Posted August 7, 2025

Summary of The Big Beautiful Bill Act - July 2025

- What's in the Bill?

- How will the Bill affect you?

Feel free to contact Asher Taxation Law for further consultation or help.

[Here's A Very Good Summary That I Found]

(https://www.naea.org/2025-gop-tax-and-spending-bill-key-provisions/ ).

"Congress Passes President Trump’s One Big Beautiful Bill Act

After overcoming significant opposition and obstacles within the Republican caucus, the House of Representatives passed the GOP’s $3.4 trillion tax-and-spending package on Thursday afternoon. The House stayed in session overnight as Speaker Mike Johnson (R-LA) and President Trump cajoled and wore down opposition from roughly two dozen Republican lawmakers with various concerns and reservations about the legislation after changes were made in the Senate. In the end, the bill passed 218-214, with Congressman Thomas Massie (R-KY) and Congressman Brian Fitzpatrick (R-PA) being the only House Republicans to vote against the bill. Before final passage, Minority Leader Hakeem Jeffries (D-NY) spoke out about the harms of the bill for a record-breaking 8+ hours, using his “magic minute” floor speech to delay a final vote on the legislation. Earlier in the week, the Senate GOP overcame similar obstacles, with Senators passing the bill on Tuesday after the Senate pulled its all-night voting session. Ultimately, the Senate passed the bill in a 51-50 vote, with Vice President JD Vance casting the tie-breaking vote. Senator Lisa Murkowski’s (R-AK) support, which came after hours of negotiation with Majority Leader John Thune (R-SD), was also critical to its passage. Three Republican lawmakers, Senators Rand Paul (R-KY), Thom Tillis (R-NC), and Susan Collins (R-ME), voted against the bill with every Senate Democrat.

The nearly 900-page reconciliation bill has a vast impact across various policy areas and industries, including taxes, healthcare, education, defense, energy, and the debt ceiling. President Trump is expected to sign the legislation at a ceremony at the White House on Friday, July 4.

Below are some of the key provisions included in the legislation:

Debt Limit

• $5 trillion Debt Limit Increase: The bill raises the debt limit by $5 trillion. This is a $1 trillion increase from the House version of the bill.

TCJA Permanence

• Marginal Tax Rates: The legislation permanently extends the 2017 Tax Cuts and Jobs Act’s (TCJA) lower rates for individuals beginning in 2026. The bill also provides an additional year of inflation in the cost-of-living adjustment for the 10%- and 12%-income tax brackets.
• Standard Deduction: The legislation permanently extends the enhanced standard deduction, which is annually adjusted for inflation. It increases the standard deduction to $15,750 for individual filers and to $31,500 for joint filers.
• Paid Leave: TCJA’s paid family and medical leave tax credit for employers is made permanent under the legislation. The credit allows employers to claim non-refundable credits ranging from 12.5% to 25% of the wages paid to workers on paid leave.
• Mortgage Deductions: The bill makes the mortgage deduction from TCJA permanent, allowing taxpayers to deduct interest on the first $750,000 of home mortgage debt.
• Child Tax Credit: The bill increases the maximum amount of the child tax credit by $2,200 per child beginning in 2025 and indexes the credit amount for inflation.  The bill also makes permanent the $1,400 refundable additional child tax credit (ACTC), adjusted for inflation. The measure also makes permanent the income thresholds at $200,000 for individuals and $400,000 for joint filers, as well as the $500 nonrefundable credit for each dependent of the taxpayer other than a qualifying child.
• Alternative Minimum Tax: The legislation permanently extends an increased exemption set under TCJA, which reduces the amount of income subject to special AMT rules.
• Estate and Gift Tax: The exemption for the estate and gift tax is permanently extended and increased to $15 million for individual filers, and $30 million for married couples filing jointly, starting in tax year 2026. The exemption amount is indexed to inflation after 2026.
• Pass-Through Business Income: The bill keeps the 199A business deduction for pass-through companies at its current level of 20%. It also increases the phase-in range, making the deduction more generous for those phasing out of the credit. In addition, the legislation creates a new minimum deduction of $400 for eligible taxpayers with at least $1,000 of pass-through income beginning in 2026.

