Everything You Need To Know About The One Big Beautiful Bill Act

Our Head of Tax Advisory Kristin Carter has nearly 20 years of expertise in tax compliance and planning, and spearheads our tax advisory team. Her mission: to make the ins and outs of taxes approachable and exciting. She’s the most passionate person about taxes we know, and one of the most fun. 

The One Big Beautiful Bill Act (H.R.1 - 119th Congress) was signed into law on July 4, 2025. While the name may lean flashy, the substance runs deep. For our clients — especially founders, early employees, business owners, and high-net-worth families — this law introduces a mix of permanent tax relief, planning windows, and policy curveballs.

Some changes are retroactive to the start of 2025. Others don’t kick in until 2026. Some are permanent. Others are temporary. What matters is understanding which of these changes impact you and your family — and what to do about it.

Let’s walk through the key updates and their impact.

📜 Core Tax Changes

✅ Lower Individual Tax Rates Made Permanent

The historically low Tax Cuts and Jobs Act rates (with the top rate being 37%) are here to stay. The top of the 10- and 12-percent brackets got a bump as well, creating some additional relief for all taxpayers. These changes permanently lock in the wide brackets and lower marginal rates we’ve seen since 2018 — great news for anyone with high wages, equity comp, K-1 income, or capital gains.

✅ Standard Deduction Increased (Retroactive to 2025)

• $15,750 for single / MFS
  
• $23,625 for Head of Household
  
• $31,500 for married filing jointly

All indexed for inflation going forward.

⚠️ But New Limits for High-Income Earners

If you’re in the 37% bracket, itemized deductions will only reduce your income by $0.35 on the dollar. On top of that, there’s a new 0.5% floor on charitable contributions. This reduces the overall benefit of itemized deductions, particularly for high income earners.‍

✅ SALT Cap Raised Temporarily

The $10,000 deduction cap for state & local taxes jumps to $40,000 starting in 2025 and is indexed for inflation.

But:

• The change is temporary (reverting to $10k in 2030)
  
• It phases out starting at $500,000 of MAGI and completely phases out at $600,000 — regardless of filing status. 

Translation: Many high-income earners — especially those who are married with dual income — won’t feel this relief.

✅ Child Tax Credit Increased

Child tax credit increased to $2,200 per child and indexed for inflation starting in 2025.

✅ New Deduction for Seniors

A new $6,000 “Senior Deduction” (for those age 65 and older) is available from 2025 to 2028, but it phases out at $75k (single) / $150k (married). Most of our clients won’t qualify — but it’s worth knowing what you do and don’t qualify for.

📊 QSBS: Big Wins for Founders & Investors

This is a big one for a lot of our clients. For founders, early employees, and investors, the changes to Qualified Small Business Stock (QSBS) are some of the most exciting!

These changes only apply to stock acquired after July 4, 2025 (“post-enactment”), and allows earlier liquidity events to come with at least some tax relief.‍

✅ Shorter holding period, partial benefit

• 3 years → 50% exclusion
  
• 4 years → 75% exclusion
  
• 5+ years → 100% exclusion (unchanged)

✅ Eligibility expanded

The gross asset limit increased from $50M to $75M, indexed for inflation. This lets more scaling startups issue QSBS-eligible equity.

✅ Exclusion cap increased

The gain exclusion jumps from $10M to $15M per company (or 10× basis—whichever is greater), starting with post-enactment shares. Indexed for inflation beginning in 2027.

🔍 What this means: If you’re raising or exercising options after July 4, 2025, you could lock in more flexibility and tax savings. And if you’re investing in multiple startups, these changes compound quickly.

🛡️ Estate Planning: Certainty at Last

✅ Exemption increased to $15M per person ($30M per couple)

This is a major win for our clients. Beginning in 2026, the lifetime exemption rises to $15 million per person ($30M per couple), indexed for inflation.

Unlike the original TCJA increase, this one doesn’t sunset. That provides real planning clarity and a longer runway to set into motion more complicated tax-savings opportunities, like gifting strategies and QSBS trust stacking.

📌 Planning opportunity: If you’ve held back on gifting because of sunset uncertainty, you now have room to revisit — and potentially simplify — your strategy.

🏢 Business Owner Benefits

✅ 20% QBI deduction made permanent

Section 199A is here to stay. A small but notable update: If you have at least $1,000 of QBI, you now get a minimum $400 deduction—even if your qualified income is modest.

✅ 100% bonus depreciation returns and is permanent

If you’re making capital investments (new computers, office equipment, etc.), you can expense it all immediately.

