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New and Revised Tax Provisions in the Big Beautiful Bill

  • Writer: Naila Sharifova, CPA, MST
    Naila Sharifova, CPA, MST
  • Jul 15
  • 4 min read

Well, after a lot of commotion and arguments, multiple revisions by the House and Senate, late night voting, and use of a tie-breaker by the VP, a new law aka the Big Beautiful Bill (BBB) got passed. I am not here to discuss the merits of the law in its entirety as it will inevitably bring division, but instead highlight some of the tax provisions impacting so many of us and our clients directly.


Certain tax provisions are effective for the year 2025, while others are not going into effect until 2026. As with any major bills, we should expect technical corrections in the form of a legislation to be passed which will provide further clarity on some provisions currently left up to interpretation.


Many tax practitioners were watching closely the 2024 election to determine how it may impact multiple tax provisions enacted in 2017, but which were set to expire in 2025. Depending on the election results, we were prepared to use alternative year-end planning suggestions either accelerating some income into 2024 and 2025 or buying ourselves more time with the expectation that TCJA provisions would likely get extended.  


Just a bit of a background of why the tax portion of the BBB was highly anticipated by tax professionals. Back in December 2017, the newly signed Tax Cuts and Jobs Act (TCJA) significantly overhauled the U.S. tax code, but many of its tax provisions were set to expire at the end of 2025. For example, most tax rates in seven tax brackets either got lowered or the brackets themselves got expanded under the TCJA. Standard deduction almost doubled under the TCJA, while personal exemption got eliminated, mortgages got capped at $750,000, and state income tax deduction got limited to $10,000. Child tax credit increased from $1,000 to $2,000 per child. Most impactful, perhaps, was the 20% qualified business income deduction which provided the 20% deduction for business income generated within the US which did not require actual cash spending.


Here are some personal income tax provisions extended/revised under the BBB. The list is not exhaustive:


1.      Tax rates and brackets got permanently extended.

2.      Personal exemptions we used to deduct prior to 2017 are now permanently gone.

3.      Child tax credit set to revert to $1,000 after 2025 got permanently extended to $2,200 per child. Effective for tax years 1/1/2026. The refundable portion of the credit is permanently made $1,700 with annual adjustment for inflation.

4.      Standard deduction set to revert to pre-TCJA amounts of $3,000 for single, $6,000 for married filing joint, and $4,000 for head of household, has been permanently extended to the following amounts: $15,750 for single, $31,500 for married filing joint, and $23,625 for head of households. These amounts are adjusted annually for inflation. Effective for tax years 1/1/2026.

5.      Mortgage limit of $750,000 is extended, and home equity interest deduction is permanently suspended (with the exception of use for acquisition, improving, or expanding the home).

6.      State and local income tax deduction limit of $10,000 which was set to expire in 2025 has been extended to $40,000 for year 2025, $40,400 in 2026, 1% increase in 2027-2029, and $10,000 in 2030. However, there is a phaseout of $40,000 for modified adjusted income greater than $500K, but not below $10,000.

7.      Casualty & theft loss deduction – permanent suspension of the casualty & theft loss deduction except for federally declared disasters.

8.      Miscellaneous itemized deductions such as investment and tax preparation fees are permanently suspended.

9.      Charitable contributions – there is a new 0.5% floor on charitable contributions. It means that only charitable contributions exceeding 0.5% of income will count toward charitable contributions. Effective for tax years 1/1/2026.

10. Charitable contributions – allows deduction for nonitemizers of up to $1,000 for single and $2,000 for married filing joint. Effective for tax years 1/1/2026.

11.  Alternative Minimum Tax – permanently extends AMT exemption.

12. Estate and gift tax – permanent extension of increase in estate and gift tax exemption to $15 mln per person ($30 mln for married filing joint). Effective for decedents passing away after 12/31/25.

13. No tax on overtime – this is a temporary deduction capped at $12,500 for single and $25,000 for married filing joint with the phaseout for income over $150,000 for single and $300,000 for married filing joint. Effective for taxable years after 12/31/24 and before 1/1/2029.

14. No tax on tips - this is a temporary deduction capped at $25,000 with the phaseout for income over $150,000 for single and $300,000 for married filing joint. Effective for taxable years after 12/31/24 and before 1/1/2029.

15. Deduction for auto loan interest – there is a temporary deduction of interest of up to $10,000 on an auto loan with the phaseout for income over $100,000 for single and $200,000 for married filing joint. Applies to new cars assembled in the US and purchased in 2025-2028. Effective for taxable years after 12/31/24 and before 1/1/2029.

16. Extra deduction for seniors of $6,000 but with the phaseout for income over $75,000 for single and $150,000 for married filing joint. Effective for taxable years after 12/31/24 and before 1/1/2029.


There are many more provisions including the ones for businesses which I will cover in subsequent posts.

 
 
 

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