Summary of Key Tax Changes in the One Big Beautiful Bill Act (OBBBA)

Rödl & Partner Tax Matters, Volume 2025-9,​ published July 7, 2025

• ​​​100% Bonus Depreciation (Full Expensing) Permanently Extended: Permanently allows full expensing of qualifying capital assets acquired after Jan 19, 2025. Under prior law, bonus depreciation was phasing down from 100% (in 2022) to 20% in 2026 and 0% in 2027. A transitional election is available for the first taxable year ending after January 19, 2025, allowing taxpayers to elect a reduced bonus depreciation percentage of 40% or 60%, depending on the property type.
• Expensing Expanded to Include Manufacturing Real Estate: 100% bonus depreciation expanded to cover manufacturing buildings placed in service before January 1, 2031.
  

• ​Section 179 expensing limit increased from $1.16 million to $2.5 million; phase-out starts at $4 million rather than $2.89 million. 
• Business Interest Limitation: The OBBBA restores the original, more favorable EBITDA-type calculation of the business interest deduction limit for tax years beginning in 2025. Certain production-related capitalized interest is now excluded from the Section 163(j) limitation. For businesses with foreign income that may have previously been allowed to increase their adjusted taxable income (ATI), the OBBBA now excludes GILTI and Subpart F income inclusions. Finally, an ordering rule is imposed that requires calculation of the Section 163(j) limitation before the application of any interest capitalization provision (except for interest capitalized under Sections 263A(f) and 263(g)).
• R&D Expenses: The OBBBA allows for immediate expensing of domestic research costs and accelerates the remaining unamortized amounts of previously capitalized research costs incurred in 2022 through 2024. The bill maintains the TCJA's requirement that foreign-sited R&D costs be amortized over a 15-year period. Special rules would allow small business taxpayers to apply the rules retroactively to tax years beginning after December 31, 2021, while an election would permit all taxpayers to accelerate over a one or two-year period beginning with the taxpayer’s first tax year beginning after December 31, 2024, the deductions for unamortized domestic R&E expenditures that were capitalized after December 31, 2021, and before January 1, 2025.
• Corporate Charity Deduction Limit: The Act imposes a new limitation for C-corporations, only allowing charitable contributions to the extent they exceed 1% of the corporation's taxable income.
• Form 1099 Reporting Threshold Increase: The Act provides compliance relief by increasing the information reporting threshold for Forms 1099-NEC and 1099-MISC from $600 to $2,000, indexed for inflation, effective for payments made in 2025 and beyond. The new $2,000 threshold will be adjusted for inflation in calendar years after 2026.
• Enhancement of Advanced Manufacturing Investment Credit: The Act increases the "Advanced Manufacturing Investment Credit" (from the CHIPS Act) from 25% to 35%. This enhanced credit applies to investments in property used to manufacture semiconductors or semiconductor manufacturing equipment. The increase is effective for property placed in service after December 31, 2025.
• Opportunity Zones – Renewal and Enhancement: The Opportunity Zone program, which offers tax benefits for investments in designated low-income areas and was set to fully phase out by end of 2026. The Act provides for a "second round" of Qualified Opportunity Funds (QOFs) starting in 2027 and running through 2033. The new round comes with narrower eligibility requirements and some modifications (including special incentives for investments in "qualified rural opportunity funds" with higher basis step-up potential).
• New Markets Tax Credit: The OBBBA makes the credit permanent.
• Extension and Enhancement of Paid Family and Medical Leave Credit: The Act extends and enhances the tax credit for employers who provide paid family and medical leave, effective for tax years beginning after December 31, 2025.
  

• ​Removal of Section 899: One particularly aggressive provision, a retaliatory "revenge tax" under a proposed Section 899 aimed at jurisdictions implementing Pillar Two taxes, was removed from the final bill following a preliminary understanding reached between the Treasury Secretary and the G7.
• Foreign tax credits (FTCs): The Act changes expense allocation rules to increase the amount of foreign tax credits that U.S. companies can claim. For purposes of calculating the foreign tax credit limit on certain income (specifically, GILTI & Subpart F), companies are no longer required to allocate their general domestic expenses, such as interest and R&D expenses, against that foreign income unless directly related. This results in higher foreign income, which increases the cap on the amount of foreign taxes that can be credited.
• Global intangible low-tax income (GILTI): The OBBBA permanently decreases the section 250 GILTI deduction to 40% and renames GILTI to “net CFC tested income” (NCTI).
• Foreign derived intangible income (FDII): The OBBBA permanently decreases the section 250 FDII deduction to 33.34% and renames FDII to “foreign-derived deduction eligible income” (FDDEI).
  