SALT Deduction

• State and Local Tax Deductions: The legislation temporarily increases the State and Local Tax (SALT) deduction cap to $40,000 from its current $10,000 (and increases it by 1% annually through 2029). Households with income under $500,000 will qualify for the deduction. In 2030, the SALT deduction cap will revert back to $10,000. For income exceeding the $500,000 threshold, the deduction will phase down to a minimum of $10,000. The final legislation does not impose any new limits on the SALT deduction for pass-through businesses, allowing state pass-through entity taxes (PTETs) to continue in efforts to avoid the SALT cap.

New Tax Deductions

• No Taxes on Tips: The legislation creates a deduction for qualified tips for taxable years 2025 through 2028. Tipped income includes cash tips that are customary and paid voluntarily by the customer. In order to qualify for the deduction, employees need to have a Social Security number and cannot work in specific trade or business professions such as law, health care, consulting, financial services, athletics, and performing arts. The deduction is capped at $25,000 and phases out for income that exceeds $150,000 for individuals and $300,000 for joint filers. While the deduction is effective as of January 1, 2025, it provides transition relief in the first year by allowing employers and individuals to approximate a separate accounting of amounts designated as tips using any reasonable method.
• No Taxes on Overtime Pay: The legislation establishes a deduction for overtime compensation for taxable years 2025 through 2028. The deduction is capped at $12,500 for individuals and $25,000 for joint filers, with the same income phaseouts as the tip deduction. While the deduction is effective on January 1, 2025, it provides transition relief for the first year, allowing employers to approximate a separate accounting of amounts designated as qualified overtime compensation by any reasonable method.
• Deduction for Seniors: The bill provides taxpayers ages 65 and older with a $6,000 deduction from their taxable income for years 2025 through 2028. This is on top of the regular standard deduction. The credit will phase out at a 6% rate for individual filers whose income is more than $75,000 or joint filers whose income exceeds $150,000.
• Deductions on Car Loan Interest: The legislation creates a deduction up to $10,000 for interest payments on auto loans for tax years 2025 through 2028. The deduction only applies to interest paid on loans for new cars and those whose final assembly is in the U.S. The deduction is reduced for modified adjusted gross income that exceeds $100,000 for individual filers or $200,000 for joint filers.

Business Provisions

• Research and Development: The final bill makes R&D immediate expensing permanent, reversing the change made by TCJA and allowing businesses to immediately deduct the cost of their domestic research expenses in the year paid or incurred for tax years 2025 onward.
• Business Interest Expenses: The legislation reinstates more favorable treatment for business interest expenses by allowing businesses to calculate their adjusted taxable income (ATI) without including deductions for depreciation and amortization beginning in tax year 2025. The provision is permanent.
• Depreciation Deductions: The bill permanently restores the 100% bonus depreciation rate for certain property if it was placed in service on or after January 19, 2025. The legislation also allows taxpayers to immediately deduct 100% of the cost of qualified production property that is put in service before 2031. It increases the maximum amount that could be deducted for certain depreciable business assets to $2.5 million. It phases out for costs of qualifying property that exceeds $4 million.
• Opportunity Zones: The bill modifies and makes permanent the Opportunity Zone program. It defines a low-income community as a census tract that doesn’t exceed 70% of the state’s median income or has a poverty rate of at least 20% and the median family income doesn’t exceed 125% of the state’s median income. The bill provides a 30% step-up in basis for opportunity zones in rural areas held for at least five years. For non-rural zones, the step-up in basis is increased by 10%.
• Low-Income Housing Credit: The legislation would permanently increase the low-income housing tax credit’s (LIHTC) state allocation ceiling by 12 percent starting in tax year 2026.  This increase would be applied to the 9% LIHTC allocation. The bill also lowers the bond-financing threshold for the 4% LIHTC to 25% for projects financed by bonds starting in 2026.
• Corporate Charitable Donations: The legislation puts new limits on corporate charitable deductions, allowing corporate taxpayers to deduct charitable contributions between 1% to 10% of taxable income. The measure allows contributions beyond the cap to be carried forward for as long as five tax years.
• Employee Retention Tax Credit (ERTC): The Senate bill includes provisions on the employee retention tax credit (ERTC), including heightened due diligence requirements on promoters with respect to a taxpayer’s eligibility for an ERTC. It also prevents the IRS from paying out ERTC claims filed after January 31, 2024, for the third and fourth quarters of 2021. The provision is a pared-back version of the ERTC repeal initially proposed in the House, which sought to retroactively block all claims filed after January 31, 2024, including those filed for 2020 and the first two quarters of 2021. Due to the Byrd Rule, that language was changed and limited to the third and fourth quarters of 2021.

