Tax Breakdown: One Big Beautiful Bill

Christopher Abell
6 days ago
2 min read

The sweeping tax package known as The One Big Beautiful Bill proposes major changes to income tax rates, deductions, and business write-offs, all of which will affect how Americans file and plan starting in 2025. Here’s a breakdown of what matters most.

1. Lower Income Tax Rates Are Here to Stay

The bill makes the 2017 Tax Cuts and Jobs Act (TCJA) rates permanent. Without this bill, the lower rates were set to expire after 2025.

Bottom Line: Keeps your tax bracket lower long term, avoiding an automatic tax hike in 2026.

2. Standard Deduction Increase (2025 vs. 2024)

The Big Beautiful Bill proposes a slight increase in standard deductions for 2025 across all filing statuses.

3. Bigger Child Tax Credit

Keeps the $2,000 child tax credit from TCJA.
Temporarily increases to $2,500 per child from 2025 to 2028.
Keeps the Social Security number requirement and high-income phase-out thresholds.

Families with kids continue to benefit, with a temporary bump that offers more help at tax time.

4. No More Tax on Tips or Overtime

Above-the-line deduction for tips (2025–2028).
Overtime premium pay is deductible too (2025–2028).
High earners (based on IRC Sec. 414 thresholds) are excluded.

Workers in hospitality, beauty, and hourly industries will take home more of what they earn.

5. 23% Deduction for Small Business Owners

The bill makes the QBI deduction permanent and even improves it.

Increases the deduction from 20% to 23% for pass-through income.
Fixes the phase-in cliff that created marginal rates as high as 70%.
Applies an inflation adjustment to income thresholds.
Includes Business Development Companies as eligible.
Simplifies the phase-in formula so deduction phases out gradually at 75 cents per $1 of income over the threshold.

S corps, sole proprietors, and partnerships receive long-term certainty and a larger deduction with fewer pitfalls.

6. Supercharged Tax Breaks for Small Businesses

This bill gives business owners a major toolkit of tax incentives:

Bonus Depreciation: 100% expensing for qualifying assets placed in service through 2029.
Section 179: Maximum expensing increased to $2.5 million, with phase-out starting at $4 million (up from $1 million and $2.5 million).
Interest Deduction Expanded: EBITDA replaces EBIT in the capitalization formula, allowing for larger deductions.
Rural Property Loans: 25% of loan interest can be excluded from taxable income if secured by rural or agricultural real estate.
Opportunity Zones 2.0: Adds a second wave of OZs through 2033 with stronger incentives in rural areas.
Clean Fuel Credit Extension: Clean fuel producers get tax benefits through 2031 if feedstocks are U.S.-based.
Tightens 1099-K Rules: Reverses $600 threshold and brings it back to $20,000 and 200 transactions.
More Favorable Reporting: Raises independent contractor reporting from $600 to $2,000.

Whether you’re expanding, reinvesting, or just staying afloat, this bill arms businesses with tools to reduce taxes and reinvest in growth.

Want Help Navigating the Changes?

We’re tracking this bill closely and will provide updates if and when it becomes law. In the meantime, reach out to Abell & Advisors to see how these potential changes may impact your 2025 tax plan.