One Big Beautiful Bill Highlights
New Senior Exemption
- Up to $6,000 for 2025-2028 not indexed for inflation
- Married couples can claim for each spouse if both qualify
- Must file MFJ or qualify as unmarried to claim both
- Exemption is phased out if AGI exceeds $75,000 ($150,000 MFJ)
- Must provide SSN to claim, if married both spouses must have SSN (ITINs do not qualify)
SALT Deduction
- SALT limitation is made permanent
- Temporarily increased for 2025-2029, subject to an MAGI phasedown, but not below $10,000
- $40,000 for 2025, increases 1% per-year through 2029
- Applies to all taxpayers except MFS who are limited to $20,000
- Reverts to $10,000 ($5,000 MFS) starting with 2030
Passthrough Entity Taxes
- Prior versions of House and Senate bills would have restricted passthrough entity taxes and other SALT
limitation workarounds
- Nothing in the final bill, but we still don’t have final guidance on Notice 2020-75
Charitable Contribution Deduction
- Allows non-itemizers to claim charitable deductions of up to $1,000 ($2,000 MFJ) for 2025-2028;
- Permanently extends the 60% deduction for cash contributions; and
- Imposes a 0.5% floor for individuals who itemize starting in 2026
- Limit does not apply to pre-2026 carryovers
No Tax on Tips
- New above-the-line deduction of up to $25,000 for cash tips provided voluntarily to taxpayers in an “occupation that traditionally and customarily receive tips” (to be determined by Treasury Secretary) for the 2025 through 2028 tax years
- Still subject to SS and Medicare taxes
- May want to review withholding/estimates for clients who qualify for the deduction
No Tax on Overtime
- Above-the-line deduction for overtime pay of up to $12,500 ($25,000 MFJ) for 2025-2028
- Overtime = “qualified compensation” defined under §7 of the Fair Labor Standards Act of 1938 (aka hours above 40 hours per week for nonexempt employees working on an hourly basis)
- Only qualified compensation reported separately on the employee’s W-2 qualifies for the deduction
No Tax on Car Loan Interest
- Above-the line deduction of up to $10,000 for qualified passenger vehicle interest paid during the 2025 through 2028 tax years
- For loans incurred (including refinancing) after 2024
- Deduction phases by $200 for each $1,000 of MAGI above
$100,000 ($200,000 MFJ), phased out at $150,000 ($250,000 MFJ)
- No SSN requirement
Employer Assistance Program Exclusions
- Employer-provided dependent care assistance is increased to $7,500 ($3,750 for MFS), beginning with 2026
- The expansion of the $5,250 educational assistance program exclusion to include an employer’s payment on an employee’s student loan is made permanent
- Increased for inflation beginning with the 2027 tax year
Child Tax Credit & Other Dependents Credit
- Child Tax Credit increased to $2,200 + inflation adjustments starting in 2026
- Increased phaseouts are also permanent
- Child and at least one parent must have SSN
Child and Dependent Care Credit
- Beginning with 2026, the Child and Dependent Care Credit is increased from a maximum of 35% of eligible costs to 50% of eligible costs, with an accelerated phasedown of the credit for those taxpayers whose AGI exceeds $75,000 ($150,000 MFJ)
- Increased the maximum credit from $1,050 to $1,500 for one qualifying individual, and from $2,100 to $3,000 for more than one qualifying individual
Bonus Depreciation
- Permanently extends the 100% bonus depreciation for property acquired after 1/19/25, and allows election for lower percentages for property placed in service during the first taxable year ending after 1/19/25
- Creates a new class of 100% bonus-eligible property for nonresidential real property in the U.S. used in manufacturing, agricultural or chemical production, or certain refining operations if construction begins after 1/19/25, and before 1/1/29, placed in service after 7/4/25, and before 1/1/31