Table of Key Tax Provisions in OBBBA
Now that the One Big Beautiful Bill Act (OBBBA) is final, businesses and investors should carefully review the tax changes to understand the potential impact. The legislation comprises a broad range of tax provisions that will affect all types of taxpayers across most industries.
Many of the provisions offer different options for implementation. The effective dates are important, and there are time-sensitive planning considerations. The changes could affect third-quarter financial statements and estimated tax payments. By staying informed and prepared, businesses can help mitigate risks, capitalize on opportunities, and maintain compliance with new changes.
The following table offers a detailed breakdown of the key tax provisions in the enacted legislation compared to pre-enactment law. Use it as a resource for identifying important changes and assessing their potential impact. For an in-depth analysis of the key tax provisions, see our full alert: Republicans Complete Sweeping Reconciliation Bill. We have also prepared several other analyses of key aspects of the bill:
- New Tax Act Changes Numerous International Tax Provisions
- One Big Beautiful Bill Act: Implications for Accounting for Income Taxes
- OBBBA Is Final: What’s Next for Asset Managers?
- New Tax Law Will Have Significant Impact on Tax-Exempt Organizations
- New Tax Law Includes Numerous Provisions Affecting Real Estate Industry
BDO’s Washington National Tax will continue to monitor guidance and developments on these issues. Check our tax policy page periodically for the latest information.
Key Tax Provisions
Provision
Law Prior to OBBBA Enactment
OBBBA Changes
Individual income tax rates (Sec. 1).
The Tax Cuts and Jobs Act of 2017 (TCJA) provided rate cuts and adjusted the thresholds across the tax brackets from 2018 through 2025, setting them at 10%, 12%, 22%, 24%, 32%, 35%, and 37%.
Extends the TCJA changes and provides an additional year of inflation adjustments for the 10% and 12% brackets, effective after 2025.
Standard deduction (Sec. 63).
TCJA increased the standard deduction from 2018 through 2025, which reached the following amounts with inflation adjustments for 2025:
- $30,000 (MFJ)
- $15,000 (S/MFS)
- $22,500 (HOH)
Permanently increases the standard deduction beginning in 2025 to $31,500 (MFJ), $15,750 (S), and $23,625 (HOH), and indexed for inflation thereafter.
Personal exemptions (Sec. 151).
Personal exemptions set at zero from 2018 through 2025.
Permanently repeals personal exemptions, except for creating a new personal exemption for seniors, discussed below.
Child tax credit (Sec. 24).
TCJA increased the maximum child tax credit (CTC) to $2,000 per qualifying child and made up to $1,700 per child refundable (indexed for inflation). The TCJA also increased the thresholds at which the CTC began to phase out to:
- $200,000 of modified adjusted gross income (MAGI) for single filers
- $400,000 of MAGI for joint filers
- Permanently increases the CTC to $2,200 beginning in 2025, indexing it for inflation thereafter.
- Makes permanent the refundable portion of the CTC and higher phaseout thresholds.
Qualified business income deduction (Sec. 199A).
- TCJA created Section 199A from 2018 through 2025, allowing individuals, trusts, and estates to deduct 20% of qualified business income from a partnership, S corporation, or sole proprietorship (20% of total qualified real estate investment trust dividends and publicly traded partnership income are also eligible).
- Taxpayers cannot be in specified service trade or business and must meet capital investment or wage payment requirement unless income is below inflation-adjusted thresholds that reached $394,600 (MFJ) and $197,300 (S, HOH, MFS) in 2025.
- Makes deduction permanent at 20% rate while slowing the phaseout of the exception from the capital investment and wage expense requirements and the bar on specified service trades or businesses.
- Creates new minimum $400 deduction for taxpayers with at least $1,000 of qualified income, with both figures indexed for inflation.
- Changes effective for tax years beginning after 2025.
Alternative minimum tax (AMT) exemptions and phaseouts (Sec. 55).
TCJA increased the exemptions and exemption phaseouts from 2018 through 2025. Exemptions in 2025:
- $137,000 (MFJ)
- $88,1000 (S/HOH)
- $68,500 (MFS)
- $1,252,700 (MFJ)
- $636,350 (S/HOH/MFS)
Makes the TCJA AMT thresholds permanent, but only after resetting the inflation adjustments for the exemptions phaseout threshold back to the 2018 level, effectively reducing the thresholds and reindexing them for inflation after these 2026 amounts:
- $1,000,000 (MFJ)
- $500,000 (S/HOH/MFS)
Deduction for qualified residence interest (Sec. 163(h)).
TCJA lowered the cap on the amount of acquisition indebtedness taxpayers can consider for the mortgage interest deduction from $1 million to $750,000 for indebtedness incurred after December 31, 2017, and before January 1, 2026.
Makes permanent the lower cap on indebtedness but treats certain mortgage insurance premiums as qualified interest effective for tax years beginning after 2025.
Casualty loss deduction (Sec. 165(c)).
TCJA repealed the deduction for personal casualty losses incurred after December 31, 2017, and before January 1, 2026 (except to the extent of personal casualty gains) except for disaster losses, which remain deductible under the TCJA to the extent the loss exceeds 10% of AGI. Disaster losses are deductible to the extent they exceed $500 without regard to the 10% AGI threshold for disasters declared between Feb. 26, 2021, and 60 days after Dec. 12, 2024.
- Makes the casualty loss limitations under the TCJA permanent, but expands the exception for disaster loss treatment to state-declared disasters.
- Extends the $500 threshold in place of the 10% AGI requirement for disasters declared within 60 days of July 4, 2025.
Miscellaneous itemized deductions (Sec. 67).
TCJA suspended miscellaneous itemized deductions from 2018 through 2025.
Makes repeal of miscellaneous itemized deductions permanent, but allows an itemized deduction for certain educator expenses beginning in 2026.
Pease limitation on itemized deductions (Sec. 68).
TCJA suspended the Pease limitation on itemized deductions for 2018 to 2025.
Makes the repeal of the Pease limitation permanent but creates a new limitation beginning in 2026 capping the value of itemized deductions so that the maximum benefit is equivalent to reducing taxable income in the 35% bracket rather than the 37% bracket.
Child and dependent care credit (Sec. 21).
Individuals can receive a credit ranging from 20% to 35%, depending on income, for certain dependent care costs.
Increases the credit rate from 20% to 50% for tax years beginning after 2025.
Dependent care assistance programs (Sec. 129).
Employees may exclude from income certain dependent care costs paid by their employers.
Increases cap from $5,000 to $7,500.
Adoption credit (Sec. 23).
Individuals can claim a credit for qualified adoption expenses up to a lifetime inflation-adjusted cap that reached $17,280 in 2025, with the credit phasing out for AGI exceeding an inflation-adjusted cap that reached $259,190 in 2025.
Makes up to $5,000 of the credit refundable, with a slight change in the inflation adjustments for the credit, effective for 2025.
Charitable deduction (Sec. 170).
- Individuals are generally allowed an itemized deduction for charitable contributions. For 2021, a temporary provision allowed a charitable deduction of up to $300 for non-itemizing taxpayers.
- TCJA increased the AGI cap on the deduction for charitable contributions from 50% to 60% for 2018 through 2025.
- Reinstates a deduction for cash contributions to public charities for taxpayers that do not itemize of up to $2,000 (MFJ) or $1,000 (S, HOH, MFS) beginning in 2026.
- Makes permanent the 60% of AGI threshold for the itemized deduction.
- Creates a new 0.5% AGI floor on itemized charitable deductions beginning in 2026.
Other TCJA limits.
TCJA provided from 2018 through 2025:
- Repeal of exclusion for bicycle commuting reimbursements
- Repeal of exclusion for moving expenses
- ABLE account changes
- Exclusion for student loan forgiveness after death
- Special tax treatment for service on Sinai Peninsula
- Exclusion from income of employer payments of student loans
All listed TCJA changes are generally made permanent, with several changes:
- Offers an additional year of inflation adjustments for the limits on qualified transportation fringe benefits and ABLE accounts
- Increases the savers credit for ABLE contributions and makes other changes
- Provides an exception for the repeal of the exclusion for moving expenses for members of intelligence communities
- Changes inflation adjustment for the exclusion from income of employer payments of student loans
Wagering losses (Sec. 165(d)).
Wagering losses are generally deductible only up to wagering gains, and TCJA clarified that this limit also applies to wagering losses in a trade or business from 2018 through 2026.
