“Big Beautiful Bill”

Formally introduced to Congress on May 20, 2025, the House narrowly passed the Big Beautiful Bill (BBB) on May 22, 2025. The Senate then debated and approved an amended version which the House subsequently approved on July 3, 2025n. President Trump signed it into law on July 4, 2025. While many BBB changes become effective in subsequent years, the BBB introduced several significant tax and policy changes that take effect in 2025. Below is a summary of those main provisions. For additional implementation details, refer to my minicourse dedicated to BBB tax provisions.

Lower Individual Tax Rates and Higher Standard Deduction

The BBB permanently extends the lower individual tax rates that were initially implemented by the 2017 Tax Cuts and Jobs Act (TCJA), beginning in 2025. Additionally, the increased standard deduction amounts introduced by the TCJA become a permanent feature for taxpayers starting in 2025.

Enhancements to Child and Dependent Tax Benefits

Beginning with the 2025 tax year, the child tax credit increases to $2,200 per qualifying child. This amount will also be subject to inflation adjustments starting in 2026. The BBB permanently maintains the $500 nonrefundable credit for other dependents, along with a requirement that the taxpayer, spouse, and each child possess a work-eligible Social Security number.

Qualified Business Income (QBI) Deduction

Pass-through business owners benefit from the permanent extension of the 20% qualified business income (QBI) deduction, effective in 2025. This provision includes expanded phase-in ranges and an enhanced minimum deduction for certain taxpayers.

Tip and Overtime Income Deductions

From 2025 through 2028, a new above-the-line deduction is available for up to $25,000 in qualified tips for eligible employees and self-employed individuals, subject to a phase-out at higher income levels. Overtime pay for non-highly compensated employees is also deductible during the same period.

State and Local Tax (SALT) Deduction

The SALT deduction cap increases significantly, rising from $10,000 to $40,000 for tax years 2025 through 2029. An income phase-out for this deduction begins at the $500,000 income level.

Business Property Expensing and Depreciation

Starting in 2025, full expensing for business property is permitted, along with expanded Section 179 expensing limits. Both provisions apply retroactively to the start of the 2025 tax year.

Estate and Gift Tax Changes

The BBB extends and makes permanent the higher estate and lifetime gift tax exclusion, setting the exclusion at an inflation-adjusted $15 million for individuals.

Clean Energy Credits

Provisions for certain clean energy credits are terminated after 2025. Notably, the federal clean vehicle tax credit, including the $7,500 clean vehicle credit, is phased out by September 30, 2025.

Child Care and Dependent Care Benefits

The tax credit cap for employer-provided child care increases from $150,000 to $500,000, starting in 2025, with future increases indexed for inflation.

Updates for Small Business and Investments

For small businesses, the limit for qualified small business stock (QSBS) exclusion is increased for stock issued after July 4, 2025. Additional inflation adjustments and new holding period requirements apply to shares issued after this date.

Other Notable Provisions

Among other measures, the BBB introduces “Trump Accounts,” special savings accounts for children, with a $1,000 federal contribution for every U.S. child born between 2025 and 2028. The bill also expands the allowable educational uses for 529 plan funds, effective in 2025.

These provisions reflect a mixture of permanent extensions, new deductions, and the phase-out of certain credits, many building on the framework established by the TCJA.