CSG Law Alert: One Bill, Big Changes: Tax Implications of Trump’s One Big Beautiful Bill Act
President Donald Trump signed into law the One Big Beautiful Bill Act (“OBBBA”) on July 4, 2025, extending many of the provisions of the Tax Cuts and Jobs Act of 2017 (“TCJA”) enacted during President Trump’s first term and introducing significant changes to key tax provisions.
I. Qualified Small Business Stock (“QSBS”) Exclusion
Section 1202 of the Internal Revenue Code (“Code”) allows non-corporate taxpayers to exclude gains realized from the future sale of stock and encourages investment in emerging companies. The OBBBA expands the benefits allowing for greater gain exclusion once the QSBS is ultimately sold.
| LAW PRIOR TO CHANGE | OBBBA |
| Gain from the sale of QSBS held for more than five years is 100% excluded, if acquired after Sept. 27, 2010.
The exclusion is capped at $10 million per taxpayer, subject to a greater exclusion based on 10 times the taxpayer’s basis in the QSBS, but no exclusion applies if the corporation’s gross assets exceed $50 million at issuance. |
For QSBS acquired after the passage of the OBBBA:
Tiered Gain Exclusion: Increased Cap Per Taxpayer: Raises cap to $15 million or 10 times the taxpayer’s basis, indexed for inflation. Increased Aggregate Gross Asset Threshold: Raises corporate-level gross asset threshold to $75 million (subject to inflation adjustments). |
In order to qualify for the QSBS exclusion: (1) originally issued stock in a domestic C corporation must be acquired by a noncorporate taxpayer; (2) the corporation must have assets not more than $75 million (indexed for inflation); (3) the corporation must be engaged in qualified trade or business; and (4) the corporation must actively use at least 80% of its assets in that qualified trade or business.
It is important to note that for investments made on or before July 4, 2025, the exclusion for each investor is still limited to $10 million and the tiered gain exclusion holding period structure does not apply.
II. Qualified Business Income (Section 199A) Deduction
Section 199A, enacted under the TCJA, provided a temporary deduction of up to 20% of qualified business income (QBI) for owners of eligible pass-through entities.
| LAW PRIOR TO CHANGE | OBBBA |
| Section 199A deduction, expiring at the end of 2025, set phase-in amounts at $50,000 over threshold amounts ($100,000 for married filing jointly (“MFJ”) status). | Section 199A deduction made permanent. Phase-in amounts increased to $75,000 ($150,000 MFJ). |
It is important to note that once income exceeds the new thresholds, the Section 199A deduction remains available only for a “qualified trade or businesses.” Under Section 199A this term generally refers to any trade or business except those that involve the performance of specified services. These specified services include, but are not limited to, law, accounting, financial services, healthcare, consulting, and any other trade or business where the business’s principal asset is the reputation or skill of one or more of its owners or employees.
III. State and Local Tax (SALT) Deduction
Section 164 of the Code allows taxpayers to deduct certain state and local taxes on their federal return. The OBBBA increases the maximum deduction of $10,000 for tax years after 2025 and through 2029.
| LAW PRIOR TO CHANGE | OBBBA |
| Limited deductibility of SALT income, sales, and property taxes to a $10,000 maximum deduction for single and joint filers. | Temporarily raises the SALT maximum deduction to $40,000 through 2029 and phases down the deduction for individuals with modified adjusted gross income of more than $500,000, if married filing jointly ($250,000, if married filing separately)—adjusted upward by 1% each year. |
The OBBBA does not restrict the use of state-level pass-through entity tax (“PTET”) as a SALT cap workaround. Many states allow pass-through entities— like partnerships and S corporations—to pay state income taxes at the entity level. Because the SALT deduction generally only applies to individuals, these pass-through entities may deduct the full amount of state taxes paid, reducing the taxable income allocable to an individual owning an interest in an entity and, thus, effectively avoiding the SALT limitation that would have applied if the individual paid the state income taxes directly.
IV. Domestic Research or Experimentation Expenditures
Section 174 and the new Section 174A of the Code provide benefits for businesses that engage in research and experimentation (“R&E”). The OBBBA restores the immediate deduction treatment for domestic R&E expenses, no longer requiring taxpayers to capitalize and amortize such costs over five years.
| LAW PRIOR TO CHANGE | OBBBA |
| Most R&E expenses must be capitalized and amortized over five years.
Foreign R&E costs must be amortized over 15 years. |
Taxpayers may immediately deduct domestic R&E expenditures paid or incurred for years beginning in 2025.