Makes permanent the TCJA treatment of wagering losses in a trade or business and adds a new limit allowing taxpayers to deduct only up to 90% of wagering losses (up to the amount of gains).
Section 529 accounts (Section 529).
Section 529 provides tax-preferred savings accounts for certain education expenses.
Expands the definition of qualified expenses and doubles the limit on distributions for elementary and secondary schools
State and local tax (SALT) cap (Sec. 164).
SALT itemized deductions limited to $10,000 ($5,000 MFS) of state and local income, property, and sales taxes from 2018 through 2025.
- Makes the $10,000 SALT cap permanent, with a temporary increase in the threshold from 2025 through 2029.
- Increases threshold to $40,000 in 2025, but this phases down to $10,000 for income exceeding $500,000.
- Increases the $40,000 and $500,000 thresholds by 1% each year from 2026 through 2029.
Active loss limit (Sec. 461).
Section 461 limits a taxpayer’s ability to deduct certain active business losses above a limit that is indexed for inflation and in 2025 reached $626,000 (MFJ) and $313,000 (S/HOH/MFS). The limited loss generally becomes an NOL in future years. The provision was set to expire for tax years beginning after Dec. 31, 2028.
Makes the active loss limit under Section 461(l) permanent while reducing the threshold at which the limit applies by clawing back eight years of inflation adjustments.
Estate and gift tax lifetime exemption amount (Secs. 2010, 2505).
Lifetime exemption amount set at $10 million and indexed for inflation ($13.99 million in 2025). The top estate tax rate is 40%. The exemption amount was scheduled to be cut in half after 2026.
Exemption amount is increased to $15 million per taxpayer in 2026 and indexed for inflation thereafter.
Exemption for seniors (Sec. 151).
The TCJA generally repealed personal exemptions.
- Creates a $6,000 personal exemption for taxpayers aged 65 and above for four years from 2025 through 2028.
- Exemption begins to phase out with MAGI exceeding $150,000 (MFJ) and $75,000 (S/HOH/MFS).
Taxation of tip income (Sec. 61).
Tip income is taxed under Sec. 61 and reported to employers monthly under Sec. 6053.
- Creates an income tax deduction of up to $25,000 per year from 2025 through 2028.
- Deduction is available only for voluntary tips in occupations that “traditionally and customarily” received tips before 2025 in a business that is not a specified service trade or business under Section 199A.
- Deduction is available without regard to whether deductions are itemized but phases out for MAGI exceeding $150,000 (S, MFS, HOH) or $300,000 (MFJ).
- Extends the FICA tip credit to cover certain beauty services.
- Creates reporting requirements for employers.
Taxation of overtime pay (Sec. 61).
Overtime pay is subject to income and employment tax.
- Creates an income tax deduction of up to $12,500 (S, MFS, HOH) or $25,000 (MFJ) for overtime pay under the FLMA from 2025 through 2028.
- Deduction is available without regard to whether deductions are itemized but phases out for MAGI exceeding $150,000 (single) or $300,000 (joint).
- Creates reporting requirements for employers.
Auto loan interest deduction.
There is no current deduction for personal interest, which includes interest incurred on a personal vehicle loan.
- Creates an income tax deduction of up to $10,000 in interest paid on a loan for new vehicles under 14,000 pounds with final assembly in the U.S.
- Deduction is available for non-itemizers but phases out when modified AGI exceeds $100,000 (S, MFS, HOH) or $200,000 (MFJ).
- Effective for tax years 2025 through 2028. Creates reporting requirements for lenders.
Tax-preferred savings accounts. (Sec. 530A).
The tax code provides several types of tax-preferred savings and spending accounts.
- Creates a new type of tax-preferred account for minors called “Trump” accounts.
- Contributions are allowable after July 4, 2026, until an individual turns 18, and are capped annually at $5,000 (indexed for inflation).
- Contributions are not deductible, but the accounts would generally be exempt from tax, with qualified distributions taxed as capital gains.
- Under a pilot program, children born between 2025 and 2028 are eligible to receive a $1,000 contributory credit in their account.
- Investments up to age 18 are limited to mutual funds or exchange-traded funds that track a qualified index, do not use leverage, and have expenses of less than 0.1%. Qualified indexes include the S&P 500 and other indexes for equity investments primarily in U.S. companies. Industry-specific indexes are prohibited but indexes based on market capitalization are allowed.
- Distributions are generally not allowed until age 18, with rules similar to IRAs thereafter.
Provision
Law Prior to OBBBA Enactment
OBBBA Changes
Bonus depreciation (Sec. 168(k)).
Bonus depreciation phases down to:
- 80% in 2023
- 60% in 2024
- 40% in 2025
- 20% in 2026
- 0% thereafter
- Restores 100% bonus depreciation for property placed in service after Jan. 19, 2025.
- Creates a new category of 100% expensing to cover nonresidential real property that is qualified production property if construction of the property begins after Jan. 19, 2025, and before 2029 and the property is placed in service by the end of 2030.
Deduction for domestic research and experimental expenditures (Sec. 174).
For tax years beginning after 2022, taxpayers must amortize domestic research costs over five years and foreign costs over 15 years.
- Restores the expensing of domestic research costs for tax years beginning after Dec. 31, 2024 (foreign research costs must still be amortized over 15 years).
- Retains election to capitalize.
- Taxpayers can claim unused amortization deductions from 2022 to 2024 in the first tax year beginning after 2024 or ratably in the first two tax years beginning after 2024. Alternatively, taxpayers that meet the gross receipts threshold for simplified accounting methods under Section 448(c) can amend returns to retroactively claim full expensing.
- Requires taxpayers to reduce their deduction or capital account by the amount of any research credit, effective for tax years beginning after 2024.
Business interest deduction calculation (Sec. 163(j)).
For tax years beginning after 2022, taxpayers must include amortization, depreciation, and depletion in the calculation of adjusted taxable income (ATI) for calculating whether the deduction for net interest expense exceeds the cap of 30% of ATI.
- Permanently removes amortization, depreciation, and depletion from ATI for tax years beginning after 2024.
- Interest capitalized to other assets remains subject to the limit (except interest capitalized to straddles under Section 263(g) or to certain production property under Section 263A(f)) for tax years beginning after 2025).
- Excludes from ATI income inclusions from Subpart F, GILTI, and any Section 78 gross-up for tax years beginning after 2025.
- Expands floor plan financing exception to campers.
Limitation on expensing of certain depreciable assets (Sec. 179).
Section 179 allows taxpayers to expense qualified property up to a cap that is indexed for inflation ($1.25 million in 2025), but this cap is reduced dollar for dollar by the amount of qualified property placed in service that exceeds a threshold indexed for inflation ($3.13 million in 2025).
Increases the Section 179 deduction cap to $2.5 million, with a phaseout threshold of $4 million, indexed for inflation, effective for tax years beginning after 2024.
Qualified small business (QSB) stock (Sec. 1202).
Taxpayers can exclude 100% of the gain from the sale of QSB stock held for more than five years, up to the greater of 10 times basis or $10 million. The gross assets threshold for a company to qualify as a QSB cannot exceed $50 million when the stock is issued.
- Provides a 50% exclusion for QSB stock held three years and a 75% exclusion for stock held four years, effective for stock issued after the date of enactment.
- Increases the current exclusion limit from $10 million to $15 million (or 10 times basis) indexed for inflation beginning in 2027, effective for stock issued after the date of enactment.
- Increases the current limit on assets held at the time of stock issuance from $50 million to $75 million, indexed for inflation beginning in 2027, effective for stock issued after the date of enactment.
Opportunity zones (Sec. 1400Z).
Investment in a Qualified Opportunity Fund allows taxpayers to defer capital gain and receive a step-up in basis so that appreciation on the qualified investment is tax-free after a 10-year holding period. Qualified investments must be made by the end of 2026.
- Makes program permanent over 10-year rolling designation periods.
- Gain deferred on investments made after 2026 would be recognized five years after investment, with a 10% increase in basis.
- Step-up in basis to FMV after 10 years would be capped at FMV after 30 years.
- Requires new designation of opportunity zones with updated criteria and special benefits for a new category of rural opportunity zones.
- Requires additional reporting and imposes penalties for noncompliance.
REIT asset test (Sec. 856).
REITs are subject to a qualified asset test that generally allows them to hold no more than 20% of their assets in taxable REIT subsidiaries.
Increases the amount of allowable assets held in taxable REIT subsidiaries to 25%, effective for tax years beginning after 2025.
