The One Big Beautiful Bill Act became law on July 4, 2025, creating immediate planning and investing opportunities. This sweeping legislation makes permanent many Tax Cuts and Jobs Act provisions that were set to expire and adds roughly $3 trillion to the national debt while.
The law combines permanent tax changes with temporary benefits expiring in 2028. Several provisions took effect immediately or retroactively to 2025, while others begin in 2026. Many changes have important implications for optimizing your financial strategy.
What became permanent
Tax Brackets and Structure: The seven-bracket tax structure from the Tax Cuts and Jobs Act becomes permanent. Without this change, tax rates would have reverted to higher pre-2018 levels for most income brackets.
Pass-Through Business Deduction: The 20% deduction for qualified business income (Section 199A) becomes permanent. This affects owners of LLCs, S-corporations, partnerships, and sole proprietorships who can deduct 20% of qualified business income from their taxable income.
Estate and Gift Tax Exemptions: Beginning January 1, 2026, you can transfer $15 million per person ($30 million for married couples) without triggering estate or gift taxes. This exemption is permanent and will increase with inflation. Previously, the exemption was set to drop to around $7 million in 2026.
Investment Tax Credits: The New Markets Tax Credit becomes permanent. This provides ongoing opportunities for investments in low-income communities. Opportunity Zones also become permanent with rolling 10-year designations starting January 1, 2027.
Higher limits and increased deductions
Standard Deductions: Standard deductions increased to $31,500 for married couples filing jointly and $15,750 for single filers. These amounts will increase with inflation each year.
Estate and Gift Tax Exemptions: The same $15 million per person exemption mentioned above also represents a significant limit increase from the current $13.99 million threshold.
State and Local Tax Deduction: The SALT deduction cap increases from $10,000 to $40,000 for taxpayers making less than $500,000. This change lasts five years before reverting to $10,000.
Child Tax Credit: The Child Tax Credit increases to $2,200 per child beginning in 2025 and will increase with inflation going forward.
Annual Gift Tax Exclusion: You can now give $19,000 per person annually without using your lifetime exemption, up from previous limits.
Temporary benefits expiring in 2028
Worker Benefit Deductions
- Tips deduction capped at $25,000 for workers making less than $150,000
- Overtime pay deduction capped at $12,500 for workers making less than $150,000
- $6,000 senior deduction for those age 65 and older, phasing out at higher incomes
Auto Loan Interest Deduction: Up to $10,000 deduction for auto loan interest on US-assembled vehicles. This phases out for incomes over $100,000 single or $200,000 married.
Business tax changes
Equipment and Asset Purchases: 100% bonus depreciation returns for property placed in service after January 19, 2025. This means you can deduct the full cost of qualifying equipment, vehicles, and other business assets in the year you buy them instead of depreciating them over multiple years.
Section 179 Expensing: The immediate expensing limit for business equipment increased to $2.5 million with a $4 million phase-out threshold.
Research and Development: You can immediately deduct domestic research and development expenses instead of spreading them over multiple years. Foreign R&D expenses still must be deducted over 15 years.
International Business Rules: New rules for multinational corporations take effect December 31, 2025. These involve complex international tax calculations (GILTI, FDII, and BEAT rates) that primarily affect large companies with significant overseas operations.
Stocks and sectors that could benefit (or not)
Benefiting Sectors
- Domestic Manufacturing: The Advanced Manufacturing Credit increased from 25% to 35% for property placed in service after 2025, enhancing profitability for US-based manufacturers
- Traditional Energy: With many clean energy incentives reduced or eliminated, traditional energy companies may benefit from reduced competition
- Construction and Equipment: 100% bonus depreciation could increase business equipment investment, benefiting machinery, construction, and industrial companies
- Real Estate: Permanent Opportunity Zones and increased REIT subsidiary limits (from 20% to 25% of assets) provide more investment flexibility
- Automotive: US-assembled vehicles benefit from the new auto loan interest deduction
Challenged Sectors
- Electric Vehicles: Tax breaks for EVs expire September 30, 2025, instead of continuing through 2032
- Renewable Energy: Multiple Inflation Reduction Act credits are repealed or restricted, with some unavailable for facilities beginning construction 60 days after the law’s enactment
- Healthcare: Significant Medicaid cuts totaling nearly a trillion dollars over the next decade may pressure healthcare companies serving lower-income populations
Mixed Impact
- Technology: Immediate R&D expensing benefits domestic tech companies, while international tax changes may affect multinational tech firms differently
Investment accounts for children
The legislation creates new “Trump Accounts” that function as specialized savings accounts for children. Here’s how they work:
You can contribute up to $5,000 annually to these accounts. The money goes in after-tax (like a Roth IRA), grows tax-free, and can be withdrawn tax-free for qualified expenses. The government provides a $1,000 tax credit for opening accounts for children born between January 1, 2025, and December 31, 2028.
These accounts can be professionally managed like other investment accounts. The $5,000 annual limit is relatively small, but the $1,000 opening credit effectively provides a 20% immediate return on the first year’s contribution. For families with multiple children born during the eligible period, this could represent significant value.
The accounts may work well alongside 529 education plans and other children’s savings strategies, though the specific qualified expenses and withdrawal rules will need clarification through Treasury regulations.
Timeline to implementation
Already in Effect (Retroactive to 2025)
- Higher standard deductions
- Child Tax Credit increase to $2,200
- Senior, tips, and overtime deductions
- Auto loan interest deduction
- 100% bonus depreciation (from January 19, 2025)
Beginning January 1, 2026
- Estate tax exemption increases to $15 million per person
Beginning December 31, 2025
- New international tax rules for multinational corporations
Key Expiration Dates
- September 30, 2025: Electric vehicle tax breaks end
- 2028: Temporary worker benefit deductions expire
- Five years from enactment: Enhanced SALT deduction cap expires
What to review
Estate Planning Review: The permanent $15 million per person exemption unlocks generational wealth transfer strategies. Utilizing an irrevocable trust can remove appreciating assets from your taxable estate while preserving the full exemption for future use.
Investment Portfolio Adjustments: Sector implications from changes to energy incentives and manufacturing credits may warrant sector rotation. Some changes are permanent while others are temporary, which creates market timing opportunities.
Business Investment Timing: 100% bonus depreciation creates immediate opportunities for business owners invest in equipment purchases and reduce current taxes. Increased Section 179 limits provide additional flexibility for smaller purchases.
Tax Planning Strategies: Multiple temporary deductions create specific windows for optimization. High earners in high-tax states should utilize SALT deduction benefits during the five-year window.
Retirement and Education Planning: New investment accounts for children can be combined with existing 529 plans and other education savings. The immediate tax credit for opening accounts provides clear value for qualifying families.
Conclusion
The One Big Beautiful Bill Act creates both immediate and future opportunities. The mix of permanent and temporary provisions requires sophisticated coordination to maximize benefits while preparing for eventual expirations.
Many changes necessitate professional attention to capture the full benefit. The key is understanding which provisions apply to your specific situation and implementing appropriate strategies within the relevant timeframes.
Given the complexity and immediate nature of many provisions, professional guidance helps ensure you capture available benefits while avoiding compliance pitfalls. Ready to see if these changes create opportunities in your specific situation? Our quick 4-question assessment helps determine if we’re a good fit to guide you through these planning decisions. Start here.
