Brad Gold, Director, Head of Tax
On July 4th, President Trump signed the One Big Beautiful Bill Act (OBBBA) into law. Along with other provisions, OBBBA includes a robust and broad package of tax benefits and revenue raisers likely to affect the overwhelming majority of people and entities subject to US taxation.
Regarding the tax revisions, OBBBA focuses primarily on the following categories:
- Extends or makes permanent various provisions first legislated in 2017’s TCJA
- Restores tax advantaged treatment for certain business expenditures
- Materially restructures the international tax regime; and
- Reduces clean energy tax incentives.
Below is a brief summary of the main tax aspects of OBBBA that affect corporate and individual taxpayers. The changes brought about by OBBBA are wide-ranging and impactful and prudently require consultation with your tax advisor.
Business Expenditures
- Depreciation: Permanently reinstates 100-percent “bonus” depreciation for property acquired and put into service effective beginning January 20, 2025. Expands definition of property eligible for immediate, full expensing.
- Interest Expense: Permanently reverts to a favorable EBITDA approach for computing allowable business interest expense limitations for tax years beginning in 2025. The provision is permanent.
- R&D: Permanently permits immediate expensing of domestic R&D expenditures. Provides an option to deduct the remaining unamortized basis of research costs previously capitalized for 2022 through 2024.
- Meals Deduction: Provides selected relief to claim additional deductions for on-premises employer-provided meals, effective beginning in 2026.
International Tax
- Substantial changes to:
- Foreign Tax Credits: Relating primarily to Section 960 deemed paid credits, and PTEP under Section 951A.
- SubPart F: Section 954(c)(6) look-through rule for related party payments is made permanent.
- Global Intangible Low-Tax Income (GILTI): Permanent reduction to 40-percent, for the Section 250 deduction, while also renaming GILTI to “Net CFC Tested Income” (NCTI).
- Foreign Derived Intangible Income (FDII):
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- Permanent reduction to 33.34-percent, for the Section 250 deduction
- Renames FDII to “foreign-derived deduction eligible income” (FDDEI); and
- Excludes interest expense and R&D expense from apportionment to properly allocable deductions.
- Base Erosion and Anti-Abuse Tax (BEAT): Permanently changes the rate to 10.5%.
- Other:
- Restores Section 958(b)(4) elimination of general downward attribution from a foreign person; introduces new Section 951B requiring new downward attribution with respect to certain foreign-controlled US shareholders.
- New requirement expands CFC income apportionment based on US shareholders’ actual ownership percentages during the income generating period, and not merely on ownership as of the end of the year. The OBBBA modifies and/or makes permanent several individual tax provisions that the TCJA established. Areas of focus and corresponding tax proposals include:
Individuals
- Schedule A SALT Deduction: The SALT limitation is increased to $40,000 ($20,000 for married separate filers) and indexed for inflation through tax year 2029; the limitation is phased-out for taxpayers with modified adjusted gross income exceeding certain thresholds. After 2029 the SALT deduction limitation reverts to $10,000.
- Tax Rates: Makes permanent the current rates and brackets, effective beginning January 1, 2026.
- Standard Deduction: Makes permanent the amounts enacted by the TCJA and includes increases for 2025; further provides for future increases as adjusted for inflation.
- Itemized Deductions: Eliminates miscellaneous itemized deductions category; imposes an overall itemized deductions percentage cap for higher income individuals.
- Personal Exemptions: The elimination of personal exemptions is now made permanent.
- Tips and Overtime Pay: New beneficial provisions offering above-the-line deductions to offset tax computed on certain types and levels of tips and overtime.
- Individual Trust Accounts (Trump Accounts): Newly created tax-favored account benefitting children under age 18, for education, small business investments and first home purchases.
- Estate and Gift Tax: permanently increases the lifetime exclusion amount to $15 million, adjusted for inflation, effective Dec. 31, 2025.
Miscellaneous
- Qualified Small Business Stock (QSBS): Expansion of Section 1202 benefits associated with the gain on sale of QSBS.
- Opportunity Zones (OZ): Generally expands various provisions to foster further tax-advantaged investments in economically depressed areas.
- Excise Tax on Remittance Certain Overseas Transfers: Establishes a 1-percent excise tax on certain electronic transfers of money sent from within the US to a foreign country, where the sender provides cash, money order, or cashier’s check.