Advanced manufacturing investment credit (Sec. 48D).
Section 48D provides a 25% credit for semiconductor manufacturing facilities.
Increases the credit from 25% to 35% for property placed in service after 2025.
New markets tax credit (Sec. 45D).
The new markets tax credit was scheduled to expire in 2026.
Makes the credit permanent.
Low-income housing credit (Sec. 42).
The low-income housing tax credit offers credits for certain low-income building projects that receive an allocation up to state caps.
- Permanently increases the population component of the state low-income tax credit ceiling to 12% effective after 2025.
- Modifies the tax-exempt bond financing requirement.
1% floor on corporate charitable contribution deduction (Sec. 170).
Corporations are generally permitted to deduct charitable contributions up to 10% of taxable income.
- Permits a corporation to deduct a charitable contribution only to the extent it exceeds 1% of taxable income (up to 10% of taxable income) for tax years beginning after 2025.
- Five-year carryforward is available for the amount disallowed, but only if the taxpayer has a carryforward for exceeding the 10% cap.
Disguised sales (Sec. 707).
Section 707 provides rules for certain transactions between partners and a partnership.
Clarifies that the rules prescribed under Section 707(a)(2) are self-executing and not contingent on the issuance of regulations by Treasury, effective for services performed and property transferred after July 4, 2025.
Remittance excise tax (Sec. 4475).
There is no specific current excise tax on remittances.
Creates a 1% excise tax on remittance transfers of cash, money orders, cashier’s checks, and any other similar physical instruments made after 2025 with an exception for transfers sent from debit cards, credit cards, and most accounts at financial institutions.
Firearm excise tax (Secs. 5811 and 5821).
There is a $200 excise tax on the manufacture or transfer of firearms.
Limits the $200 firearms excise tax only to “machineguns” or “destructive devices,” effective in 2026.
Long-term contracts (Section 460).
Taxpayers building homes are generally exempt from the percentage of completion method for long-term contracts. These home builders can also be exempt from the uniform capitalization rules if they meet the gross receipts test under Section 448(c) ($31 million in 2025) and the contract is estimated to be completed within two years.
- Expands the exception from the percentage of completion method for home construction to include any residential construction.
- Expands the exception from the uniform capitalization rules for taxpayers meeting the Section 448(c) gross receipts test by increasing the allowable estimated contract period from two to three years.
Spaceports treated like airports for tax exempt bond rules (Sec. 142).
Certain tax-exempt bonds may be used to fund specific types of facilities, including airports.
Treats spaceports like airports for the tax-exempt bond rules, effective for obligations issued after July 4, 2025.
Capital gain on farmland sales (Sec. 1062).
There is no specific provision providing for installment of payments on gain for farmland sales.
Allows taxpayers to elect to pay the tax on gain from sales of qualified farmland property in installments over four years, effective for tax years beginning after July 4, 2025.
Rural real properly loan interest (Sec. 139L).
There is no current provision specific to interest on loans on rural land.
Creates new Section 139L to exempt from income 25% of the interest from loans on certain agricultural and rural real estate for a specific category of lenders, effective for tax years beginning after 2025.
Rum ‘Cover Over’ (Sec. 7652).
Excise taxes for certain distilled spirits are “covered over” and paid to the Treasuries of Puerto Rico and the Virgin Islands.
Increases cap on the “cover over” of distilled spirits from $10.50 to $13.25, effective for spirits brought into the U.S. after 2025.
Sound recording expensing (Sec. 181).
Taxpayers can expense certain qualified film, television, and live theatrical productions.
- Expands expensing under Section 181 to include up to $150,000 in sound recordings for tax years beginning after July 4, 2025.
- Makes sound recording productions eligible for bonus depreciation.
Provision
Law Prior to OBBBA Enactment
OBBBA Changes
Executive compensation (Sec. 162(m)).
Section 162(m) generally denies public companies a deduction for compensation in excess of $1 million paid to “covered employees.”
Expands the aggregation rules so that the identification of covered employees and the calculation of compensation is made on a controlled group basis under the rules in Section 414, effective for years beginning after 2025.
Employer- Provided Child Care Credit (Sec. 45F).
Section 45F provides a credit of 25% of qualified childcare costs and 10% for resource and referral costs, capped at $150,000 annually.
- Increases the credit to 40% for qualified childcare costs (50% for eligible small businesses).
- Increases the cap in credit to $500,000 indexed to inflation ($600,000 for eligible small businesses).
- Expands credit to cover jointly owned facilities and intermediaries.
Paid Family Leave Credit (Sec. 45S).
Section 45S provides a credit for employers that offer qualifying paid family leave to certain employees, set to expire after 2025.
- Makes the credit permanent.
- Expands the credit to cover premiums for insurance policies that provide paid family and medical leave to qualifying employees.
- Creates a new aggregation rule so employers in the same controlled group are treated as a single employer (and must have leave plans meeting the requirements).
- Expands credit to all states.
- Expands credit for offering leave to broader range of employees.
Form 1099-K reporting (Sec. 6050W).
For payments made after 2021, Section 6050W generally requires payment settlement entities to perform reporting once aggregate annual payments to a payee exceed $600 or more. The IRS delayed implementation of this threshold so payments made in 2022 and 2023 were reportable only to the extent aggregate payments exceeded $20,000 and the number of transactions exceeded 200. Reporting is required for 2024 and 2025 only if aggregate payments exceed $5,000 in 2024 and $2,500 in 2025 (without regard to the number of transactions).
Reinstates the 200 transaction and $20,000 threshold retroactive to the enactment of the $600 threshold.
Form 1099-NEC and 1099-MISC reporting (Secs. 6041, 6041A).
Sections 6041 and 6041A generally require reporting on non-employee compensation or payments from a business for services on Form 1099-NEC or 1099-MISC once aggregate payments to a payee exceed $600 for the year.
Increases the threshold for reporting to $2,000 beginning in 2026 and indexes it to inflation thereafter.
Meals deduction (Sec. 274).
Beginning in 2026, employers will no longer be able to deduct meals provided to employees at the convenience of the employer (if the meals are excluded from employee income).
Provides an exception allowing taxpayers to deduct meals provided at the convenience of the employer if the meals were sold by the taxpayer in a bona fide transaction for full consideration or for meals provided on certain fishing vessels or processing plants, effective for amounts incurred after 2025.
Employee retention credit (Sec. 3134).
The employee retention credit was available for certain wages paid in specific periods of 2020 and 2021.
- Disallows refunds effective after July 4, 2025 unless the claim was filed on or before Jan. 31, 2024.
- Extends the statute of limitations for certain claims.
- Increases preparer and promoter penalties in certain circumstances.
Provision
Law Prior to OBBBA Enactment
OBBBA Changes
Global intangible low-taxed income (GILTI) (Sec. 951A).
- Intended to prevent U.S. multinational corporations from shifting profits to low-tax foreign jurisdictions by imposing a minimum tax on certain foreign earnings of U.S. corporations.
- Effective rate was 10.5% before FTC haircut, and was scheduled to increase to 13.125% after 2025.
- Reduces the Section 250 deduction to 40% for tax years beginning after 2025, creating an effective rate of 12.6% (before FTC haircut).
- Renames GILTI “Net CFC Tested Income” (NCTI).
- Reduces FTC haircut from 20% to 10%.
- Taxes associated with PTET no longer be treated as deemed paid under Section 78.
- Repeals QBAI deemed return.
- Limits expense allocation for FTC purposes to “directly allocable” deductions and expressly excludes interest and R&E.
Foreign-derived intangible income (FDII) (Sec. 250).
- Intended to encourage the sale of goods and services to foreign markets, it permits U.S. corporations to claim a reduced rate on income derived from exports
- Effective rate was 13.125% of eligible income, and was scheduled to increase to 16.4% after 2025.
- Reduces the Section 250 deduction to 33.34% for tax years beginning after 2025, creating an effective rate of 14%.
- Renames FDII “foreign-derived deduction-eligible income” (FDDEI)
- QBAI reduction to FDII/FDDEI is repealed. Eligible income is reduced only by deductions properly allocable to the income and expressly excludes interest and R&E.
- Excludes income or gain from property subject to depreciation amortization or depletion in the hands of the seller or intangible property under Section 367(d)(4) effective June 16, 2025.
- Renames FDII “foreign-derived deduction-eligible income” (FDDEI).
Base erosion and anti-abuse tax (Sec. 59A).
