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Major Tax and Policy Updates in the One Big Beautiful Bill

The One Big Beautiful Bill (OBBB) was signed into law on July 4, 2025, causing significant changes to the U.S. tax code, energy policy, and healthcare funding. Designed as an extension of the 2017 Tax Cuts and Jobs Act (TCJA), the OBBB delivers over $4.5 trillion in tax cuts over the next decade, while reducing federal spending by $1.7 trillion. Here's a breakdown of the most significant provisions and what they could mean for you and your clients.

Extension of the Tax Cuts and Jobs Act (TCJA)

The OBBB extends many key provisions of the TCJA, providing continuity and predictability for individuals and businesses. Notable business tax policies from the TCJA will remain in effect, including corporate tax rate reductions and pass-through business income deductions.

Standard Deduction and Personal Exemptions

The standard deduction will see a substantial increase:

  • $16,000 for single filers
  • $32,000 for those married filing jointly

These amounts will apply starting in 2026 and will be adjusted for inflation in the future. In contrast, the personal exemption is fully eliminated.

State and Local Tax (SALT) Deduction

A major win for high-tax states, the OBBB increases the SALT deduction cap:

  • Raised from $10,000 to $40,000 beginning in 2025
  • $20,000 for married individuals filing separately

The expanded deduction phases out for households earning between $500,000 and $600,000 (married filing jointly). This increased cap is temporary—it returns to the original $10,000 cap after 2029. Most states including South Carolina have enacted Pass-Through Entity Taxes (PTEs) as a workaround to the SALT cap for business owners.

Estate and Gift Tax Exclusion

Starting in 2026, the federal estate and gift tax exclusion will jump to $15 million, with inflation adjustments in the following years. This expansion is expected to significantly impact estate planning strategies for high-net-worth individuals.

Healthcare and Medicaid Spending Cuts

The OBBB is reducing federal Medicaid and healthcare spending over the 2025–2034 period by $1 trillion. While the long-term impact on the federal budget is significant, questions remain about how states will absorb the cuts. It is unclear whether states will face budget shortfalls or need to reduce coverage and services.

Clean Energy Incentives and New Restrictions

The OBBB is introducing stricter timelines and national security-related restrictions to clean energy tax incentives.

Wind and solar projects:

  • Construction must begin within 12 months of the bill’s enactment (i.e., by July 4, 2026), or be placed in service by Dec. 31, 2027
  • Projects must be completed within four years

Effective immediately, projects will face restrictions on the involvement of foreign entities of concern (FEOCs), particularly those linked to China. These FEOC rules will fully apply to projects starting after December 31, 2025.

Nuclear, geothermal, battery, and hydropower projects remain eligible for full tax credits if construction begins by 2033. However, the value of these credits will begin to phase down after that date.

Bonus Depreciation Enhancements

The OBBB revives and strengthens bonus depreciation, offering significant incentives for capital investment:

  • 100% Bonus Depreciation is back for qualified property acquired and placed in service after January 19, 2025. This allows businesses to fully expense eligible assets immediately, instead of depreciating them over time.
  • 40% Bonus Depreciation is available for property acquired before January 20, 2025, but placed in service during 2025, providing partial acceleration for near-term investments.
  • In addition to bonus depreciation:
    • Section 179 expensing limits have been raised, expanding access for small and mid-sized businesses to write off more assets upfront.
    • Stricter 1099 information reporting requirements have been introduced, requiring improved compliance and documentation.
    • Enhanced charitable deduction limits have also been reinstated, supporting greater philanthropic flexibility.

These changes are designed to encourage immediate reinvestment, stimulate economic growth, and simplify asset planning for a broad range of taxpayers.

Opportunity Zones (OZ) Become Permanent

With the passage of the OBBB, Opportunity Zones are now a permanent fixture of the U.S. tax code, offering long-term certainty for investors and developers:

  • Originally created in 2017 with incentives scheduled to taper off by 2028, OZs now operate on a rolling 10-year map cycle—with a new set of eligible census tracts designated every decade.
  • Investors in Qualified Opportunity Funds (QOFs) can now:
    • Defer and reduce capital gains by investing in OZ projects.
    • Elect a step-up in basis any time between Year 10 and Year 30 of their investment (previously capped at Year 10), allowing up to 30 years of tax-deferred growth before recognition.
  • This extended timeline opens the door to multi-decade compounding, allowing funds to develop, refinance, and reinvest cash flow strategically across OZs without triggering capital gains—making the policy far more robust and flexible than its original version.
  • While future administrations could technically reverse the permanence, OZs currently enjoy bipartisan support, providing strong legislative backing and planning reliability.
  • Many of TCM’s development partners are redeveloping projects in OZs that also qualify for either federal or state redevelopment credits.

Whether you're an individual taxpayer, business owner, energy investor, or advisor, now is the time to re-evaluate your and your clients’ financial strategies and stay ahead of these changes. As always, Tax Credit Marketplace is here to help you navigate. Reach out to a member of our team with any questions (info@taxcreditmp.com).

Tax Credit Marketplace is informing you that the information provided is of a general nature and does not address the circumstances of any particular project, entity, or individual. Nothing in this article constitutes professional and/or financial advice, investment advice, tax advice, or legal advice. Any tax topics contained in this article are not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the tax laws and regulations of the State of South Carolina or any local governmental entity or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Furthermore, nothing in this article should be construed as an offer to solicit or sale securities.

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