✅ Opportunity Zones extended through 2033

This keeps the window open for deferring gains and excluding post-investment appreciation by investing in Qualified Opportunity Funds (QOFs).

✅ The PTET (pass-through entity tax) workaround survives. 

A key win for business owners, particularly those in high-tax states. Despite changes to the SALT deduction (and after much previous discussion about the PTET workaround being on the chopping block), the federal PTET workaround was left fully intact — meaning founders and business owners in states like CA and NY can still deduct their full state tax burden at the entity level and sidestep the SALT cap. It’s one of the most valuable tools we have for mitigating federal income tax exposure for pass-through entity owners, and it’s not going anywhere (for now). Whew!

🌱 Clean Energy Credits: Fewer Incentives, Shorter Timelines

The OBBBA rolls back several clean energy tax credits introduced just a few years ago — especially those related to personal energy upgrades, electric vehicles, and green infrastructure.

For Individuals

If you were planning to install solar panels, upgrade HVAC systems, or purchase an EV, you’ll want to move quickly:

• Home Solar & Clean Energy Systems (30% tax credit):
  Expires after 2025. This includes solar panels, geothermal systems, and battery storage.
  → If you’ve delayed installation, 2025 is your last year to capture the credit.
  
• Home Energy Efficiency Upgrades:
  Credits for things like new windows, insulation, and heat pumps will also sunset after 2025.
  
• Electric Vehicle (EV) Tax Credit:
  The $7,500 federal credit for new EVs (and $4,000 for used ones) ends after September 30, 2025.
  → Delivery must be completed before the deadline to qualify.
  
• Home Charging Station Credit:
  Also phased out after 2025 — capped at $1,000 for individuals.

These changes aren’t retroactive, and they haven’t taken effect yet. But if you’re planning a home upgrade or vehicle purchase, timing is now critical.

For Business Owners

Business-focused clean energy incentives are also being scaled back:

• Credits for commercial EVs and charging stations begin phasing out after 2025.
  
• Investment and production tax credits for solar, wind, and other renewables phase down starting in 2027.
  
• Advanced manufacturing credits for green components (like solar cells and battery tech) phase out after 2027 for many items.

Takeaway: Whether you’re upgrading a home or investing in infrastructure, the clean energy incentives that once made these projects more financially attractive are quickly vanishing. If you’re planning to take advantage, 2025 may be your final window to do so.

New Deductions and Credits, But High-Earners Won’t Qualify

These provisions offer headline-worthy relief, but many of our clients won’t qualify:

❌ No tax on overtime and tips

• Up to $12,500 (or $25k joint) for overtime
  
• Up to $25k for qualified tips
  
• Phased out at $150k single / $300k joint MAGI

(These are “above the line” deductions — helpful if you qualify.)‍

❌ Car loan interest deduction

Deduct up to $10,000 of interest on new car loans (2025–2028), but only for lower-income households.

❌ Trump accounts

A new type of custodial IRA for minors under 18.

• $5,000 annual contribution limit
  
• $1,000 tax credit for accounts opened for children born between 2025–2028

This still seems light on details — but likely irrelevant for most of our clients unless you’re interested in gifting to grandchildren.

❌ New credit for donations to scholarship-granting orgs

Up to $1,700/year. Good to know, but capped and niche.

✅ Child and dependent care credit enhanced

• Max dependent care assistance program exclusion increased from $5,000 to $7,500
• The dependent care credit jumps from 35% to 50% for lower-income families
• Income phaseouts still apply

❗ AMT: Quietly Back in Focus

The AMT exemption was made permanent, but…

⚠️ The phaseout thresholds revert to pre-TCJA levels:

• $500K single / $1M joint
• both indexed for inflation

This means higher-income families will lose their AMT exemption faster than under the TCJA rules — potentially triggering unexpected AMT liability. This is especially relevant for those with incentive stock options or large preference item deductions.

Final Thoughts from Kristin

The One Big Beautiful Bill Act has a lot to like — for founders, for investors, and for anyone doing long-term financial planning. We now have:

• Permanent low rates and wide brackets
  
• Expanded QSBS rules & eligibility
  
• A historically high lifetime estate & gift tax exemption
  
• New benefits for founders and business owners

But we also have temporary perks, phaseouts that limit benefits for high-income earners, and a few new planning wrinkles — especially around itemized deductions and AMT. The most important thing is to understand how these changes impact you and your family.

If you’re thinking about exercising options, updating your estate plan, launching a new venture, or gifting to family, now’s the time to get a fresh plan in place. We’re already helping clients map strategies that make the most of this new law. Talk to a Compound Planning advisor to make sure you’re one of them.