On July 3, 2025, the House of Representatives narrowly passed President Donald Trump’s sweeping domestic policy package—officially titled the One Big Beautiful Bill Act (H.R. 1)—by a vote of 218–214.
This follows the bill’s passage in the Senate two days earlier, on July 1, by a 51–50 vote, with Vice President JD Vance casting the tie-breaking vote. The legislation overcame strong Democratic opposition and internal Republican dissent in both chambers.
The bill, a cornerstone of President Trump’s second-term agenda, now heads to the president’s desk; he is expected to sign it into law by July 4 at 5PM on July 4th as a part of Independence Day celebrations.
The following are the most notable provisions that we’ve identified:
Business Entities
Research & Development (R&D)
- Starting with costs incurred in 2025, anything spent on research performed inside the United States is 100% deductible in the year paid, with no more five-year amortization and no sunset date.
- Research work performed abroad must be capitalized and deducted at an equal rate over fifteen years, to encourage domestic labs.
- Domestic research expenses forced to capitalize in 2022-24 can be rolled into 2025’s return with a simple method-change election (no income pick-up, no IRS consent required).
Pass-Through Entity Tax (PTET)
- PTET workaround survives unchanged. The final bill drops all prior language that would have made the deduction less desirable.
- Partnerships or S-corps electing PTET retain the uncapped federal deduction.
- Owners still get state credit/refund outside $10,000 SALT limit.
- SALT cap lifted to indexed “applicable limitation amount” starting at $40,000/$20,000, but cap applies only to itemized deductions on Schedule A.
- PTET credits don’t count toward ceiling.
Employment:
Tips and Overtime
- Up to $25,000 of cash tips allowed tax-free annually.
- Tips must be from occupations that customarily receive tips, as specified in a future Treasury-provided list.
- Up to $12,500 of overtime wages deductible annually ($25,000 for joint filers).
- This covers time-and-a-half pay required by Fair Labor Standards Act; straight-time wages and tips don’t count.
- Both benefits phase out starting at $150,000 in income.
1099 Reporting
- Starting threshold raised to $2,000 annually for payments made after December 31, 2025.
Real Estate
- 100% bonus depreciation write-off returns permanently, with no phase-down provisions included.
- Business Interest Deduction: EBITDA test made permanent for § 163(j) cap, so depreciation and amortization are added back when measuring adjusted taxable income, restoring room for capital-intensive firms.
- Opportunity zones program extended seven years forward. Capital gains invested in Qualified Opportunity Fund (QOF) through December 31, 2033, can be deferred to December 31, 2042.
Nonprofit
- The final bill swaps the House’s “10 % of AGI or $5 000” formula for a flat dollar-for-dollar credit up to $1,700 per return each year for cash gifts to a state-approved 501(c)(3) SGO; any excess carries forward.
- 529 plans can now be used to include tuition expenses for K–12 private and religious schools.
- Non-itemizers can claim up to a $1,000/$2,000 deduction for cash gifts. This is an increase from $300/$600 in the original version of the bill.
- Proposed nonprofit UBTI add-ons for employee parking/transit and name and likeness royalty income in the original bill are now removed from the final bill.
- Beginning in 2026, businesses must skip first 1% of taxable-income gifts; individuals must skip first 0.5% of AGI when claiming charitable deductions, with unused amounts carried forward five years.
Other Important Provisions
- Starting in 2025, each qualifying child automatically receives a federally-funded “Trump Account” seeded with a one-time $1,000 deposit, operating like a child’s IRA with up to $5,000 annual contributions allowed.
- Electric-vehicle credits, home-efficiency incentives, and wind/solar eligibility ending between 2025-2027. Limited window remains to utilize existing rebates.
- Child tax credits are permanently increased to $2,200 per child with standard income phaseouts.
- Lifetime exemption on estate and gift taxes are permanently raised to $15 million per individual.
As always, we are closely monitoring developments and will be distributing thorough reviews of each of these topics in the coming weeks.
This material has been prepared for informational purposes only, and is not intended to provide or be relied upon for legal or tax advice. If you have any specific legal or tax questions regarding this content or related issues, please consult with your professional legal or tax advisor.
Correction (July 4 2025): An earlier version cited an outdated draft of the bill and stated the Scholarship-Granting-Organization credit was “10 % of AGI or $5,000.” The final bill instead provides a flat $1,700 credit per return.
