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.