BEAT imposes an additional tax on certain corporations that make large payments to foreign related parties to discourage profit shifting. It generally applies to corporations with annual gross receipts of $500 million or more in a three-year period. The rate is 10%, and was scheduled to increase to 12.5% after 2025 with other changes.
- Increases BEAT rate to 10.5%.
- Makes permanent the current favorable treatment of credits.
CFC look-through rule (Section 954(c)(6)).
CFC look-through rule was scheduled to expire for tax years beginning on or after January 1, 2026.
Makes the CFC look-through rule permanent.
Downward attribution rule (Sec. 958(b)(4)).
TCJA repealed the exception for downward attribution under Section 958(b)(4).
Restores the exception from downward attribution rules under Section 958(b)(4), while adding a narrower rule under Section 951B that more closely aligns with TCJA’s intent.
Foreign tax credits (Section 904).
Income from inventory produced and sold by a taxpayer is generally sourced based on production activities.
Treats income from the sale of inventory produced in the U.S. and sold through foreign branches as foreign-source income, capped at 50%.
Pro rata rules (Section 951).
The pro rata rules generally require a U.S. shareholder to own stock of the CFC on the last day on which the foreign corporation was a CFC.
Requires a U.S. shareholder of a CFC to include its pro rata share of Subpart F or GILTI/NCTI income if it owned stock in the CFC at any time during the foreign corporation’s tax year in which it was a CFC.
Repeal of one-month deferral for specified foreign corporations (Sec. 898).
Specified foreign corporations (CFCs more than 50% owned by a U.S. shareholder) are permitted to have a tax year beginning one month later than the majority shareholder’s tax year.
Repeals the one-month deferral so specified foreign corporations must generally use the same tax year as the majority U.S. shareholder.
Provision
Law Prior to OBBBA Enactment
OBBBA Changes
Clean fuel production credit (Sec. 45Z).
Section 45Z provides a credit for the production of certain transportation fuels that meet lifecycle greenhouse gas emissions standards. The credit is scheduled to expire for fuel sold after 2027.
- Extends the credit to fuel sold through the end of 2029, with a new requirement that feedstock be produced or grown in the U.S., Mexico, or Canada, effective for fuel produced after 2025.
- Amends the calculation of greenhouse gas emissions to exclude indirect land use changes and provides emissions rate can generally not be below zero.
- Repeals increased credit rate for sustainable aviation fuel produced after 2025.
- Reinstates a stackable small agri-biodiesel credit under Section 40A. Bars credit for foreign entities of concern for tax years beginning after the date of enactment.
- Bars credit for “foreign-influenced entities” for tax years beginning two years after the date of enactment.
Previously owned clean vehicle credit (Sec. 25E).
Section 25E provides a credit for certain previously owned EVs and other “clean” vehicles.
Repeals the credit for vehicles acquired after Sep. 30, 2025.
Clean vehicle credit (Sec. 30D).
Section 30D provides a credit for certain EVs and other “clean” vehicles.
Repeals the credit for vehicles acquired after Sep. 30, 2025.
Commercial clean vehicles credit (Sec. 45W).
Section 45W provides a credit for certain commercial EVs and other clean vehicles.
Repeals the credit for vehicles acquired after Sep. 30, 2025.
Alternative fuel vehicle refueling property credit (Sec. 30C).
Section 30C provides a credit for certain EV charging property and other alternative fuel refueling property.
Repeals the credit for property placed in service after June 30, 2026.
Energy-efficient home improvement credit (Sec. 25C).
Section 25C provides a credit for certain energy-efficient home improvement property.
Repeals the credit for property placed in service after Dec. 31, 2025.
Residential clean energy credit (Sec. 25D).
Section 25D provides a credit for certain residential clean energy property.
Repeals the credit with respect to expenditures made after Dec. 31, 2025.
Energy-efficient commercial buildings deduction (Sec. 179D).
Section 179D offers a deduction of up to $5 per square foot for certain energy-efficient improvements to lighting, HVAC, hot water systems, and the building envelope.
Repeals the deduction for construction beginning after June 30, 2026.
New energy-efficient home credit (Sec. 45L).
Section 45L provides a credit for construction of energy-efficient new homes.
Repeals the credit for homes acquired after June 30, 2026.
Energy property depreciation (Sec. 168).
Qualified energy property generally has a five-year depreciable life.
Repeals the five-year depreciable life for certain energy property under Section 48 if construction begins after Dec. 31, 2024.
Clean energy production credit (Sec. 45Y).
- The production tax credit under Section 45Y offers a per-kilowatt credit for producing electricity from sources that meet lifecycle greenhouse gas emissions standards.
- The credit is scheduled to phase out when certain nationwide emissions goals are reached (or 2032 if later).
- Taxpayers must generally meet prevailing wage and apprenticeship rules to receive full credit amounts.
- Additional credits are available for projects in energy communities or meeting domestic sourcing requirements.
- Phases out the credit for projects beginning construction after 2032, except for wind and solar. Wind and solar projects must be placed in service by the end of 2027 if they begin construction after July 4, 2026.
- Facilities receiving “material assistance” from any prohibited entity are not eligible if construction begins after Dec. 31, 2025, with material assistance based on a cost ratio.
- Disallows credits for taxpayers that are prohibited foreign entities for tax years beginning after the date of enactment.
- Disallows credits for tax years beginning after the date of enactment for leased wind and solar property qualifying for the residential tax credit under Section 25D.
Clean energy investment credit (Sec. 48E).
- The investment tax credit under Section 48E provides a credit against the cost basis of qualified property that generates electricity meeting lifecycle greenhouse gas emissions standards or that is qualified energy storage or interconnection property.
- The credit is scheduled to phase out when certain nationwide emissions goals are reached (or 2032 if later).
- Taxpayers must generally meet prevailing wage and apprenticeship rules to receive full credit amounts.
- Additional 10% credits are available for projects in energy communities or meeting domestic sourcing requirements.
- Wind and solar projects must be placed in service by the end of 2027 if they begin construction after July 4, 2026.
- Facilities that receive “material assistance” from any prohibited entity are not eligible if construction begins after Dec. 31, 2025, with material assistance based on a cost ratio.
- Disallows credit for taxpayers that are prohibited foreign entities for tax years beginning after the date of enactment.
- Increases the domestic sourcing threshold for the 10% additional credit from 40% to 45% for construction beginning after June 16, 2025, 50% for construction beginning after Dec. 31, 2025, and 55% for construction beginning after 2026.
- Disallows credit for tax years beginning after the date of enactment for leased wind and solar property qualifying for the residential tax credit under Section 25D.
Credit for carbon oxide sequestration (Sec. 45Q).
Section 45Q provides a credit per metric ton of carbon captured and permanently sequestered. The maximum credit rates in 2025 for equipment placed in service after 2022 are $85 per metric ton for geologic storage and $60 per metric ton for tertiary injectant or other productive use (increased rates are available for direct air capture). The credit expires for projects beginning construction after 2032.
- Increases the credit rates for productive use to the same $85 per metric ton available for geologic storage (with corresponding increase for direct air capture rates) for taxable years beginning after the date of enactment.
- Bars credits for a “foreign specified entity” or “foreign-influenced entity” for tax years beginning after the date of enactment.
Clean hydrogen production tax credit (Sec. 45V).
Section 45V provides a production tax credit for producing hydrogen that meets certain lifecycle greenhouse gas emissions standards. The credit was scheduled to expire for projects beginning construction after 2032.
Repeals the credit for construction beginning after 2027.
Zero-emission nuclear power production credit (Sec. 45U).
Section 45U provides a production tax credit for producing nuclear power in facilities placed in service before August 16, 2022.
- Disallows the credit for taxpayers that are foreign entities of concern for tax years beginning after the date of enactment.
- Disallows the credit for taxpayers that are a “foreign-influenced entity” for tax years beginning two years after the date of enactment.
Advanced manufacturing production credit (Sec. 45X).
Section 45X provides a credit for producing and selling certain wind, energy, inverter, and battery components, as well as critical minerals. The credit begins to phase out in 2030, except for critical minerals, for which the credit was permanent.
- Repeals the credit for wind energy components sold after 2027 and phases out the credit for critical minerals, with 75% of the credit available for mineral produced in 2031, 50% in 2032, 25% in 2033, and no credit after 2033.
- Adds new credit for metallurgical coal.
- Modifies the definition of battery module for tax years beginning after July 4, 2025.
- Denies a credit for components manufactured in tax years beginning after July 4, 2025, if “material assistance” was provided by any prohibited entity, with the definition of material assistance including a cost threshold.