• Base erosion and anti-abuse tax (BEAT): The base erosion minimum tax, which was set to increase from 10% to 12.5% in 2026, now has a permanent rate of 10.5%. The existing 3% de minimis threshold remains unchanged. Although discussed, a new high tax exception was not included in the final bill.
• Downward attribution: The OBBBA restores section 958(b)(4), which generally prohibits downward attribution from a foreign person for purposes of determining U.S. shareholder and CFC status. However, the OBBBA also creates a new category called "foreign controlled foreign corporations" which may have a similar effect as downward attribution for some taxpayers.
• Permanent Extension of CFC Look-Through Rule: The Act makes the "look-through rule" for controlled foreign corporations (CFCs) a permanent part of the tax code which was set to expire at the end of 2025.
• Modifications to Pro Rata Share Rules: The Act overhauls how a U.S. shareholder's portion of a foreign subsidiary's income (Subpart F income) is calculated, closing a major tax loophole. Previously, a U.S. shareholder was only taxed on a CFC's annual income if they owned the stock on the last day of the CFC's tax year. Now, income will be allocated based on the portion of the year a shareholder actually owned the stock.​
  

• OBBA significantly scales back many of the clean energy tax credits introduced under the IRA:
  

• 2025 Tax Rates Remain Unchanged: The lower individual income tax brackets (10%, 12%, 22%, 24, 32%, 35%, 37%) that were scheduled to expire after 2025 are made permanent. In other words, the pre-2018 higher rates will not return in 2026. 
  

• SALT cap: Increased to $40,000 ($20,000 for married separate filers) and indexed for inflation through tax year 2029. Phased down for taxpayers with modified AGI over $500,000.
  

• ​Pass-through Entity Tax (PTET) Elections: No new limitations.
• QBI deduction: The bill makes the Sec. 199A qualified business income (QBI) deduction permanent and keeps the deduction rate at 20% (the bill passed by the House would have raised it to 23%). 199A deduction limit phase-in range for SSTBs and other entities subject to the wage and investment limitation by increasing the $50,000 amount for non-joint returns to $75,000 and the $100,000 amount for joint returns to $150,000.
• Excess Business Loss (EBL) limitations: Makes permanent the current limitations on business losses allowed to offset other income.
• Standard Deduction: Makes permanent the standard deductions enacted by the TCJA. For 2025:

• ​Personal Exemptions: Permanently eliminates personal exemptions other than a temporary $6,000 senior deduction for qualified individuals over the age of 65. This senior deduction phases out for taxpayers with MAGI over $75,000 (or $150,000 for joint filers). This creates a "tax cliff" where a single dollar over the income limit could lose the entire​ benefit.
• Alternative Minimum Tax (AMT): Makes permanent the increased AMT exemption and phaseout thresholds, effective Dec. 31, 2025.
  
• Child Tax Credit: Provides for a permanent increase to $2,200 per child, with $1,400 refundable with inflation adjustments.​
  
• Deductible Mortgage Insurance: The Act permanently allows mortgage insurance premiums to be treated as deductible qualified residence interest (this had lapsed in 2021).
• Charitable Deductions: Starting in 2026, individuals who do not itemize deductions can claim a charitable deduction of u​p to $1,000.
• Tips & Overtime Pay: Introduces above-the-line deductions for 2025–2028 tax years. The deduction is up to $25,000 for tips and $12,500 for overtime pay. 
• Trump Accounts: Creates a new type of tax-favored account, similar to a traditional IRA designed to benefit children under age 18. The government may fund the account with $1,000 for children born between 2025-2028.
• 1% Excise Tax on Money Orders Sent Overseas: The OBBBA establishes a 1% collected federal excise tax on certain transfers of cash sent from within the U.S. by individuals to a foreign country.
• Car Interest Deduction: In a notable change, interest on personal auto loans will become tax-deductible (it's currently treated as personal interest and not deductible). Taxpayers can deduct up to $10,000 of interest paid on a loan for a passenger vehicle, for tax years 2025 through 2028. This deduction is available whether or not the taxpayer itemizes. Subject to phase-outs at higher income levels, generally beginning around $150,000 AGI for single filers.
  

• Estate planning: The estate tax basic exclusion amount, which was set to drop back to ~$7 million in 2026, will instead be increased to $15 million (per individual) for estates of decedents dying in 2026 and later. This $15 million exemption is permanent and will be indexed for inflation going forward. ​