The “Big Beautiful Bill” Tax Law and Its Implications
The One Big Beautiful Bill Act of 2025 has a significant
effect on federal taxes, credits, and deductions. Signed into law on July 4,
2025, the "Big Beautiful Bill" has implications for how it impacts
personal and corporate taxes.
The changes it ushered in reshaped the tax landscape,
affecting individuals and corporations differently. Here are some of the key
changes investors and business owners need to know about this new tax law.
Personal taxes under Big Beautiful Bill
One of the key tenets of the Big Beautiful Bill was the
effect it had on personal income tax brackets. Designed to provide tax relief,
it aims to extend benefits across various income levels.
- Standard deduction increase- There is a significant
increase in the standard deduction amount. This change means that fewer
taxpayers need to itemize, simplifying the tax-filing process.
- Lower tax rates- The Big Beautiful Bill lowers
marginal tax rates for most taxpayers.
- Child tax credits- The law expands child tax credits
by an additional $200, to $2200, as a measure to provide a financial boost to
families.
- Mortgage interest provision- The $750,000 principal
limit for the home mortgage interest deduction is now permanent.
- Estate and gift taxes- Permanently increase the
estate and lifetime gift tax exemption to an inflation-indexed $15
million for single filers, and $30 million for joint filers beginning in 2026.
- SALT taxes- Temporarily increase the cap on
the itemized deduction for state and local taxes (SALT) to $40,000
for 2025, increasing the cap 1 percent each year through 2029. This provision phases
out for taxpayers with incomes above $500,000, then reduces the cap to $10,000
thereafter.
Corporate taxes and the Big Beautiful Bill
The corporate tax structure underwent substantial changes
with the introduction of this law.
- Reduction in corporate tax rate- The change was a
significant reduction in the corporate tax rate, aimed at stimulating
investment and growth within companies.
- Changes to deductions- There are changes to what
corporations can now deduct as business expenses.
- Repatriation of overseas profits- The Big Beautiful
Bill provides a one-time tax on overseas profits, driving corporations to
repatriate, or bring back to the U.S., their foreign income.
The above changes fundamentally alter the corporate tax
landscape. While the reduction in tax rates is a welcome change for many
businesses, other changes require careful planning and foresight to navigate.
As with any tax-related matter, consult with a financial or tax
professional who can provide guidance based on your unique circumstances. The
"Big Beautiful Bill" is no exception, and understanding its
implications is essential for optimizing your tax situation, whether you're an
individual taxpayer or a business owner.