July 7, 2025 – After being passed in the Senate on Tuesday, July 1st, and then being re-passed in the House of Representatives on Thursday, July 3rd, President Trump signed into law on July 4th his major priorities bill for his first year back in office. This bill included a variety of provisions and touched many different areas of government, and it included a large section devoted to changes to the Federal Tax Law.

The team at HBE has been monitoring these tax law changes and has been sending updates out over the past few months, highlighting the proposed legislation. After first passing in the House in late May, the bill underwent some major changes in the Senate’s version. The Senate, itself, ended up making a few key changes to its version before passing the legislation, and the House ended up approving the Senate’s version of the bill.

Positive Tax Implications

From a tax perspective, there are some positive details we want to emphasize for our clients, in addition to providing details on key provisions. Big picture, there are two major positives to focus on: permanency of key components and no changes to Pass-Through Entity Tax (PTET) for business owners. From the point of view of permanency, the majority of the provisions from 2017’s Tax Cuts & Jobs Act (TCJA) have been made permanent, including things like lower tax rates, wider tax brackets, a higher standard deduction, the QBI deduction, expensing of R&D costs for businesses, bonus depreciation, and more. 

Making these items permanent helps taxpayers plan better, and we do not have to worry about needing to deal with extensions of this law in the future. Of course, future presidents and Congress could (and likely will, at some point) make changes to these items, but it makes it much more stable for now. Both the House’s version of the bill and the Senate’s first draft included various mechanisms that would have limited business owners’ ability to deduct PTET taxes paid by their partnerships or S corporations. We are very glad to see that the final legislation removed all of those restrictions, so business owners will continue to benefit from this!

Changes to Energy Credits

While many of the tax-related changes in this legislation are generally positive for taxpayers, some changes will reduce credits for taxpayers, primarily related to energy credits. In particular, individuals should be aware that credits for residential energy improvements and electric vehicles are going away, and businesses should understand that energy credits, particularly for solar and wind projects, are going away far sooner than originally expected.

Key Details of the New Legislation

Below are some of the key details of the new legislation. In the coming months, we’ll be working here at HBE to help you determine what impacts you might see in your own tax situation and how to prepare.

HBE will be hosting a 10 Minute Tuesday on Tuesday, July 15th, all about this new tax legislation, so watch for information on that, and we encourage you to attend!

• Extension of 2017 Tax Cuts & Jobs Act (TCJA): The bill seeks to make permanent the individual and estate tax cuts enacted under the TCJA. Included in the items made permanent are lower tax rates and wider tax brackets (Top Rate of 37%), a higher standard deduction ($31,500 for married taxpayers for 2025), and a higher estate & gift threshold ($15 million per person). Making these provisions permanent means that we will not have to deal with the sunsetting of provisions in the future, though future legislation could change tax laws.
• SALT Itemized Deduction Cap Increase: The state and local tax (SALT) deduction cap would rise from $10,000 to $40,000 for households with incomes under $500,000, starting in 2025. The amount would increase each year through 2029, but would then revert to $10,000 beginning in 2030. Higher-income taxpayers would see the higher limit phase down when income exceeds $500,000.
• Other Itemized Deduction Changes: Higher-income taxpayers who itemize will see new limitations on their total itemized deductions. Miscellaneous itemized deductions had been suspended by the TCJA, and they were permanently removed by this bill. In addition, there’s a new minimum floor to exceed before charitable contributions can be deducted – only contributions in excess of .5% of your contribution base (generally your AGI) can be deducted. For those who do not itemize, there will be a deduction allowed beginning in 2026 of $1,000 (single) / $2,000 (married).
• Casualty Loss Deductions: This provision makes permanent TCJA rules that limit casualty losses to only being deductible when they occur in officially designated disaster areas. One positive change here, however, is that they updated the rules to include certain state/local-declared disasters; previous rules only allowed the losses in federally-declared areas.
• Temporary Boost in Deductions for Senior Citizens: Seniors, who are 65 or older, will have an additional $6,000 deduction for tax years 2025 through 2028. This does phase out as income goes over $75,000 (Single) / $150,000 (Married).
• Child Tax Credit Expansion: The child tax credit would permanently increase to $2,200 per child.
• Child Care Credit / Dependent Care Assistance Programs: The base child tax credit rises from 35% of costs to 50% of costs, with the credit still going down as AGI increases. There is also a provision that increases the amount excludable from income under Section 129 plans for dependent care to $7,500, up from $5,000.
• Deduction for Tip Income: A key provision that President Trump had campaigned on, the bill temporarily provides a deduction of up to $25,000 per individual for tip income for those who have income from businesses that generally have tipped employees. The deduction is for tax years 2025 through 2028. This deduction phases out for higher-income taxpayers.
• Deduction for Overtime Income: Similar to the provision for tips, this was a campaign focus for the President. Under this provision, there’s a temporary deduction of up to $12,500 per individual ($25,000 for joint returns) for overtime compensation received from 2025 through 2028. This deduction phases out for higher-income taxpayers.
• Deduction for Car Loan Interest: This provision creates a temporary deduction of up to $10,000 for interest paid on car loans. This is in effect for 2025 through 2028, and phases out as income goes above $100,000 (single) / $200,000 (married). The vehicle must have been financed after December 31, 2024, and the vehicle must have had its final assembly in the United States to qualify for the deduction.
• Trump Accounts: Introduced in the House’s version of the bill as a savings account for minors, it has morphed through the final bill into a type of traditional IRA for minors. These accounts can have contributions (up to $5,000 a year indexed for inflation) made each year until the beneficiary turns 18. Distributions are not allowed until after the beneficiary turns 18. Accounts must be designated as Trump Accounts when they’re set up, and contributions are not allowed to be made until 12 months after the bill’s enactment date, or July of 2025. Along with this, there is a pilot program that provides a $1,000 tax credit for opening a Trump account for children born between January 1, 2025, and December 31, 2028.
• Qualified Business Income (QBI) Deduction: The 20% QBI deduction for pass-through entities would be made permanent. In addition, there are some increases to the phase-out range impacting some businesses, allowing more businesses to claim QBI or claim a larger QBI deduction than under existing law.
• Bonus Depreciation: Bonus depreciation, allowing some immediate write-offs for many fixed asset purchases other than real estate, would be restored to 100% for assets purchased after January 19, 2025; this is permanent, so there is no phase-out date for Bonus.
• Research & Development Expenses: Under this provision, businesses with research and development expenses are permanently able to immediately expense all domestic costs, though costs related to research outside of the United States must be capitalized and amortized over 15 years. In addition, businesses with annual gross receipts under $31 million annually are able to amend their returns for 2022 through 2024 to remove amortization of the costs that they’d previously been forced to amortize. In addition, taxpayers of all sizes will be able to expense any remaining amortized assets either fully in 2025 or half in 2025 and half in 2026.
• Clean Energy Incentives: A variety of clean energy incentives are being cut short through this legislation. Credits for electric vehicles, including personal use, used vehicles, and commercial vehicles, all end for vehicles purchased after September 30, 2025. In addition, credits for residential home energy credits will end for purchases made after December 31, 2025. Section 179D, which provides credits for energy-efficient commercial buildings, ends for properties that begin construction after June 30, 2026. A variety of credits for wind and solar projects will end for facilities and projects placed in service after December 31, 2027.

Future Updates

Overall, this bill represents largely an extension of the existing TCJA legislation that was set to expire at the end of 2025. At the same time, it also includes a variety of tweaks and changes that will impact a variety of different taxpayers.

Now that the bill has passed, more guidance will be coming from the IRS, and HBE will be working to keep our clients updated as more details continue to trickle out!