A significant tax bill, H.R. 1, also known as the “One Big Beautiful Bill Act,” recently passed the House on May 22, 2025. If you file taxes, run a business, or work at a nonprofit, several provisions could affect your bottom line as early as next year. Below is a concise breakdown of key changes for individuals, businesses, and nonprofit organizations.
For Individuals
Permanent TCJA Provisions (Set to Expire After 2025)
- Individual Income Tax Rates Become Permanent. The seven-bracket rate structure established by the Tax Cuts and Jobs Act (TCJA) would remain in place, with annual inflation adjustments continuing.
- Standard Deduction Permanently Increased. The higher standard deduction from the TCJA stays, plus a temporary enhancement for 2025–2028: an extra $2,000 for joint filers, $1,500 for heads of household, and $1,000 for all others.
- Personal Exemptions Remain Suspended. The exemption (suspended from 2018–2025) would be terminated permanently.
- Child Tax Credit Temporarily Expanded. For 2025–2028, the credit would increase to $2,500 per qualifying child, reverting to $2,000 thereafter (all amounts indexed for inflation).
- Estate and Gift Tax Exemption Permanently Raised. Increases to $15 million (indexed starting in 2026) and remains permanent.
- Alternative Minimum Tax (AMT) Thresholds Made Permanent. Higher exemption amounts and phase-out thresholds continue indefinitely.
- Mortgage Interest Deduction Permanently Capped at $750,000. The lower acquisition indebtedness limit from the TCJA would remain in effect.
- Casualty and theft loss deductions. Permanent suspension, except for those in federally declared disaster areas.
- Miscellaneous Itemized Deductions Remain Disallowed. Deductions suspended from 2018–2025 (e.g., unreimbursed employee expenses) would be permanently eliminated.
New & Enhanced Deductions (2025–2028)
- Partial Charitable Deduction for Non-Itemizers. Up to $150 (/$300 for joint filers) per taxpayer, allowing a limited deduction even for those who don’t itemize.
- Qualified Tips Deduction. A deduction for up to a certain amount of tipped income in service occupations, e.g., restaurants (expires after 2028).
- Qualified Overtime Compensation Deduction. Allows a deduction for overtime pay for certain workers (expires after 2028).
- Enhanced Senior Deduction. Taxpayers aged 65+ get an extra $4,000 deduction (2025–2028), phased out at higher income levels.
- Car Loan Interest Deduction. Up to $10,000 of interest on new car loans for U.S.-assembled passenger vehicles (2025–2028).
Other Changes
- State and local tax deductions (SALT) now have a limitation. Phasedown for taxpayers who MAGI> $500k – down to $10K. Increase to $40K for taxpayers except MFS, who are entitled to $20K.
- Stronger Penalties for Unauthorized Disclosure. Unauthorized inspection, disclosure, or misuse of tax return information faces fines up to $250,000 and prison terms up to 10 years.
- IRS Direct File Program Terminated. The pilot program allowing certain taxpayers to file directly with the IRS would end; instead, Congress directs the Treasury to form a public-private partnership for free-file services.
- Section 529 plans. Expand the education fund for postsecondary credentials.
For Businesses
- Employer-Provided Childcare Credit Expanded. Increases to 40% of qualified childcare expenses (50% for small businesses), up to $500,000 per year ($600,000 for small employers), with annual inflation adjustments.
- Paid Family & Medical Leave Credit Extended. The temporary credit (for paying insurance premiums) is enhanced, expands eligibility rules, and clarifies employer aggregation requirements.
- R&D Expensing (Section 174) Fully Allowed (2025–2029). Businesses can immediately deduct 100% of domestic research and experimental expenditures through 2029; amortization resumes in 2030.
- Bonus Depreciation Restored to 100%. Equipment or property placed in service between January 19, 2025, and December 31, 2029, qualifies for full bonus depreciation.