- Disallows the credit for specified foreign entities for tax years beginning after July 4, 2025.
- Narrows the provision allowing the sale of an eligible component as part of an integrated component to be treated as a sale to an unrelated person for tax years beginning after 2026.
Qualifying income of certain publicly traded partnerships (Sec. 7704).
Publicly traded partnerships can generally be taxed as partnerships only if 90% of their income comes from qualifying income sources, such as real property or certain traditional energy activity.
Adds to the definition of qualifying income any income from carbon capture facilities, the transportation or storage of alternative fuels, sustainable aviation fuel or hydrogen, or income from nuclear energy, hydropower, or geothermal energy.
Intangible drilling costs for purposes of CAMT (Sec. 56A).
A corporate alternative minimum tax (CAMT) applies based on the adjusted financial statement income (AFSI) for corporations with more than $1 million in average AFSI over a three-year period.
Provides a reduction in AFSI for intangible drilling and development costs under Section 263(c), effective for tax years beginning after 2025.
Provision
Law Prior to OBBBA Enactment
OBBBA Changes
Excise tax on investment income of certain private colleges and universities (Sec. 4968).
Net investment income of certain educational institutions is subject to a 1.4% excise tax.
- Increases rates under a new tiered structure. For institutions with adjusted per-student endowments:
- Over $500,000 but not exceeding $750,000, the rate would remain at 1.4%
- Over $750,000 but not exceeding $2 million, the rate would be 4%
- Over $2 million, the rate would be 8%
- Increases the threshold for the exemption from 500 students to 3000 students, effective for tax years beginning after 2025.
- Includes certain royalty income and student loan interest income in net investment income.
Excise tax on highly paid employees of tax-exempt organizations (Sec. 4960).
A 21% excise tax is imposed on compensation over $1 million paid to “covered employees,” defined as the five most highly compensated employees or former employees of the organization or someone who was a covered employee for any period after 2016.
- Revises definition of covered employee to include all current and former employees employed in tax years beginning after 2016.
- Effective for tax years beginning after 2025.
Credit for scholarship-granting organizations (Sec. 25F).
There was no previous credit for scholarship-granting organizations.
- Creates an income tax credit of up to $1,700 for individual gifts to a newly defined category of tax-exempt entities that must be designated by states and spend 90% of their income on scholarships for elementary and secondary school.
- Exempts certain scholarship income from tax.
Provision
Law Prior to OBBBA Enactment
OBBBA Changes
Individual income tax rates (Sec. 1).
The Tax Cuts and Jobs Act of 2017 (TCJA) provided rate cuts and adjusted the thresholds across the tax brackets from 2018 through 2025, setting them at 10%, 12%, 22%, 24%, 32%, 35%, and 37%.
Extends the TCJA changes and provides an additional year of inflation adjustments for the 10% and 12% brackets, effective after 2025.
Standard deduction (Sec. 63).
TCJA increased the standard deduction from 2018 through 2025, which reached the following amounts with inflation adjustments for 2025:
- $30,000 (MFJ)
- $15,000 (S/MFS)
- $22,500 (HOH)
Permanently increases the standard deduction beginning in 2025 to $31,500 (MFJ), $15,750 (S), and $23,625 (HOH), and indexed for inflation thereafter.
Personal exemptions (Sec. 151).
Personal exemptions set at zero from 2018 through 2025.
Permanently repeals personal exemptions, except for creating a new personal exemption for seniors, discussed below.
Child tax credit (Sec. 24).
TCJA increased the maximum child tax credit (CTC) to $2,000 per qualifying child and made up to $1,700 per child refundable (indexed for inflation). The TCJA also increased the thresholds at which the CTC began to phase out to:
- $200,000 of modified adjusted gross income (MAGI) for single filers
- $400,000 of MAGI for joint filers
- Permanently increases the CTC to $2,200 beginning in 2025, indexing it for inflation thereafter.
- Makes permanent the refundable portion of the CTC and higher phaseout thresholds.
Qualified business income deduction (Sec. 199A).
- TCJA created Section 199A from 2018 through 2025, allowing individuals, trusts, and estates to deduct 20% of qualified business income from a partnership, S corporation, or sole proprietorship (20% of total qualified real estate investment trust dividends and publicly traded partnership income are also eligible).
- Taxpayers cannot be in specified service trade or business and must meet capital investment or wage payment requirement unless income is below inflation-adjusted thresholds that reached $394,600 (MFJ) and $197,300 (S, HOH, MFS) in 2025.
- Makes deduction permanent at 20% rate while slowing the phaseout of the exception from the capital investment and wage expense requirements and the bar on specified service trades or businesses.
- Creates new minimum $400 deduction for taxpayers with at least $1,000 of qualified income, with both figures indexed for inflation.
- Changes effective for tax years beginning after 2025.
Alternative minimum tax (AMT) exemptions and phaseouts (Sec. 55).
TCJA increased the exemptions and exemption phaseouts from 2018 through 2025. Exemptions in 2025:
- $137,000 (MFJ)
- $88,1000 (S/HOH)
- $68,500 (MFS)
- $1,252,700 (MFJ)
- $636,350 (S/HOH/MFS)
Makes the TCJA AMT thresholds permanent, but only after resetting the inflation adjustments for the exemptions phaseout threshold back to the 2018 level, effectively reducing the thresholds and reindexing them for inflation after these 2026 amounts:
- $1,000,000 (MFJ)
- $500,000 (S/HOH/MFS)
Deduction for qualified residence interest (Sec. 163(h)).
TCJA lowered the cap on the amount of acquisition indebtedness taxpayers can consider for the mortgage interest deduction from $1 million to $750,000 for indebtedness incurred after December 31, 2017, and before January 1, 2026.
Makes permanent the lower cap on indebtedness but treats certain mortgage insurance premiums as qualified interest effective for tax years beginning after 2025.
Casualty loss deduction (Sec. 165(c)).
TCJA repealed the deduction for personal casualty losses incurred after December 31, 2017, and before January 1, 2026 (except to the extent of personal casualty gains) except for disaster losses, which remain deductible under the TCJA to the extent the loss exceeds 10% of AGI. Disaster losses are deductible to the extent they exceed $500 without regard to the 10% AGI threshold for disasters declared between Feb. 26, 2021, and 60 days after Dec. 12, 2024.
- Makes the casualty loss limitations under the TCJA permanent, but expands the exception for disaster loss treatment to state-declared disasters.
- Extends the $500 threshold in place of the 10% AGI requirement for disasters declared within 60 days of July 4, 2025.
Miscellaneous itemized deductions (Sec. 67).
TCJA suspended miscellaneous itemized deductions from 2018 through 2025.
Makes repeal of miscellaneous itemized deductions permanent, but allows an itemized deduction for certain educator expenses beginning in 2026.
Pease limitation on itemized deductions (Sec. 68).
TCJA suspended the Pease limitation on itemized deductions for 2018 to 2025.
Makes the repeal of the Pease limitation permanent but creates a new limitation beginning in 2026 capping the value of itemized deductions so that the maximum benefit is equivalent to reducing taxable income in the 35% bracket rather than the 37% bracket.
Child and dependent care credit (Sec. 21).
Individuals can receive a credit ranging from 20% to 35%, depending on income, for certain dependent care costs.
Increases the credit rate from 20% to 50% for tax years beginning after 2025.
Dependent care assistance programs (Sec. 129).
Employees may exclude from income certain dependent care costs paid by their employers.
Increases cap from $5,000 to $7,500.
Adoption credit (Sec. 23).
Individuals can claim a credit for qualified adoption expenses up to a lifetime inflation-adjusted cap that reached $17,280 in 2025, with the credit phasing out for AGI exceeding an inflation-adjusted cap that reached $259,190 in 2025.
Makes up to $5,000 of the credit refundable, with a slight change in the inflation adjustments for the credit, effective for 2025.
Charitable deduction (Sec. 170).
- Individuals are generally allowed an itemized deduction for charitable contributions. For 2021, a temporary provision allowed a charitable deduction of up to $300 for non-itemizing taxpayers.
- TCJA increased the AGI cap on the deduction for charitable contributions from 50% to 60% for 2018 through 2025.
- Reinstates a deduction for cash contributions to public charities for taxpayers that do not itemize of up to $2,000 (MFJ) or $1,000 (S, HOH, MFS) beginning in 2026.
- Makes permanent the 60% of AGI threshold for the itemized deduction.