International Provisions

• Foreign Taxes: The final bill does not include the “revenge tax” that would have penalized U.S. income of entities from foreign countries deemed to have discriminatory tax policies.
• ‘De Minimis’ Exemption: The bill repeals the de minimis privilege and extends the exemption worldwide, effective July 1, 2027. It imposes additional penalties before that date on imports that violate other provisions of U.S. customs laws.
• Foreign Income: The final measure permanently reduces the deduction for foreign-derived intangible income (FDII) to 33.3%, from 37.5%, and the deduction for global-intangible low-taxed income (GILTI) to 40%, from 50%. It also permanently increases the rate of the base erosion and anti-abuse tax (BEAT), aimed at limiting profit shifting by large multinational corporations, to 10.5%, from 10%.

Education

• Endowment Tax: The final legislation exempts schools from the endowment tax if they have fewer than 3,000 tuition-paying students. Furthermore, it modifies the existing 1.4% excise tax on annual net investment income for private college and university endowments subject to the tax. The newly established tiered rates are:
• 1.4% for an institution with a student-adjusted endowment greater than $500,000 and up to $750,000.
• 4% for an institution with a student-adjusted endowment greater than $750,000 and up to $2 million.
• 8% for an institution with a student-adjusted endowment greater than $2 million.
• Federal Student Aid Eligibility: The legislation exempts certain assets when determining student need, such as the net value of a farm on which a family resides, a small business with up to 100 full-time employees a family owns, or a family-owned commercial fishing business beginning in the 2026-2027 award year.
• Pell Grant Eligibility: The legislation excludes families from the grant with a student aid index of more than twice the maximum Pell Grant. It also counts certain foreign income towards a student’s AGI when determining their eligibility beginning on July 1, 2026. Students won’t be eligible for a Pell Grant if they receive more than their cost of attendance in aid from other sources.

Artificial Intelligence

• AI Moratorium: The final legislation did not include a provision seeking to bar states from regulating artificial intelligence (AI). A provision that would have cut off certain funding for states that regulated AI was taken out after Senators voted 99-1 to remove it.
• AI Research: The bill provides $150 million for the Energy Department’s National Laboratories to partner with industry sectors to structure their scientific data to make it suitable for use in AI models and help establish AI models for science and engineering powered by the data.

Clean Energy Credits

The legislation repeals and phases out key tax credits enacted in the Inflation Reduction Act but keeps in place clean electricity production and investment credits for technologies other than wind and solar.

• Clean Fuel Credit Extension: The legislation extends the credit for two years. The expiration date is extended through 2029. The bill prohibits the credit for any feedstock produced outside the U.S., Mexico, or Canada.
• Clean Electricity Credits: The legislation ends clean electricity production and investment credits for wind and solar projects for any facility placed into service starting in 2028. The provision applies to projects that begin construction starting 12 months after enactment. Other qualified technologies, such as hydropower, nuclear, and geothermal, could still be used in full through 2033. After 2033, they will be reduced to 75% in 2034, 50% in 2035, and eliminated in 2036.
• Advanced Manufacturing: The legislation modifies the phase-out of this credit by limiting its use for manufacturing wind components produced and sold after Dec. 31, 2027. Credits for critical minerals will be reduced to 75% starting in 2031, 50% in 2032, 25% in 2033, and eliminated in 2034. Metallurgical coal production is eligible for the credit through December 31, 2029.