- Business Interest Limitation Reverts to EBIT (2025–2029). Rather than being tied to EBITDA, the interest deduction limit is based on earnings before interest and taxes (EBIT) for these five years.
- Reduced FDII & GILTI Deductions. Deductions for Foreign-Derived Intangible Income and Global Intangible Low-Taxed Income are scaled back, raising potential U.S. tax liability on offshore profits.
- Section 199A pass-through deduction. Permanent extension and increase in deduction from 20% to 23% with a change in the past-in limitation that may impact many small businesses.
- Section 461(I) excess business loss deduction. Permanent limitation on excess business losses.
- Corporate Charitable Deduction Floor. Corporations may only deduct charitable contributions exceeding 1% of taxable income (still capped at 10%), making small gifts nondeductible.
For Nonprofit Entities
- Corporate Charitable Deduction Floor Applies to UBTI. Under current law, a deduction up to 10% of taxable income is allowed for corporate donors. H.R. 1 adds a 1% floor, meaning only donations above 1% of income qualify for the deduction (up to 10%). This may lead to reduced corporate support for nonprofits.
- Fringe Benefits Added Back Into UBTI. Certain employer-provided fringe benefits (for example, group life insurance premiums exceeding $50,000) would be included in unrelated business taxable income (UBTI), increasing nonprofits’ tax exposure.
- Name & Logo Royalties Treated as UBTI. Income from selling or licensing trademarks, trade names, or logos is treated as regularly carried UBTI, subject to unrelated business income tax.
- Research Income Exclusion Limited. Only income from publicly available research remains excluded from UBTI. Proprietary or contract research revenues would now count as UBTI.
- Revised Excise Tax on Private College/University Endowments. A tiered excise tax rate on net investment income applies based on “student-adjusted endowment” size. New rules also include student loan interest and certain royalties as gross investment income.
- Higher Excise Tax on Private Foundation Investment Income. The tax rate (currently 1.39%) becomes tiered, ranging from 1.39% up to 10% based on asset size, significantly increasing costs for very large foundations.
- Excess Business Holdings Rules Adjusted. Purchases of employee-owned stock by a business enterprise are disregarded when calculating the foundation tax on excess holdings.
- Broader “Covered Employee” Definition for Excess Compensation Tax. The excise tax on excess remuneration would apply to a wider class of employees (including former employees and certain related parties), making compliance more complex.
Energy Credits
Several energy-related tax credits, including the residential clean energy credit, certain commercial energy property credits, and electric vehicle purchase credits, would expire for property or vehicles placed in service or acquired after December 31, 2025. If you currently plan to invest in solar, EVs, or other qualifying clean-energy property, action before the end of 2025 may preserve your eligibility.
Conclusion & Next Steps
H.R. 1 represents one of the most sweeping tax overhauls in recent years. Between permanently extending TCJA rate cuts, introducing new deductions, and reshaping UBTI rules, the bill could materially affect your 2026 tax planning:
- Individuals should revisit withholding and projection worksheets to account for higher standard deductions, expanded credits, and new phase-outs.
- Businesses need to model cash flow changes from restored bonus depreciation, amended R&D expensing rules, and revised interest limits.
- Nonprofits must assess potential UBTI increases, review charitable gifting strategies, and gauge excise tax exposure on investments.
If you disagree with or support specific provisions, there’s still time to contact your Members of Congress. Let them know how H.R. 1 impacts your community https://www.congress.gov/members
At Inter CPA, we’re tracking legislative progress closely. If you would like help estimating the impact on your 2026 return, evaluating capital purchases before year-end 2025, or analyzing how these changes affect your nonprofit’s UBTI liabilities, reach out to our team at info@inter.cpa or schedule a consultation at https://scheduler.zoom.us/jesus-pizarro/intercpa
References:
H.R. 1 – One Big Beautiful Bill Act (House Committee on Rules) https://www.congress.gov/bill/119th-congress/house-bill/1
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