The One Big Beautiful Bill Act (HR 1): Permanent TCJA Extensions and the New Tax Provisions

The One Big Beautiful Bill Act (OBBB), enacted as H.R. 1 in 2025, represents the most consequential tax legislation since TCJA itself. The bill addressed the looming TCJA sunset by making many individual provisions permanent, expanded business expensing options, introduced new deductions, and modified key thresholds. For taxpayers and CPAs who had been planning for the 2026 sunset, OBBB fundamentally reshapes the federal tax landscape.

TCJA Provisions Made Permanent

OBBB's central feature is making permanent many of the individual TCJA provisions that were scheduled to sunset on December 31, 2025:

Marginal Tax Rates

The TCJA-era brackets (10%, 12%, 22%, 24%, 32%, 35%, 37%) become permanent — eliminating the planned reversion to pre-TCJA rates (10%, 15%, 25%, 28%, 33%, 35%, 39.6%). The bracket boundaries continue to inflation-adjust annually.

Standard Deduction

The doubled standard deduction (currently $30,000 joint for 2025) becomes permanent — eliminating the reversion to pre-TCJA levels (~$16,000 joint). Personal exemptions remain eliminated.

Section 199A QBI Deduction

The 20% deduction on qualified business income from pass-through entities becomes permanent. The SSTB carve-outs, W-2 wage and UBIA limits, and aggregation provisions all continue.

Child Tax Credit

The $2,000 per qualifying child credit becomes permanent (vs reverting to $1,000). Refundable portion provisions continue. Income phase-out thresholds maintained at $200K single / $400K joint.

Estate and Gift Tax Exemption

The doubled estate and gift tax exemption ($13.99M per person for 2025) becomes permanent — eliminating the planned reduction to approximately $7M. Continued inflation indexing.

SALT Cap

The $10,000 SALT deduction cap continues as a permanent provision. Pass-Through Entity Tax (PTET) workarounds remain valuable in PTET-enabled states.

Mortgage Interest Cap

The $750,000 acquisition mortgage interest cap becomes permanent. Home equity loan interest restrictions continue (deductible only when used to acquire or substantially improve the home).

Miscellaneous Itemized Deduction Suspension

The elimination of 2% floor miscellaneous itemized deductions (employee business expenses, investment management fees, tax preparation fees) becomes permanent.

Bonus Depreciation Restoration

OBBB restored 100% bonus depreciation, eliminating the phase-down schedule:

• 2025-onward: 100% bonus depreciation (vs 40% scheduled).

• Retroactive election available for property placed in service in 2023 and 2024 (taxpayers can amend returns or file Form 3115 to recover deductions taken at 80%/60%).

• Eliminates the scheduled phase-down to 20% in 2026 and 0% in 2027.

Section 174 R&D Reform

OBBB restored full current-year deductibility of domestic R&D expenditures:

• Domestic R&D: Fully deductible in year incurred (eliminating 5-year amortization).

• Foreign R&D: Continues to require 15-year amortization.

• Retroactive relief available for 2022-2024 capitalized amounts through accounting method change procedures.

For software companies, technology firms, and R&D-intensive businesses, this is one of the most consequential provisions of OBBB — restoring billions of dollars of deductibility.

Section 179 Expensing Increase

OBBB expanded Section 179:

• Maximum deduction: $2,500,000 (up from $1,250,000).

• Phase-out threshold: $5,000,000 (up from $3,130,000).

• Inflation-adjusted annually.

Combined with restored 100% bonus depreciation, OBBB dramatically expanded immediate expensing options for business equipment and qualifying improvements.

New Provisions Introduced

Tip Income Deduction

OBBB introduced a deduction for qualified tip income for taxpayers in industries where tipping is customary:

• Above-the-line deduction for federal income tax (does not reduce SE tax for self-employed).

• Limited to specific industries (food service, beauty services, hospitality, others).

• Income limits apply.

• Implementation guidance from Treasury continues to refine eligibility rules.

Overtime Pay Deduction

OBBB introduced a deduction for qualified overtime pay:

• Above-the-line deduction.

• Limited to non-exempt hourly workers.

