Summary of Key Tax Provisions
Individual Tax Provisions
Tax Rates
Makes the TCJA tax rates permanent, with the highest individual income tax rate of 37%.
Elimination of Federal Tax on Tips
Provides a temporary deduction of up to $25,000 per individual for qualified tips for tax years 2025 through 2028, subject to income limitations.
Estate and Gift Tax Exemption
Permanently increases the estate and gift tax exemption amount to $15 million—$30 million for a married couple—beginning in 2026 and then adjusted for inflation.
Credit for Seniors
The legislation provides up to $6,000 in additional deductions for individuals and $12,000 for married couples, with phase-out limits based on AGI.
Individual Clean Energy Incentives
Repeals individual electric vehicle credits after September 30, 2025, and residential energy efficiency credits after December 31, 2025.
Expanded Child Tax Credit
The child tax credit has been raised to $2,200 per qualifying child under the age of 18. The refundable portion of $1,700 was made permanent starting in 2025 as well, with phase-out limits based on AGI.
New Family Incentives
Starting in 2025 through 2028, every child (born from 2025-2028) of a parent with a Social Security number will receive a new “Trump account”—a government-funded investment account with $1,000 deposited at birth. While modeled after individual retirement accounts and governed by relevant sections of federal law pertaining to them, there are major distinctions from typical IRAs. Note that you can open these accounts for your child even if they were born before 2025, but without the $1,000 starter money.
State and Local Tax Deduction
The 2017 tax law introduced a $10,000 cap on the amount of state and local tax (SALT) payments people could deduct from their federal taxes. The new law temporarily increases this threshold to $40,000 (or $20,000 for married filing separately) for tax years 2025 through 2029, with phase-out limits based on AGI.
The final law does not limit the deductibility of state and local taxes for owners of pass-through entities at the entity level, preserving many existing ‘SALT cap workaround’ strategies.
Business Tax Provisions
Extension of 100% Bonus Depreciation
Permanently restores 100% bonus depreciation for qualifying property placed in service after January 19, 2025.
Expanded Section 179 Expensing
The cap for Section 179 expensing has been raised to $2.5 million, with a phase-out beginning at $4 million.
Research-and-Development Expenses
The bill allows taxpayers to immediately deduct domestic research or experimental expenditures paid or incurred in tax years beginning after December 31, 2024. Small business taxpayers with average annual gross receipts of $31 million or less will generally be permitted to apply this change retroactively to tax years beginning after December 31, 2021. And all taxpayers that made domestic research or experimental expenditures after December 31, 2021, and before January 1, 2025, will be permitted to elect to accelerate the remaining deductions for those expenditures over a one- or two-year period.
Qualified Small Business Stock Gain Exclusion
Expands the benefits under the Section 1202 qualified small business stock (QSBS) gain exclusion, creating a tiered approach for the exclusion of gain for QSBS acquired after the date of enactment based on holding period—50% gain exclusion after three years, 75% gain exclusion after four years, and 100% gain exclusion after five years, increasing the per-issuer limitation from $10 million to $15 million for post-enactment shares, and increasing the gross asset threshold from $50 million to $75 million for stock issued after the applicable date.
New Domestic Manufacturing Credit
Under the bill, the advanced manufacturing investment credit rate increases from 25% to 35%, effective for property placed in service after December 31, 2025.
Opportunity Zones
The bill renews and modifies the opportunity zone program.
Charitable & Other Deductions
Charitable Deductions
Non-itemizing taxpayers can now deduct up to $2,000 (married) or $1,000 (single) in qualified charitable donations each year beginning in 2026.
Itemized charitable deductions have a 0.5% floor which limits the total deduction.
Repeal of Itemized Deduction Phaseout
The ‘Pease limitation,’ which previously reduced itemized deductions for high-income taxpayers, was suspended by the 2017 tax law and is now permanently repealed. This is replaced by a new overall limitation on itemized deductions for high-income taxpayers, which effectively caps the benefit from itemized deductions at 35%.
Auto Loan Interest Deduction
Creates a temporary deduction of up to $10,000 for qualified interest on personal auto loans for tax years 2025 through 2028, subject to income limitations. The deduction is applicable for new vehicles in which final assembly occurred in the United States.
Expanded Use of 529 Plans
Tax-advantaged 529 educational savings plans can now be used to pay for homeschool curriculum, tutoring, and other non-traditional educational expenses, such as an elementary, private, or religious school, as well as tutoring, books, and online educational materials.
Payroll and Employment Incentives
Tax Deduction for Overtime Pay
Provides a temporary deduction of up to $12,500 ($25,000 for joint returns) for qualified overtime compensation for tax years 2025 through 2028, subject to income limitations.
Paid Family and Medical Leave Credit
Under the bill, Sec. 45S is amended to make the employer credit for paid family and medical leave permanent.
Employer-Provided Child Care Credit
The bill increases the amount of qualified childcare expenses taken into account for purposes of the Sec. 45F employer-provided child care credit from 25% to 40%. The maximum amount of the credit increases from $150,000 to $500,000 ($600,000 for eligible small businesses) and will be adjusted for inflation.
Tax-Exempt Provisions
Excise Tax on College and Universities
Increases the excise tax on private college and university endowment investment income for tax years beginning after December 31, 2025, replacing the current 1.4% tax rate with a tiered rate structure based on the size of the student adjusted endowment, with a highest rate of 8%.
Excise Tax on Private Foundations
Notably does not include a provision to change the current 1.39% tax rate on investment income of private foundations, which under a previous version of the legislation would have changed to a tiered rate structure based on the size of the private foundation, with a highest rate of 10%.
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