On July 4, 2025, President Trump signed the One Big Beautiful Bill Act (OBBBA) into law after it narrowly passed in the Senate (51-50) and House (218-214). While the new law may have only narrowly passed, it will have widespread impact for almost every taxpayer. From its extension of Tax Cuts & Jobs Act provisions set to expire at the end of 2025, to modifications of other tax laws and completely new provisions added, OBBBA will affect businesses, individuals, tax-exempt organizations and even international taxpayers.
While the final version of OBBBA largely follows the previously released Senate version, lawmakers made some key adjustments to garner enough support for the bill’s passage in both chambers of Congress. Below highlights six important areas that changed in the final hours before the bill’s passage.
1. State and Local Tax Itemized Deduction Cap
- The state and local tax itemized deduction cap increases to $40,000 ($20,000 for married filing separately). The increased cap is subject to phase-out beginning at $500,000 ($250,000 if married filing separately) of modified Adjusted Gross Income (AGI).
- The $40,000 cap, however, is not permanent. It’s applicable for tax years beginning in calendar year 2025 and reverts to $10,000 for tax years beginning in calendar year 2030. For tax years beginning in calendar year 2027 through 2029, the cap is 101% of the cap for the preceding year.
- Owners of pass-through entities will continue to be able to take full advantage of state-level pass-through entity tax (PTET) election opportunities to potentially deduct state taxes in excess of the cap via their pass-through entities.
2. Excess Business Loss Limitation
- The excess business loss limitation is now permanent.
- Losses limited under this provision will continue to be carried forward as net operating losses (NOLs). This allows taxpayers to offset nonbusiness income with the carryforward amount.
3. Clean & Green Energy Tax Credits
- Many of the clean and green energy tax credits available to both individuals and businesses are being phased out sooner than originally scheduled. It’s important to understand the phase-out dates to ensure eligibility of existing projects or planned investments.
4. REIT Asset Test Modification
- The percentage of a REIT’s assets that can be held in securities of one or more taxable REIT subsidiaries increases from 20% to 25%.
5. International Provisions
- The retaliatory tax provisions were removed from the final bill after the U.S. reached a deal with other G7 countries.
- Permanently changes the base erosion anti-abuse tax (BEAT) rate from 10% to 10.5%. This rate had been scheduled to increase to 12.5% for tax years beginning after 2025.
6. Qualified Opportunity Zone Program
- The deferral benefit will now be a five-year “rolling benefit” that will use a taxpayer-specific driven investment date as opposed to a designated date in the law.
- The prior requirement to hold a Qualified Opportunity Fund interest for five years to eliminate 10% of the original gain via a basis step-up was added back into the final legislation.
There are, of course, many other important tax provisions in OBBBA to consider closely with your tax advisers, which we covered in “Senate Details Tax Provisions in Its Version of The One Big Beautiful Bill”, including:
- Permanent extension of many of the individual income tax provisions from the TCJA that were set to expire after 2025.
- Above-the-line deductions for certain tip and overtime income for tax years 2025 through 2028.
- Permanent increase to estate tax exemption beginning in 2026, with increases indexed for inflation thereafter.
- Key depreciation and expensing provisions, such as 100% bonus depreciation, Section 179 deduction and a new deduction for the cost of qualified production property, which relates to manufacturing facilities.
- Changes to the business interest expense limitations rules in Section 163(j).
- Permanent allowance for immediate expensing of domestic research and development (R&D) costs.
- Permanent extension of Section 199A qualified business income deduction (QBID).
- Computational changes related to international tax provisions — global intangible low-tax income (GILTI) and foreign-derived intangible income (FDII) — as well as updates to the pro-rata share rule for purposes of GILTI and Subpart F inclusions.
Now that OBBBA has been signed into law, it is important to work closely with your tax adviser on its impact and a roadmap for any opportunities or areas of risk you and your business need to proactively address. While many of the headline items have been discussed and analyzed for some time, the real implications are often in the details of your particular situation. Understanding the changes, nuances and applicability dates will be critical in both the short- and long-term.
Stay tuned for additional, in-depth perspectives on OBBBA’s impact to a variety of sectors. Sign up to receive our emails as new content is released! Contact Robert Venables, Mike McGivney or a member of your service team to discuss this topic further.
In this blog Cohen & Co is not rendering legal, accounting, investment, tax or other professional advice. Rather, the information contained in this blog is for general informational purposes only. Any decisions or actions based on the general information contained in this blog should be made or taken only after a detailed review of the specific facts, circumstances and current law with your professional advisers.