The Big Beautiful Bill: Key Tax Changes
10 Things you need to know
On July 4, 2025, President Trump signed a massive $4.5 trillion tax law, marking one of the biggest changes to the tax code in decades. You've probably heard headlines about permanent lower tax rates and no tax on tips, but the bill includes much more. Whether you're a small business owner, W-2 employee, or in real estate, these changes could impact your wallet. Let's break it down.
Tax Rates, Breaks and Deductions for Everyone
1. Permanent Lower Tax Rates
The bill makes the 2017 tax cuts permanent, preventing a revert to higher pre-2017 rates in 2026.
Here's a comparison of marginal tax rates:
2. Bigger Standard Deduction
The bill locks in the higher standard deduction from 2017 and gives it a boost for 2025. After that, it will rise each year with inflation. Here's the breakdown for 2025:
3. Tax Break on Tips and Overtime
This deduction subtracts tips or overtime from taxable income upfront, like the standard deduction. From 2025-2028:
Up to $12,500 single/$25,000 married per category.
Phases out above $150,000 single/$300,000 married.
4. Car Loan Interest Deduction
Deduct up to $10,000 interest on loans for new American-made vehicles 2025-2028. Phases out $200,000+ adjusted gross income (AGI).
State and Local Relief
5. State and Local Tax (SALT) and Pass-Through Entity Tax (PTET) Relief
SALT deduction cap temporarily raised from $10,000 to $20,000 single/$40,000 married through 2029. Phases down above $500,000 AGI.
PTET allows pass-through owners (LLCs, etc.) to pay state taxes via business for full federal deduction, bypassing the SALT deduction cap.
Family and Health Support: Credits and Savings for Personal Life
6. Child Tax Credit Boost
Permanent CTC at $2,200 per child under 17 starting 2026 (inflation-adjusted); phases out above $200,000 single/$400,000 married.
7. Health Savings Accounts (HSAs):
HSAs now for Bronze/Catastrophic plans; contributions $4,150 individual/$8,300 family.
Business Deductions and Tools for Owners and Startups
8. Bonus Depreciation
100% deduction for qualifying assets bought after Jan. 20, 2025; phases down post-2025. No dollar cap; new/used qualify.
9. Qualified Business Income (QBI) Deduction
20% off pass-through income. Phaseout widens to $150,000 in 2026; service businesses phase faster.
10. Expanded Qualified Small Business Stock (QSBS): Tax-Free Gains on Startup Investments
Exclude up to $15 million gains on small C-Corp stock (up from $10 million); 50% at 3 years, 75% at 4, 100% at 5; companies with up to $75 million assets qualify.
Make the Most of the Big Beautiful Bill
Big opportunities come with fine print. While the bill offers generous tax breaks, many phase out at higher incomes or expire in a few years. Those who understand how these changes apply to their situation and move early stand to benefit the most.
Reach out to me for personal financial advice.