Navigating the Maze: The "One Big Beautiful Bill Act" Is Law
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Summary Guide to the New Tax Landscape for High-Income, Wealthy & Passthrough Entity Business Owners
July 31, 2025 (Updating this Blog Post from Jul 7, 2025)
The tax code has undergone its most significant update in years. The "One Big Beautiful Bill Act" (OBBBA) has been officially signed into law, moving from proposal to permanent policy. For high-income business owners, especially those operating passthrough entities like S-Corporations and partnerships, this law solidifies many favorable provisions from the 2017 Tax Cuts and Jobs Act (TCJA) and introduces new rules that need attention.
This isn't just an extension of the status quo; it's a fundamental shift that creates long-term certainty and opens new doors for strategic income and financial planning. Below, we break down the most critical components of the new law and what they mean for you, your family, and your business.
Disclaimer: This summary is for informational purposes and is based on the final version of the Act. Tax laws are complex, and their application depends on individual circumstances. Please consult with your tax professional for tax advice focused on your specific situation. We do not provide legal or tax advice.
Key Provisions for High-Income Individuals & Families
The new law provides significant stability for personal tax planning, making many familiar provisions permanent.
Permanent Individual Tax Rates: The existing individual income tax rates (10%, 12%, 22%, 24%, 32%, 35%, and 37%) are now permanent.
Benefit: This removes the uncertainty of expiring tax cuts, allowing for confident, long-term income planning and investment strategy.
State and Local Tax (SALT) Deduction: The cap on deducting state and local taxes is temporarily increased to $40,000 (with a $20,000 cap for married filing separately), effective beginning in 2025 through 2029. However, for taxpayers with Modified Adjusted Gross Income (MAGI) over $500,000 in 2025, the $40,000 cap phases down, though it will not go below $10,000. In 2030, the cap reverts to $10,000 with no income limits.
Example: Example: For instance, if a family has a MAGI of $700,000, which is $200,000 over the $500,000 threshold , their increased $40,000 cap would be reduced by $60,000 (30% of $200,000). Because this reduction exceeds the increased cap, their SALT deduction would be limited to the $10,000 floor. This ensures the deduction does not drop below $10,000, even for very high incomes.
Key Strategy: Crucially, for some states with income tax, the law does not limit the ability of passthrough entities to elect to pay state income taxes at the entity level (a Pass-Through Entity Tax (PTET)). For business owners with operations in states with an income tax, the PTET remains a powerful and now federally-secured strategy to deduct state taxes without being subject to the individual SALT cap.
Standard & Itemized Deduction
Standard Deduction: For those who don't itemize, the law permanently enacted the higher standard deduction amounts from the TCJA, which almost doubled the standard deduction from the 2017 amounts. For tax year 2025, the standard deduction for individuals is $15,570, for married couples filing jointly is $31,500, and for heads of household is $23,625, with inflation adjustments in subsequent years. If instead you itemize your deductions, see below.
New Itemized Deduction Limitation: The old "Pease" limitation is replaced with a new rule. Under the new rule, for tax years after December 31, 2025, your total itemized deductions are now reduced by 2/37 of the lesser of (1) your total itemized deductions or (2) the amount your taxable income exceeds the start of the 37% tax bracket (approx. $751,600 for married couples in 2025).
Example: A family has $1,500,000 of taxable income and $120,000 in itemized deductions. Their income exceeds the 37% bracket threshold by about $748,400. The lesser amount is their $120,000 of deductions. Their itemized deductions will be reduced by $6,486 ($120,000 x 2/37).
Disallowed Miscellaneous Itemized Deductions: Certain miscellaneous itemized deductions, which were temporarily disallowed under the TCJA, are now permanently disallowed for individual taxpayers for tax years beginning after December 31, 2025. These include items like investment advisory fees, legal fees, and tax preparation costs.
Key Strategy: Planning, where applicable, could be considered to mitigate parts of this disallowance.
Mortgage Interest & Wagering: For taxable years after December 31, 2025, the current $750,000 limitation on mortgage acquisition debt for the interest deduction is made permanent, along with the permanent exclusion of interest on home-equity indebtedness from qualified residence interest. The act also treats certain mortgage insurance premiums on acquisition indebtedness as qualified residence interest. Additionally, for taxable years after December 31, 2025, wagering loss deductions would be limited to 90% of the amount of those losses, and losses will be deductible only to the extent of the taxpayer's gains from wagering transactions during the tax year.
