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The Big Beautiful Bill & Tax Policy

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The passage of the One Big Beautiful Bill brings a lot of changes. Your team at HCM is prepared to help navigate those changes with you. There will be more guidance and information available in the coming weeks and months as everyone starts implementing the bill. Please reach out to your HCM Advisor with any questions you may have.  

Tax Highlights of the Big Beautiful Bill

  • Continuation of items passed in the TCJA of 2017 which had been set to expire at the end of 2025. These include but are not limited to:
    • Current tax rates and brackets (no tax rate increase)
    • Current increased standard deductions
    • Current increased child tax credit, increased to $2,200 per eligible child
    • Qualified business income (QBI) deduction becomes permanent
    • Some current itemized deduction rules become permanent
  • State and local income tax (SALT) cap deduction rises from the current $10,000 limit up to $40,000, with income phase-outs starting at $250k for single filers and $500k for joint filers. This deduction is for tax years 2025-2029.
  • Capped benefit on itemized deductions for top tax bracket starting in 2026. The benefit of itemized deductions is capped at 35% for those in the 37% bracket and capped at 32% for the expanded deduction for state and local taxes for those individuals.
  • Permanent extension of the estate and lifetime gift tax exemption, increasing the exemption amount to $15 million for single filers and $30 million for married filing joint filers in 2026. It will index for inflation going forward.
  • No tax on tips and overtime. Current paychecks will still deduct taxes. There will be a deduction line on the tax return for tax years 2025-2028 for qualified tips up to $25,000 and overtime wages up to $12,500. There is an income limit for each starting at $150k for single filers and $300k for joint filers. This deduction is for tax years 2025-2028.
  • Deduction for Seniors. For those age 65 or older, a deduction for $6,000 per eligible filer with a modified adjusted gross income up to $75,000 for single filers and $150,000 for married filing joint filers. The deduction is phased-out for those with income up to $175,000 for single filers and $250,000 for married filing joint filers. There is no deduction for income over $175,000 for single filers and $250,000 for married filing joint filers. This deduction is for tax years 2025-2028.
  • Social security income taxability has not been changed and will remain the same as current laws state.
  • No tax on car loan interest. There is now a deduction of up to $10,000 for qualified passenger vehicle loan interest. It must be a new vehicle where final assembly of the vehicle occurs in the U.S. There is an income phase-out starting at $100,000 for single filers and $200,000 for married filing joint filers. This deduction is for tax years 2025-2028.
  • Contributions to Scholarship Granting Organizations (SGOs). Ohio residents may already be familiar with the Ohio deduction for contributions to SGOs. There will be a Federal tax credit for contributions to SGOs up to an annual limit of $1,700 per taxpayer, starting in 2027.
  • Expansion of use of 529 plan funds. Additional elementary, secondary, and home school expenses treated as qualified expenses for 529 plan funds have been added.  Also for certain post-secondary credentialing expenses.
  • Above-the-line charitable contributions deduction. Without having to itemize, there will be a new above-the-line deduction for cash contributions to public charities. It starts in 2026 and will be limited to $1,000 for single filers and $2,000 for married filing joint filers.
  • MAGA/Trump Accounts. Starting in 2026, parents of any child under the age of 8 may open an account for the child. For children born between January 1, 2025 and December 31, 2028, the federal government will contribute $1,000 per child into every eligible account. If the parent hasn’t opened an account by the time they file their first tax return with the child as a dependent, the Treasury department will open one for the child. The ability to opt out exists. There are contribution restrictions and distribution restrictions to these accounts. Let us review these restrictions with you prior to opening an account.  
  • Health Savings Accounts. There are multiple changes to the use of funds and contributions, such as allowing both spouses to deposit catch-up contributions into one account instead of separate ones. More expenses, such as fitness facility membership fees, are deductible expenses.
  • 1099-NEC and 1099-MISC Reporting. There is an increased threshold for reporting amounts paid to certain payees. The threshold was $600 and is now increased to $2,000 starting in 2026. It will be indexed for inflation permanently.
  • Bonus depreciation. For businesses, 100% bonus depreciation has been reinstated permanently for qualifying property placed into service after January 19, 2025.
  • Energy credits terminated. Many energy credits related to homes and vehicles have been terminated. The clean vehicle credit for EV vehicles ends September 30, 2025. Most other credits end by December 31, 2025, such as the energy efficient home improvement credit.
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