in higher tax costs.

Estate and Gift Tax Exemption

The bill permanently increases the exemption amount for estate and gift taxes to an inflation-adjusted $15 million per person starting in 2026. This means more wealth can be passed down without federal estate or gift tax, leading to significant tax savings for high-net-worth individuals and families and providing more certainty for estate planning.

What You Should Do Next

The One Big Beautiful Bill Act is a comprehensive piece of legislation with many details that could affect your financial situation. Understanding how these changes specifically apply to you or your business is key. We encourage you to:

• Review your current tax planning: The permanent and modified provisions might require you to change the strategies you used before.
• Identify potential tax savings: Look closely at where the new deductions and incentives, especially for R&D and business investments, can benefit you or your business.
• Understand new potential costs: Be aware if any new taxes or limits will increase what you owe.

The tax rules under H.R.1 are detailed. Proactive planning is essential to maximizing your benefits and reducing your tax liability. Our team at Calvetti Ferguson is here to help you navigate these changes and create a tax strategy that works for your unique situation.

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