- Creates a new 0.5% AGI floor on itemized charitable deductions beginning in 2026.
Other TCJA limits.
TCJA provided from 2018 through 2025:
- Repeal of exclusion for bicycle commuting reimbursements
- Repeal of exclusion for moving expenses
- ABLE account changes
- Exclusion for student loan forgiveness after death
- Special tax treatment for service on Sinai Peninsula
- Exclusion from income of employer payments of student loans
All listed TCJA changes are generally made permanent, with several changes:
- Offers an additional year of inflation adjustments for the limits on qualified transportation fringe benefits and ABLE accounts
- Increases the savers credit for ABLE contributions and makes other changes
- Provides an exception for the repeal of the exclusion for moving expenses for members of intelligence communities
- Changes inflation adjustment for the exclusion from income of employer payments of student loans
Wagering losses (Sec. 165(d)).
Wagering losses are generally deductible only up to wagering gains, and TCJA clarified that this limit also applies to wagering losses in a trade or business from 2018 through 2026.
Makes permanent the TCJA treatment of wagering losses in a trade or business and adds a new limit allowing taxpayers to deduct only up to 90% of wagering losses (up to the amount of gains).
Section 529 accounts (Section 529).
Section 529 provides tax-preferred savings accounts for certain education expenses.
Expands the definition of qualified expenses and doubles the limit on distributions for elementary and secondary schools
State and local tax (SALT) cap (Sec. 164).
SALT itemized deductions limited to $10,000 ($5,000 MFS) of state and local income, property, and sales taxes from 2018 through 2025.
- Makes the $10,000 SALT cap permanent, with a temporary increase in the threshold from 2025 through 2029.
- Increases threshold to $40,000 in 2025, but this phases down to $10,000 for income exceeding $500,000.
- Increases the $40,000 and $500,000 thresholds by 1% each year from 2026 through 2029.
Active loss limit (Sec. 461).
Section 461 limits a taxpayer’s ability to deduct certain active business losses above a limit that is indexed for inflation and in 2025 reached $626,000 (MFJ) and $313,000 (S/HOH/MFS). The limited loss generally becomes an NOL in future years. The provision was set to expire for tax years beginning after Dec. 31, 2028.
Makes the active loss limit under Section 461(l) permanent while reducing the threshold at which the limit applies by clawing back eight years of inflation adjustments.
Estate and gift tax lifetime exemption amount (Secs. 2010, 2505).
Lifetime exemption amount set at $10 million and indexed for inflation ($13.99 million in 2025). The top estate tax rate is 40%. The exemption amount was scheduled to be cut in half after 2026.
Exemption amount is increased to $15 million per taxpayer in 2026 and indexed for inflation thereafter.
Exemption for seniors (Sec. 151).
The TCJA generally repealed personal exemptions.
- Creates a $6,000 personal exemption for taxpayers aged 65 and above for four years from 2025 through 2028.
- Exemption begins to phase out with MAGI exceeding $150,000 (MFJ) and $75,000 (S/HOH/MFS).
Taxation of tip income (Sec. 61).
Tip income is taxed under Sec. 61 and reported to employers monthly under Sec. 6053.
- Creates an income tax deduction of up to $25,000 per year from 2025 through 2028.
- Deduction is available only for voluntary tips in occupations that “traditionally and customarily” received tips before 2025 in a business that is not a specified service trade or business under Section 199A.
- Deduction is available without regard to whether deductions are itemized but phases out for MAGI exceeding $150,000 (S, MFS, HOH) or $300,000 (MFJ).
- Extends the FICA tip credit to cover certain beauty services.
- Creates reporting requirements for employers.
Taxation of overtime pay (Sec. 61).
Overtime pay is subject to income and employment tax.
- Creates an income tax deduction of up to $12,500 (S, MFS, HOH) or $25,000 (MFJ) for overtime pay under the FLMA from 2025 through 2028.
- Deduction is available without regard to whether deductions are itemized but phases out for MAGI exceeding $150,000 (single) or $300,000 (joint).
- Creates reporting requirements for employers.
Auto loan interest deduction.
There is no current deduction for personal interest, which includes interest incurred on a personal vehicle loan.
- Creates an income tax deduction of up to $10,000 in interest paid on a loan for new vehicles under 14,000 pounds with final assembly in the U.S.
- Deduction is available for non-itemizers but phases out when modified AGI exceeds $100,000 (S, MFS, HOH) or $200,000 (MFJ).
- Effective for tax years 2025 through 2028. Creates reporting requirements for lenders.
Tax-preferred savings accounts. (Sec. 530A).
The tax code provides several types of tax-preferred savings and spending accounts.
- Creates a new type of tax-preferred account for minors called “Trump” accounts.
- Contributions are allowable after July 4, 2026, until an individual turns 18, and are capped annually at $5,000 (indexed for inflation).
- Contributions are not deductible, but the accounts would generally be exempt from tax, with qualified distributions taxed as capital gains.
- Under a pilot program, children born between 2025 and 2028 are eligible to receive a $1,000 contributory credit in their account.
- Investments up to age 18 are limited to mutual funds or exchange-traded funds that track a qualified index, do not use leverage, and have expenses of less than 0.1%. Qualified indexes include the S&P 500 and other indexes for equity investments primarily in U.S. companies. Industry-specific indexes are prohibited but indexes based on market capitalization are allowed.
- Distributions are generally not allowed until age 18, with rules similar to IRAs thereafter.
Provision
Law Prior to OBBBA Enactment
OBBBA Changes
Bonus depreciation (Sec. 168(k)).
Bonus depreciation phases down to:
- 80% in 2023
- 60% in 2024
- 40% in 2025
- 20% in 2026
- 0% thereafter
- Restores 100% bonus depreciation for property placed in service after Jan. 19, 2025.
- Creates a new category of 100% expensing to cover nonresidential real property that is qualified production property if construction of the property begins after Jan. 19, 2025, and before 2029 and the property is placed in service by the end of 2030.
Deduction for domestic research and experimental expenditures (Sec. 174).
For tax years beginning after 2022, taxpayers must amortize domestic research costs over five years and foreign costs over 15 years.
- Restores the expensing of domestic research costs for tax years beginning after Dec. 31, 2024 (foreign research costs must still be amortized over 15 years).
- Retains election to capitalize.
- Taxpayers can claim unused amortization deductions from 2022 to 2024 in the first tax year beginning after 2024 or ratably in the first two tax years beginning after 2024. Alternatively, taxpayers that meet the gross receipts threshold for simplified accounting methods under Section 448(c) can amend returns to retroactively claim full expensing.
- Requires taxpayers to reduce their deduction or capital account by the amount of any research credit, effective for tax years beginning after 2024.
Business interest deduction calculation (Sec. 163(j)).
For tax years beginning after 2022, taxpayers must include amortization, depreciation, and depletion in the calculation of adjusted taxable income (ATI) for calculating whether the deduction for net interest expense exceeds the cap of 30% of ATI.
- Permanently removes amortization, depreciation, and depletion from ATI for tax years beginning after 2024.
- Interest capitalized to other assets remains subject to the limit (except interest capitalized to straddles under Section 263(g) or to certain production property under Section 263A(f)) for tax years beginning after 2025).
- Excludes from ATI income inclusions from Subpart F, GILTI, and any Section 78 gross-up for tax years beginning after 2025.
- Expands floor plan financing exception to campers.
Limitation on expensing of certain depreciable assets (Sec. 179).
Section 179 allows taxpayers to expense qualified property up to a cap that is indexed for inflation ($1.25 million in 2025), but this cap is reduced dollar for dollar by the amount of qualified property placed in service that exceeds a threshold indexed for inflation ($3.13 million in 2025).
Increases the Section 179 deduction cap to $2.5 million, with a phaseout threshold of $4 million, indexed for inflation, effective for tax years beginning after 2024.
Qualified small business (QSB) stock (Sec. 1202).
Taxpayers can exclude 100% of the gain from the sale of QSB stock held for more than five years, up to the greater of 10 times basis or $10 million. The gross assets threshold for a company to qualify as a QSB cannot exceed $50 million when the stock is issued.
- Provides a 50% exclusion for QSB stock held three years and a 75% exclusion for stock held four years, effective for stock issued after the date of enactment.
- Increases the current exclusion limit from $10 million to $15 million (or 10 times basis) indexed for inflation beginning in 2027, effective for stock issued after the date of enactment.