Additional Senior Deduction (Temporary): For tax years 2025 through 2028, individuals age 65 and older can claim an additional deduction of $6,000 ($12,000 for a married couple if both qualify), in addition to the existing standard deduction. This deduction phases out for taxpayers with Modified Adjusted Gross Income (MAGI) over $75,000 ($150,000 for joint filers).
Key Strategy: If you, your parents or grandparents are an eligible senior client, this temporary deduction can further reduce your taxable income. You could explore accelerating income (e.g., Roth conversions or IRA withdrawals) into these years to leverage this increased deduction, especially if you are below the phase-out thresholds.
Temporary Deductions for Tips and Overtime Pay: For tax years 2025 through 2028, individuals can claim a new deduction of up to $25,000 for qualified cash tips and up to $12,500 ($25,000 for joint filers) for qualified overtime compensation. These deductions phase out for taxpayers with MAGI over $150,000 ($300,000 for joint filers). If your income includes significant tips or overtime, these temporary deductions can help reduce your taxable income during these years.
Auto Loan Interest Expense (Temporary): For taxable years 2025 through 2028, the OBBBA introduces a temporary deduction for qualified passenger vehicle loan interest. This excludes the interest from being considered 'personal interest' for tax purposes. The deduction is capped at $10,000 per year and begins to phase out for taxpayers with Modified Adjusted Gross Income (MAGI) exceeding $100,000 ($200,000 for married couples filing jointly). To qualify, the loan must be incurred after December 31, 2024, for the purchase of a new car with its final assembly in the United States, and secured by a first lien on the vehicle for personal use. This deduction is not adjusted for inflation. For business owners, there are existing ways to deduct their business use of their vehicle.
Permanent $15 Million Estate & Gift Tax Exemption: This is one of the most significant provisions for wealth transfer. Effective January 1, 2026, the lifetime estate and gift tax exemption is permanently increased to $15 million per person ($30 million per married couple), indexed for inflation starting in 2027.
Example: A couple with a $30 million estate, who under the old law (prior to TCJA) would have faced a potential 40% estate tax on approximately $16 million of their assets, can now pass their entire estate to their heirs tax-free. This represents a potential tax saving of over $6.4 million.
Benefit: This provides an incredible opportunity for tax-efficient wealth transfer and simplifies estate planning for wealthy families.
Game-Changing Provisions for You and Your Business
The law locks in powerful incentives for business investment, growth, and innovation.
Permanent 100% Bonus Depreciation: Businesses can now immediately deduct 100% of the cost of qualifying new and used assets, such as equipment and machinery. This also applies to shorter-life depreciable assets (e.g., HVAC, plumbing, certain electrical components, landscaping) within commercial and rental residential real estate, which are classified as tangible personal property with a useful life of 20 years or less. To properly identify and reclassify these real estate costs from the building into their shorter-life components, a cost segregation study might be needed. This is effective for property acquired and placed in service on or after January 19, 2025.
Benefit: This is a powerful tool for managing taxable income, especially when combined with the enhanced Section 179 expensing. Businesses typically apply the Section 179 deduction first (up to its $2.5 million limit, provided total equipment purchases don't exceed the $4 million phase-out threshold). Then, 100% bonus depreciation allows the business to deduct the full remaining cost of the qualifying assets, with no upper limit on the total purchase amount. This one-two punch provides a compounded benefit, allowing businesses making significant capital investments to write off the entire cost in a single year, dramatically lowering their tax bill and improving cash flow for reinvestment.
Section 179 Expensing: The maximum expensing amount under Section 179 would be increased to $2.5 million, with the phase-out threshold rising to $4 million, providing more flexibility for capital investments. This is effective for property placed in service after December 31, 2024.
Permanent QBI Passthrough Deduction: The 20% Qualified Business Income (QBI) deduction is now permanent, securing a critical tax break for owners of S-Corps and partnerships. For 2026, the new law expands the taxable income phase-out range to $150,000 for married couples (up from $100,000) and $75,000 for single filers (up from $50,000). We do not know the 2026 income thresholds for when these phase-out ranges start, however, for 2025 the limitations on the deduction begin to apply at taxable incomes over approximately $394,600 for married couples and $197,300 for single filers. The 2026 income thresholds will likely be slightly higher.
For owners of Specified Service Trades or Businesses (SSTBs)—such as doctors, lawyers, and consultants—the deduction is completely phased out once their income exceeds the top of this new, higher range. For other business owners, the deduction above these thresholds is limited by W-2 wages or the basis of business property.