Small business taxpayers with annual gross revenues of $31 million or less are permitted to apply the new rules retroactively to 2022. Foreign R&E expenses must still be amortized over 15 years. |
V. Bonus Depreciation
The current bonus depreciation deduction provisions under Section 168(k) were set to expire at the end of 2026. The OBBBA restores that deduction to 100% for eligible property acquired after January 19, 2025. Thus, businesses may immediately deduct the full cost of qualified property in the year that such property is placed in service, rather than depreciating the property’s cost over time.
| LAW PRIOR TO CHANGE | OBBBA |
| Set to expire in 2026, provided bonus depreciation for certain property acquired after September 27, 2017. | Permanently restores the bonus depreciation deduction to 100% for eligible property acquired after January 19, 2025. |
VI. Business Interest Deduction
Under Section 163(j), deductions for business interest are currently based on a taxpayer’s adjusted taxable income, without including deductions for depreciation, amortization, or depletion. The OBBBA permanently reinstates the higher EBITDA cap on the deductibility of business interest expenses, including amounts deducted for depreciation, amortization, and depletion, and applies for taxable years beginning in 2025.
| LAW PRIOR TO CHANGE | OBBBA |
| Net interest expenses are limited to 30% of adjusted taxable income based on EBIT, without including deductions for depreciation, amortization, or depletion. | Permanently reinstates the EBITDA cap on the deductibility of business interest expenses, including deductions for depreciation, amortization, and depletion. |
VII. Estate, Gift and Generation-Skipping Transfer (GST) Tax Exemption
The federal estate and gift tax exemption is the maximum amount that a person can transfer during life or at death without the payment of a federal gift or estate tax. The GST tax exemption is the amount that a person can transfer during life or at death to certain lifetime trusts for the benefit of children or directly to grandchildren or trusts for their benefit without the payment of a GST tax. Both the federal estate and gift tax as well as the GST tax are imposed at a rate of 40%.
| LAW PRIOR TO CHANGE | OBBBA |
| The current amount of the federal estate and gift tax exemption is $13,990,000 per person (or $27,980,000 for spouses). The current amount of the GST tax exemption is $13,990,000 (or $27,980,000 for spouses). Both the federal estate and gift tax exemption and GST tax exemption were scheduled to expire at the end of 2025, with the result that the exemptions would be effectively cut in half on January 1, 2026. | On January 1, 2026, the estate and gift tax exemption as well as the GST tax exemption will be increased to $15,000,000 per person (or $30,000,000 for spouses) and will be adjusted for inflation starting in 2027. The increased estate and gift tax exemption and GST tax exemption do not have an expiration date. |
The retention of the increased estate, gift and GST tax exemption amounts will allow a continuing opportunity for high-net worth taxpayers to shield significant wealth from federal estate, gift, and GST taxes through thoughtful planning. Attention still must be paid to other tax and non-tax related issues in estate planning. For example, several states, such as New York, impose state estate taxes which are well below the estate and gift tax exemption amounts. For individuals or spouses which have estates valued below the federal estate and gift tax exemption amounts, income tax planning for lifetime gifts will continue to be an important consideration in planning.
VIII. Individual Income Tax Rates
| LAW PRIOR TO CHANGE | OBBBA |
| The top marginal tax rate for individuals was reduced from 39.6% to 37%. The reduced rate was scheduled to expire at the end of 2025. | The top marginal income tax rate of 37% is now permanent. |
Even with the reduced top rate being maintained, taxpayers may want to consider techniques to shift income to individuals in a lower income tax bracket, such as non-grantor trusts with beneficiaries who pay income taxes at lower marginal rates.
IX. Deductions for Charitable Contributions
| LAW PRIOR TO CHANGE | OBBBA |
| The standard deduction for income tax purposes is currently $15,750 for single filers and $31,500 for married individuals who file jointly. There is no charitable deduction available for taxpayers who claim the standard deduction.
For taxpayers who itemize deductions for income tax purposes, there is no minimum charitable contribution required to deduct such contributions. In addition, itemized deductions for cash-based contributions to public charities increased from 50% of adjusted gross income to 60% of adjusted gross income. |
The standard deduction amounts have been made permanent and will be adjusted annually for inflation.
Starting in 2026, taxpayers who claim the standard deduction can also deduct charitable contributions, up to $1,000 for single filers and $2,000 for married individuals who file jointly. Taxpayers who itemize deductions will only be permitted to deduct charitable contributions to the extent such contributions exceed 0.5% of modified adjusted gross income. The increased 60% limit for cash-based contributions to public charities will remain in effect. |
In addition to non-tax reasons for donating to charity, when planning to make charitable gifts, taxpayers should consider the tax implications for their estate plan and cost-effectiveness of a gift in any given year.