- Increases the current limit on assets held at the time of stock issuance from $50 million to $75 million, indexed for inflation beginning in 2027, effective for stock issued after the date of enactment.
Opportunity zones (Sec. 1400Z).
Investment in a Qualified Opportunity Fund allows taxpayers to defer capital gain and receive a step-up in basis so that appreciation on the qualified investment is tax-free after a 10-year holding period. Qualified investments must be made by the end of 2026.
- Makes program permanent over 10-year rolling designation periods.
- Gain deferred on investments made after 2026 would be recognized five years after investment, with a 10% increase in basis.
- Step-up in basis to FMV after 10 years would be capped at FMV after 30 years.
- Requires new designation of opportunity zones with updated criteria and special benefits for a new category of rural opportunity zones.
- Requires additional reporting and imposes penalties for noncompliance.
REIT asset test (Sec. 856).
REITs are subject to a qualified asset test that generally allows them to hold no more than 20% of their assets in taxable REIT subsidiaries.
Increases the amount of allowable assets held in taxable REIT subsidiaries to 25%, effective for tax years beginning after 2025.
Advanced manufacturing investment credit (Sec. 48D).
Section 48D provides a 25% credit for semiconductor manufacturing facilities.
Increases the credit from 25% to 35% for property placed in service after 2025.
New markets tax credit (Sec. 45D).
The new markets tax credit was scheduled to expire in 2026.
Makes the credit permanent.
Low-income housing credit (Sec. 42).
The low-income housing tax credit offers credits for certain low-income building projects that receive an allocation up to state caps.
- Permanently increases the population component of the state low-income tax credit ceiling to 12% effective after 2025.
- Modifies the tax-exempt bond financing requirement.
1% floor on corporate charitable contribution deduction (Sec. 170).
Corporations are generally permitted to deduct charitable contributions up to 10% of taxable income.
- Permits a corporation to deduct a charitable contribution only to the extent it exceeds 1% of taxable income (up to 10% of taxable income) for tax years beginning after 2025.
- Five-year carryforward is available for the amount disallowed, but only if the taxpayer has a carryforward for exceeding the 10% cap.
Disguised sales (Sec. 707).
Section 707 provides rules for certain transactions between partners and a partnership.
Clarifies that the rules prescribed under Section 707(a)(2) are self-executing and not contingent on the issuance of regulations by Treasury, effective for services performed and property transferred after July 4, 2025.
Remittance excise tax (Sec. 4475).
There is no specific current excise tax on remittances.
Creates a 1% excise tax on remittance transfers of cash, money orders, cashier’s checks, and any other similar physical instruments made after 2025 with an exception for transfers sent from debit cards, credit cards, and most accounts at financial institutions.
Firearm excise tax (Secs. 5811 and 5821).
There is a $200 excise tax on the manufacture or transfer of firearms.
Limits the $200 firearms excise tax only to “machineguns” or “destructive devices,” effective in 2026.
Long-term contracts (Section 460).
Taxpayers building homes are generally exempt from the percentage of completion method for long-term contracts. These home builders can also be exempt from the uniform capitalization rules if they meet the gross receipts test under Section 448(c) ($31 million in 2025) and the contract is estimated to be completed within two years.
- Expands the exception from the percentage of completion method for home construction to include any residential construction.
- Expands the exception from the uniform capitalization rules for taxpayers meeting the Section 448(c) gross receipts test by increasing the allowable estimated contract period from two to three years.
Spaceports treated like airports for tax exempt bond rules (Sec. 142).
Certain tax-exempt bonds may be used to fund specific types of facilities, including airports.
Treats spaceports like airports for the tax-exempt bond rules, effective for obligations issued after July 4, 2025.
Capital gain on farmland sales (Sec. 1062).
There is no specific provision providing for installment of payments on gain for farmland sales.
Allows taxpayers to elect to pay the tax on gain from sales of qualified farmland property in installments over four years, effective for tax years beginning after July 4, 2025.
Rural real properly loan interest (Sec. 139L).
There is no current provision specific to interest on loans on rural land.
Creates new Section 139L to exempt from income 25% of the interest from loans on certain agricultural and rural real estate for a specific category of lenders, effective for tax years beginning after 2025.
Rum ‘Cover Over’ (Sec. 7652).
Excise taxes for certain distilled spirits are “covered over” and paid to the Treasuries of Puerto Rico and the Virgin Islands.
Increases cap on the “cover over” of distilled spirits from $10.50 to $13.25, effective for spirits brought into the U.S. after 2025.
Sound recording expensing (Sec. 181).
Taxpayers can expense certain qualified film, television, and live theatrical productions.
- Expands expensing under Section 181 to include up to $150,000 in sound recordings for tax years beginning after July 4, 2025.
- Makes sound recording productions eligible for bonus depreciation.
Provision
Law Prior to OBBBA Enactment
OBBBA Changes
Executive compensation (Sec. 162(m)).
Section 162(m) generally denies public companies a deduction for compensation in excess of $1 million paid to “covered employees.”
Expands the aggregation rules so that the identification of covered employees and the calculation of compensation is made on a controlled group basis under the rules in Section 414, effective for years beginning after 2025.
Employer- Provided Child Care Credit (Sec. 45F).
Section 45F provides a credit of 25% of qualified childcare costs and 10% for resource and referral costs, capped at $150,000 annually.
- Increases the credit to 40% for qualified childcare costs (50% for eligible small businesses).
- Increases the cap in credit to $500,000 indexed to inflation ($600,000 for eligible small businesses).
- Expands credit to cover jointly owned facilities and intermediaries.
Paid Family Leave Credit (Sec. 45S).
Section 45S provides a credit for employers that offer qualifying paid family leave to certain employees, set to expire after 2025.
- Makes the credit permanent.
- Expands the credit to cover premiums for insurance policies that provide paid family and medical leave to qualifying employees.
- Creates a new aggregation rule so employers in the same controlled group are treated as a single employer (and must have leave plans meeting the requirements).
- Expands credit to all states.
- Expands credit for offering leave to broader range of employees.
Form 1099-K reporting (Sec. 6050W).
For payments made after 2021, Section 6050W generally requires payment settlement entities to perform reporting once aggregate annual payments to a payee exceed $600 or more. The IRS delayed implementation of this threshold so payments made in 2022 and 2023 were reportable only to the extent aggregate payments exceeded $20,000 and the number of transactions exceeded 200. Reporting is required for 2024 and 2025 only if aggregate payments exceed $5,000 in 2024 and $2,500 in 2025 (without regard to the number of transactions).
Reinstates the 200 transaction and $20,000 threshold retroactive to the enactment of the $600 threshold.
Form 1099-NEC and 1099-MISC reporting (Secs. 6041, 6041A).
Sections 6041 and 6041A generally require reporting on non-employee compensation or payments from a business for services on Form 1099-NEC or 1099-MISC once aggregate payments to a payee exceed $600 for the year.
Increases the threshold for reporting to $2,000 beginning in 2026 and indexes it to inflation thereafter.
Meals deduction (Sec. 274).
Beginning in 2026, employers will no longer be able to deduct meals provided to employees at the convenience of the employer (if the meals are excluded from employee income).
Provides an exception allowing taxpayers to deduct meals provided at the convenience of the employer if the meals were sold by the taxpayer in a bona fide transaction for full consideration or for meals provided on certain fishing vessels or processing plants, effective for amounts incurred after 2025.
Employee retention credit (Sec. 3134).
The employee retention credit was available for certain wages paid in specific periods of 2020 and 2021.
- Disallows refunds effective after July 4, 2025 unless the claim was filed on or before Jan. 31, 2024.
- Extends the statute of limitations for certain claims.
- Increases preparer and promoter penalties in certain circumstances.
Provision
Law Prior to OBBBA Enactment
OBBBA Changes
Global intangible low-taxed income (GILTI) (Sec. 951A).
- Intended to prevent U.S. multinational corporations from shifting profits to low-tax foreign jurisdictions by imposing a minimum tax on certain foreign earnings of U.S. corporations.
- Effective rate was 10.5% before FTC haircut, and was scheduled to increase to 13.125% after 2025.
- Reduces the Section 250 deduction to 40% for tax years beginning after 2025, creating an effective rate of 12.6% (before FTC haircut).
- Renames GILTI “Net CFC Tested Income” (NCTI).
- Reduces FTC haircut from 20% to 10%.
- Taxes associated with PTET no longer be treated as deemed paid under Section 78.
- Repeals QBAI deemed return.
