Written by Robin Bodine, CPA and Dustin Peck, CPA
The final version of the 2025 tax reform bill, signed into law on July 4, 2025, marks the culmination of extensive negotiations between the House and Senate. In this blog post, we break down and compare the most impactful individual, business, and energy-related tax provisions and what they mean for taxpayers, businesses, and investors.
Individual Tax Reforms
Tax Brackets and Standard Deduction
The final law makes the 2017 Tax Cuts and Jobs Act (TCJA) brackets permanent, preserving the current seven-bracket system. It also extends inflation adjustments, including an additional year for the lower brackets. The standard deduction increases are permanent, and personal exemptions remain eliminated.
|
Provision |
Current Law |
Final 2025 Tax Legislation |
|
Tax Brackets |
TCJA tax brackets expire after 2025, reverting to pre-TCJA levels (39.6% highest tax bracket) |
Makes TCJA tax brackets permanent: 10%, 12%, 22%, 24%, 32%, 35%, 37% |
|
Standard Deduction |
Reverts to lower pre-TCJA levels after 2025 (Approximately ½ of the current standard deduction |
Permanently increased to: Single/Married Separate - $15,750 Head of Household - $23,625 Married Filing Joint - $31,500 (Indexed for inflation) |
|
Personal Exemption |
Suspended 2018–2025; returns in 2026 |
Deduction is permanently terminated |
|
Car Loan Interest |
Not deductible |
2025 to 2028 allows a deduction up to $10,000 of interest on new car loans assembled in the U.S. |
Child Tax Credit (CTC) and Senior Deduction
The final law adopts a permanent, indexed Child Tax Credit increase and a more generous senior deduction, phased out at higher income levels.
|
Provision |
Current Law |
Final 2025 Tax Legislation |
|
Child Tax Credit |
$2,000 per child; reverts to $1,000 after 2025 |
$2,200 (2025 onward) indexed after 2025; stricter SSN rules |
|
Senior Deduction |
Additional standard deduction of $2,000 for age 65 or older |
$6,000 (2025–2028) income phaseout -$75,000 (single) / $150,000 (married filing jointly) |
Business & Passthrough Entity Tax Changes
Qualified Business Income (QBI) Deduction, Research & Development (R&D) Expensing, and Interest Deductions
The final legislation retains the 20% QBI deduction with expanded phase-out thresholds and makes both bonus depreciation and domestic R&D expensing permanent. It also permanently modifies interest expense limitations to 30% of earnings before interest, taxes, depreciation, and amortization (EBITDA).
|
Provision |
Current Law |
Final 2025 Tax Legislation |
|
QBI Deduction |
20% deduction; expires after 2025 |
20% deduction, permanent |
|
Section 179 |
Section 179 deduction up to $1,160,000 with the deduction reduced dollar for dollar once equipment purchases exceed $2,890,000 |
Section 179 deduction up to $2,500,000 with the deduction reduced dollar for dollar once equipment purchases exceed $4,000,000 i.e., purchase $5,000,000 of equipment in a year the deduction is limited to $1,500,000 |
|
Bonus Depreciation |
80% in 2023; phased down to 0% after 2026. 40% in 2025 |
Permanently extends 100% bonus depreciation for property placed in service after Jan 19, 2025 |
|
R&D Expensing |
5-year amortization for domestic; 15-year amortization for foreign |
Permanent expensing for domestic only; amortization continues for foreign. Provides retroactive relief for R&D capitalized after December 31, 2021 |
|
Business Interest Deduction Limitation (163(j)) |
30% of Earnings Before Interest and Taxes |
Permanent - 30% of Earnings Before Interest, Taxes, Depreciation and amortization |
|
Excess Business Loss Limitation (461) |
Through 2028 limits business losses; Disallowed losses convert to a net operating loss in the next year |
461 limitation is permanent |
|
Small Business Accounting Methods |
$31M gross receipts threshold, indexed for inflation |
No change |
|
State income tax nexus |
Public Law 86-272 Protection |
No change - final bill did not expand the “solicitation” definition to include supportive activities |
Passthrough Entity Tax (PTET)
The final law retains PTET benefits for passthroughs, including specified service trades or businesses (i.e. doctors, lawyers, etc.).
|
Provision |
Current Law |
Final 2025 Tax Legislation |
|
PTET for Specified Service Trade or Business |
Not specifically disallowed |
No change – final bill did not limit PTET for SSTB |
SALT Cap and Itemized Deductions
The final law increases the SALT deduction cap through 2029, and then reverts it to the current law – 10k limit in 2030. It also replaces the Pease limitation with a uniform cap on top-bracket itemized deductions.