Defense

• Armed Services Funding: The package provides roughly $156 billion in funding for the Defense Department, slightly higher than the funding levels included by the House measure.
• Shipbuilding & Marine Industrial Base: The legislation provides $29.2 billion for the U.S. Navy shipbuilding program and other efforts to bolster U.S. shipbuilding capacity.
• Missile Defense: The bill includes $24.4 billion to support the development of the “Golden Dome” layered missile defense system.
• Weapons & Munitions Supply Chains: The bill provides $25.4 billion for the development and procurement of weapons systems and to strengthen military supply chains and manufacturing.

Health Care

• Medicaid Work Requirements: The bill requires states to impose “community engagement” rules as a condition of receiving Medicaid benefits starting in 2027, or an earlier date under a state waiver. Medicaid beneficiaries ages 19 to 64 must demonstrate at least one of the following per month:
• Working at least 80 hours.
  
• Performing at least 80 hours of community service.
  
• Participating in a work program for at least 80 hours.
  
• Attending an educational program at least half-time.
  
• Performing a combination of the above activities for at least 80 hours.
  
• Earning a monthly income that meets minimum wage requirements multiplied by 80 hours, which will be averaged over the previous six months for seasonal workers.
  

The legislation also requires states to exclude several groups from the work requirement, including:

• People who are in compliance with work requirements under the Temporary Assistance for Needy Families program and Supplemental Nutrition Assistance Program
• Pregnant women
• Parents or caregivers of a dependent child or individual with a disability
• Individuals with disabilities, including blindness and substance use disorders
• Inmates of public institutions

The legislation specifies that parents or caregivers will be exempt from the work requirements only if they have dependents 13 years old or younger.

• ACA Enrollment Eligibility: This provision makes it so an individual cannot receive the premium tax credit until an exchange verifies specific eligibility information, including immigration status, household income and size, place of residence, and other details. The verification requirement could be waived if an individual enrolls in a health plan during a special enrollment period due to changes in family size. The provision goes into effect in 2028.
• Medicare Eligibility for Noncitizens: The bill limits Medicare eligibility for noncitizens to lawful permanent residents; certain nationals from Cuba and Haiti; and individuals from Micronesia, the Marshall Islands, or Palau who live in the U.S. It directs the Social Security Administration to review Medicare enrollment and terminate benefits for current beneficiaries who don’t fit the new eligibility restrictions.
• Rural Hospitals: The legislation provides $50 billion in mandatory spending over five years for state grants to rural hospitals, which include critical access, sole-community, or Medicare-dependent hospitals in rural areas. The funding must be used for various priorities, including:
• Payments for health-care providers.
  
• Chronic disease prevention and management services, including technology-driven approaches.
  
• Training to use technology to improve care, including through robotics and artificial intelligence.
  
• Recruitment and retention for rural hospital staffing.
  

Technical assistance and IT improvements.

• Substance use treatment and mental health services.

This provision was added to the Senate version of the bill after some Republican Senators voiced concerns over cuts to rural hospitals due to the cuts to provider taxes.

Transportation

• Air Traffic Control: The bill provides $12.5 billion for the Federal Aviation Administration to improve air traffic control technology.
• Electric Vehicle Fees: While this provision appeared in the House bill, it did not appear in the Senate version of the bill.
• Coast Guard: The bill provides $24.6 billion in mandatory funding for the U.S. Coast Guard to obtain new assets, maintain existing systems, and improve shore infrastructure. This is a $3.5 billion increase from the House version, which allocated $21.2 billion

Written for NAEA by:
Thad Inge, Vice President, Van Scoyoc Associates
Sam Ford, Manager of Government Relations, Van Scoyoc Associates"