• Subject to income limits.

• Reduces federal income tax (does not affect FICA).

Auto Loan Interest Deduction

OBBB introduced a limited deduction for auto loan interest on qualifying personal vehicle purchases:

• Limited to vehicles assembled in the United States.

• Annual cap on deductible interest.

• Income phase-outs.

• Specific eligibility rules for vehicle types and price ranges.

Senior Tax Deduction

OBBB introduced an additional deduction for taxpayers age 65 or older:

• Above-the-line deduction in addition to the existing over-65 standard deduction increase.

• Subject to income phase-outs for high-earning seniors.

• Layered with the regular standard deduction for retirees.

Business Provisions Beyond §174 and §179

QSBS Enhancements

OBBB included modifications to Section 1202 Qualified Small Business Stock provisions, potentially expanding eligibility and increasing the exclusion amounts.

Pass-Through Entity Tax Modifications

While not directly addressing PTET, OBBB's permanent SALT cap maintained the relevance of state-level PTET elections for pass-through business owners in high-tax states.

Opportunity Zone Modifications

OBBB potentially extended or modified Opportunity Zone provisions, though specific changes vary by final enacted text.

Provisions Notably Not Changed

Net Investment Income Tax

The 3.8% NIIT thresholds ($200K single / $250K joint) remain non-inflation-adjusted, continuing to capture more taxpayers each year as nominal incomes rise.

Additional Medicare Tax

The 0.9% surcharge on high earners continues without inflation adjustment.

Section 461(l) Excess Business Loss Limitation

Continues with inflation adjustments through scheduled expiration.

Capital Gains Brackets

The preferential 0%, 15%, and 20% long-term capital gains brackets continue with inflation adjustments.

Estate Planning Implications

For high-net-worth families who had been preparing to use the higher estate exemption before 2026 sunset:

• OBBB makes the higher exemption permanent.

• Urgency to execute SLATs, GRATs, and other vehicles before year-end 2025 is reduced.

• However, estate tax remains a meaningful concern at $14M+ wealth levels, and structured planning continues to provide value.

• Future legislative changes remain possible — making continued vigilance important.

Business Planning Implications

For pass-through business owners:

• Permanent §199A deduction eliminates the 2025 sunset urgency.

• Continued threshold management remains important for high-income owners.

• SSTB classification concerns continue.

• PTET elections remain valuable in high-tax states.

For C-corporations:

• 21% corporate rate (made permanent by TCJA, unchanged by OBBB) continues.

• The C-corp conversion analysis (potentially favored if §199A had sunsetted) becomes less compelling.

For capital-intensive businesses:

• Restored 100% bonus depreciation transforms equipment financing economics.

• Combined with §179 increases, immediate expensing options are dramatically expanded.

Roth Conversion Strategy Implications

The permanent TCJA-era marginal rates change Roth conversion timing analysis:

• Current 22%, 24%, 32% rates remain — eliminating the 1-3 percentage point increase that would have occurred under sunset.

• Conversions remain valuable for bracket arbitrage and RMD elimination.

• The "convert before rates rise" urgency is reduced for many taxpayers.

Common Mistakes Post-OBBB

• Continuing to plan as if TCJA were sunsetting (many provisions are now permanent).

• Missing retroactive Section 174 R&D refund opportunities.

• Failing to claim retroactive bonus depreciation amendments for 2023-2024 placements.

• Not capturing new tip, overtime, or auto loan interest deductions.

• Assuming estate tax planning urgency disappears entirely (significant wealth transfer planning still valuable).

• Continuing C-corp conversion analyses based on the assumed §199A sunset.

Bottom Line

The One Big Beautiful Bill Act represents the largest restructuring of the federal tax code since TCJA itself. By making many TCJA provisions permanent and adding new deductions, OBBB significantly changes both compliance and planning. Taxpayers and CPAs should review prior planning assumptions — particularly around year-end 2025 urgency — and identify retroactive opportunities for §174 and bonus depreciation refunds. As Treasury continues to issue implementation guidance for the new provisions (tip deduction, overtime deduction, auto loan interest deduction), additional planning opportunities will continue to emerge.