|
Provision |
Current Law |
Final 2025 Tax Legislation |
|
SALT Cap |
$10,000 cap |
Increased to $40,000 per household for incomes under $500,000; after 2029 $10,000 limit |
|
Mortgage Interest |
$750,000 acquisition debt limit expires after 2025 |
$750,000 limit is permanent |
|
Charitable Contributions - nonitemizers |
No deduction |
After 2025, a permanent above the line deduction of $1,000 for individuals and $2,000 for married couples |
|
Floor on Charitable Contributions - itemizers |
No floor |
For taxable years after 2025 individual’s charitable contributions are reduced by 0.5% of taxpayer’s contribution base (generally Adjusted Gross Income) |
|
Miscellaneous Itemized Deductions |
Suspended through 2025; return in 2026. |
Permanently suspended; After 2025, deduction for unreimbursed employee expenses for eligible educators is added to the list of itemized deductions |
|
Overall Itemized Deduction Limitation |
Reinstated after 2025 |
Itemized deductions will be reduced by 2/37 of the lesser of: |
|
Wagering Losses |
Limited to amount of winnings |
Deduction limited to 90% of losses but only to the extent of gains from wagering transactions |
Clean Energy Incentives
The final law enacts substantial changes and reductions to the green energy tax provisions originally established under the Inflation Reduction Act (IRA).
|
Provision |
Current Law |
Final 2025 Tax Legislation |
|
Energy efficient commercial buildings deduction (179D) i.e. deduction for installing energy efficient systems in commercial and certain tax exempt entities |
Up to $5/sq ft deduction |
No deduction for property that begins construction after June 30, 2026 |
|
Energy efficient home credit (25C) i.e. windows, doors, heat pumps, etc. |
30% of costs; $1,200 annual cap; expires 2032 |
No credit for property placed in service after December 31, 2025 |
|
Residential Clean Energy Credit (25D) i.e. solar, geothermal, etc. |
30% of costs; expires 2034 |
No credit for property placed in service after December 31, 2025 |
|
Previously Owned Clean Vehicle Credit (25E) i.e. electric vehicle |
Up to $4,000; expires 2032 |
No credit for property placed in service after September 30, 2025 |
|
Clean Vehicle Credit (30D) i.e. electric vehicle |
Up to $7,500; expires 2032 |
No credit for vehicles acquired after September 30, 2025 |
|
New Energy Efficient Home Credit (45L) i.e. credit for builders/developers who construct or substantially renovate energy efficient residential homes |
Max $5,000 credit; expires 2032 |
No credit for homes acquired after June 30, 2026 |
|
Credit for Qualified Commercial Clean Vehicles (45W) i.e. business electric vehicle |
Max $40,000 credit; expires 2032 |
No credit for vehicles acquired after September 30, 2025 |
Estate, AMT, and Other Miscellaneous Provisions
The final law increases the estate tax exemption and permanently indexes it for inflation. It also enhances AMT thresholds with a steeper phaseout rate and enacts new permanent reforms to individual tax relief measures.
|
Provision |
Current Law |
Final 2025 Tax Legislation |
|
Estate Tax Exemption |
2025 - $13.99 million; reverts to approximately $7 million in 2026 |
Increased to $15 million (indexed starting in 2026); made permanent |
|
Alternative Minimum Tax (AMT) Exemptions |
Higher thresholds expire after 2025 |
Permanently extends higher exemption amounts; increases phaseout rate to 50% vs currently 25%, increasing the claw-back for higher income filers |
|
Individual Income Tax Deduction for Tips |
No deduction |
Tax years 2025 to 2028 deduction capped at $25,000 phased out starting at $150,000 (single) / $300,000 (joint) adjusted gross income |
|
FICA tip credit for food & beverage employers |
Expands to beauty services starting in 2025 |
|
|
Individual Income Tax Deduction for Overtime |
No deduction |
Tax years 2025 to 2028 deduction capped at $12,500 ($25,000 joint) phased out starting at $150,000 (single) / $300,000 (joint) adjusted gross income |
|
Tax Credit for Contributions to Scholarship Granting Organizations |
No credit |
Tax years after 2025 nonrefundable tax credit limited to $1,700 |
Key Takeaways for Stakeholders
Taxpayers will generally benefit from lower taxes, with additional targeted relief from permanent inflation indexing, enhanced child tax credit refundability, and a higher senior deduction.
Business owners may appreciate the permanence of 100% bonus depreciation, domestic R&D expensing, a return to EBITDA-based interest deductions, and the QBI rate remaining at 20%.
Our team is ready to assist you in navigating and maximizing the benefits of the 2025 tax legislation. Reach out to your contact at Trout CPA or contact us to speak with one of our professionals.