Example: A married manufacturing business owner with $2,000,000 in QBI and who pays $1,000,000 in W-2 wages would have their deduction limited to the lesser of $400,000 (20% of QBI) or $500,000 (50% of W-2 wages), resulting in a full $400,000 deduction. In contrast, a married medical doctor with the same $2,000,000 of income would receive $0 for the QBI deduction, as their income is well above the complete phase-out threshold for an SSTB.
Benefit: The permanency of this deduction is a major win. The expanded phase-out range also allows some business owners to retain more of this valuable deduction than under the prior law, especially for SSTBs.
Immediate R&D Expensing: The requirement to amortize domestic Research & Development (R&D) expenses over five years has been eliminated. Businesses can now immediately deduct these expenses in the year they are incurred. This is effective for tax years beginning after December 31, 2024. Also, for small business taxpayers with average annual gross receipts of $31 million or less, this change can be applied retroactively to tax years beginning after December 31, 2021. They have until July 4, 2026 (one year from the Act's enactment) to make this election and can amend 2022-2024 returns for refunds or take catch-up deductions. All other taxpayers (average gross receipts above $31 million) with domestic R&D expenses incurred after December 31, 2021, and before January 1, 2025, can elect to accelerate any remaining unamortized amounts over a one- or two-year period, starting in the first taxable year beginning after December 31, 2024 (i.e., 2025).
Example: A tech company with $500,000 in domestic R&D costs can now deduct the full $500,000 in the current year, instead of only $100,000 under the old amortization rule. This, combined with the separate R&D Tax Credit, provides a major boost for innovation.
Favorable Business Interest Limitation (Sec. 163(j)): Effective starting with the 2025 tax year, the calculation for the business interest deduction limitation is permanently based on earnings before interest, taxes, depreciation, and amortization (EBITDA).
Benefit: This more generous EBITDA-based calculation allows most businesses, particularly those with significant capital assets, to deduct a larger portion of their interest expense each year.
Expanded Qualified Small Business Stock (QSBS) Exclusion: The OBBBA significantly increases the exclusion for gains from Qualified Small Business Stock (QSBS) to $15 million per shareholder. This exclusion now applies on a tiered basis: 50% for stock held at least three years, 75% for stock held at least four years, and 100% for stock held at least five years. The aggregate gross asset test for QSBS eligibility also increases from $50 million to $75 million. These changes generally apply to QSBS acquired after July 4, 2025.
Reduced Reporting Burden: Effective starting with the 2025 tax year, the bill raises information reporting thresholds, easing compliance for businesses. The Form 1099-K threshold would revert to its prior, higher level (more than 200 transactions AND over $20,000), and the general Form 1099 reporting threshold for services would increase from $600 to $2,000.
Your Next Steps
The "One Big Beautiful Bill Act" provides a stable foundation for financial planning that we haven't seen in years. The permanency of these key provisions allows for the development of robust, multi-year strategies for income management, business investment, and wealth creation and transfer.
Now is the time to act. The opportunities presented by this new law are significant, but they require careful planning to maximize their benefit. We encourage you to contact us to discuss how this new tax environment impacts your financial plan to ensure it is optimized. For specific tax advice, please contact your tax professional, which we will do with you if you are or want to be a client.
Sources: This summary is based on reporting from the following publications and the final text of the Act:
Loeb & Loeb LLP Client Alerts/Reports: "The One Big Beautiful Bill Act: Breaking Down Key Changes In The New Tax Legislation," by Alyse N. Pelavin, Cristine M. Sapers, Diara M. Holmes, Jennifer M. Smith, Kimberly Eney, Meghan R. Biss, Ryan M. Austin, and Ana Maganto Ramirez, dated July 7, 2025.
AICPA Town Hall OBBBA Slides: "H.R. 1 key tax provisions," presented July 14, 2025.
The One Big Beautiful Bill Act (H.R. 1): "An Act to provide for reconciliation pursuant to title II of H. Con. Res. 14," enacted July 1 (legislative day, June 30), 2025.
Journal of Accountancy: "Tax provisions in the One Big Beautiful Bill Act," by Alistair M. Nevius, J.D., originally published June 29, 2025, and updated July 7, 2025.
Proskauer Tax Talks: "President Trump Signs One Big Beautiful Bill Act into Law," by Richard M. Corn, Robert A. Friedman, Martin T. Hamilton, David S. Miller, Amanda H. Nussbaum & Rita N. Halabi, dated July 22, 2025.
AICPA Tax Section: "Effective dates of tax provisions in H.R. 1, the One Big Beautiful Bill Act (H.R. 1)," reviewed July 18, 2025.
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