- Limits expense allocation for FTC purposes to “directly allocable” deductions and expressly excludes interest and R&E.
Foreign-derived intangible income (FDII) (Sec. 250).
- Intended to encourage the sale of goods and services to foreign markets, it permits U.S. corporations to claim a reduced rate on income derived from exports
- Effective rate was 13.125% of eligible income, and was scheduled to increase to 16.4% after 2025.
- Reduces the Section 250 deduction to 33.34% for tax years beginning after 2025, creating an effective rate of 14%.
- Renames FDII “foreign-derived deduction-eligible income” (FDDEI)
- QBAI reduction to FDII/FDDEI is repealed. Eligible income is reduced only by deductions properly allocable to the income and expressly excludes interest and R&E.
- Excludes income or gain from property subject to depreciation amortization or depletion in the hands of the seller or intangible property under Section 367(d)(4) effective June 16, 2025.
- Renames FDII “foreign-derived deduction-eligible income” (FDDEI).
Base erosion and anti-abuse tax (Sec. 59A).
BEAT imposes an additional tax on certain corporations that make large payments to foreign related parties to discourage profit shifting. It generally applies to corporations with annual gross receipts of $500 million or more in a three-year period. The rate is 10%, and was scheduled to increase to 12.5% after 2025 with other changes.
- Increases BEAT rate to 10.5%.
- Makes permanent the current favorable treatment of credits.
CFC look-through rule (Section 954(c)(6)).
CFC look-through rule was scheduled to expire for tax years beginning on or after January 1, 2026.
Makes the CFC look-through rule permanent.
Downward attribution rule (Sec. 958(b)(4)).
TCJA repealed the exception for downward attribution under Section 958(b)(4).
Restores the exception from downward attribution rules under Section 958(b)(4), while adding a narrower rule under Section 951B that more closely aligns with TCJA’s intent.
Foreign tax credits (Section 904).
Income from inventory produced and sold by a taxpayer is generally sourced based on production activities.
Treats income from the sale of inventory produced in the U.S. and sold through foreign branches as foreign-source income, capped at 50%.
Pro rata rules (Section 951).
The pro rata rules generally require a U.S. shareholder to own stock of the CFC on the last day on which the foreign corporation was a CFC.
Requires a U.S. shareholder of a CFC to include its pro rata share of Subpart F or GILTI/NCTI income if it owned stock in the CFC at any time during the foreign corporation’s tax year in which it was a CFC.
Repeal of one-month deferral for specified foreign corporations (Sec. 898).
Specified foreign corporations (CFCs more than 50% owned by a U.S. shareholder) are permitted to have a tax year beginning one month later than the majority shareholder’s tax year.
Repeals the one-month deferral so specified foreign corporations must generally use the same tax year as the majority U.S. shareholder.
Provision
Law Prior to OBBBA Enactment
OBBBA Changes
Clean fuel production credit (Sec. 45Z).
Section 45Z provides a credit for the production of certain transportation fuels that meet lifecycle greenhouse gas emissions standards. The credit is scheduled to expire for fuel sold after 2027.
- Extends the credit to fuel sold through the end of 2029, with a new requirement that feedstock be produced or grown in the U.S., Mexico, or Canada, effective for fuel produced after 2025.
- Amends the calculation of greenhouse gas emissions to exclude indirect land use changes and provides emissions rate can generally not be below zero.
- Repeals increased credit rate for sustainable aviation fuel produced after 2025.
- Reinstates a stackable small agri-biodiesel credit under Section 40A. Bars credit for foreign entities of concern for tax years beginning after the date of enactment.
- Bars credit for “foreign-influenced entities” for tax years beginning two years after the date of enactment.
Previously owned clean vehicle credit (Sec. 25E).
Section 25E provides a credit for certain previously owned EVs and other “clean” vehicles.
Repeals the credit for vehicles acquired after Sep. 30, 2025.
Clean vehicle credit (Sec. 30D).
Section 30D provides a credit for certain EVs and other “clean” vehicles.
Repeals the credit for vehicles acquired after Sep. 30, 2025.
Commercial clean vehicles credit (Sec. 45W).
Section 45W provides a credit for certain commercial EVs and other clean vehicles.
Repeals the credit for vehicles acquired after Sep. 30, 2025.
Alternative fuel vehicle refueling property credit (Sec. 30C).
Section 30C provides a credit for certain EV charging property and other alternative fuel refueling property.
Repeals the credit for property placed in service after June 30, 2026.
Energy-efficient home improvement credit (Sec. 25C).
Section 25C provides a credit for certain energy-efficient home improvement property.
Repeals the credit for property placed in service after Dec. 31, 2025.
Residential clean energy credit (Sec. 25D).
Section 25D provides a credit for certain residential clean energy property.
Repeals the credit with respect to expenditures made after Dec. 31, 2025.
Energy-efficient commercial buildings deduction (Sec. 179D).
Section 179D offers a deduction of up to $5 per square foot for certain energy-efficient improvements to lighting, HVAC, hot water systems, and the building envelope.
Repeals the deduction for construction beginning after June 30, 2026.
New energy-efficient home credit (Sec. 45L).
Section 45L provides a credit for construction of energy-efficient new homes.
Repeals the credit for homes acquired after June 30, 2026.
Energy property depreciation (Sec. 168).
Qualified energy property generally has a five-year depreciable life.
Repeals the five-year depreciable life for certain energy property under Section 48 if construction begins after Dec. 31, 2024.
Clean energy production credit (Sec. 45Y).
- The production tax credit under Section 45Y offers a per-kilowatt credit for producing electricity from sources that meet lifecycle greenhouse gas emissions standards.
- The credit is scheduled to phase out when certain nationwide emissions goals are reached (or 2032 if later).
- Taxpayers must generally meet prevailing wage and apprenticeship rules to receive full credit amounts.
- Additional credits are available for projects in energy communities or meeting domestic sourcing requirements.
- Phases out the credit for projects beginning construction after 2032, except for wind and solar. Wind and solar projects must be placed in service by the end of 2027 if they begin construction after July 4, 2026.
- Facilities receiving “material assistance” from any prohibited entity are not eligible if construction begins after Dec. 31, 2025, with material assistance based on a cost ratio.
- Disallows credits for taxpayers that are prohibited foreign entities for tax years beginning after the date of enactment.
- Disallows credits for tax years beginning after the date of enactment for leased wind and solar property qualifying for the residential tax credit under Section 25D.
Clean energy investment credit (Sec. 48E).
- The investment tax credit under Section 48E provides a credit against the cost basis of qualified property that generates electricity meeting lifecycle greenhouse gas emissions standards or that is qualified energy storage or interconnection property.
- The credit is scheduled to phase out when certain nationwide emissions goals are reached (or 2032 if later).
- Taxpayers must generally meet prevailing wage and apprenticeship rules to receive full credit amounts.
- Additional 10% credits are available for projects in energy communities or meeting domestic sourcing requirements.
- Wind and solar projects must be placed in service by the end of 2027 if they begin construction after July 4, 2026.
- Facilities that receive “material assistance” from any prohibited entity are not eligible if construction begins after Dec. 31, 2025, with material assistance based on a cost ratio.
- Disallows credit for taxpayers that are prohibited foreign entities for tax years beginning after the date of enactment.
- Increases the domestic sourcing threshold for the 10% additional credit from 40% to 45% for construction beginning after June 16, 2025, 50% for construction beginning after Dec. 31, 2025, and 55% for construction beginning after 2026.
- Disallows credit for tax years beginning after the date of enactment for leased wind and solar property qualifying for the residential tax credit under Section 25D.
Credit for carbon oxide sequestration (Sec. 45Q).
Section 45Q provides a credit per metric ton of carbon captured and permanently sequestered. The maximum credit rates in 2025 for equipment placed in service after 2022 are $85 per metric ton for geologic storage and $60 per metric ton for tertiary injectant or other productive use (increased rates are available for direct air capture). The credit expires for projects beginning construction after 2032.
- Increases the credit rates for productive use to the same $85 per metric ton available for geologic storage (with corresponding increase for direct air capture rates) for taxable years beginning after the date of enactment.
- Bars credits for a “foreign specified entity” or “foreign-influenced entity” for tax years beginning after the date of enactment.
Clean hydrogen production tax credit (Sec. 45V).
Section 45V provides a production tax credit for producing hydrogen that meets certain lifecycle greenhouse gas emissions standards. The credit was scheduled to expire for projects beginning construction after 2032.
Repeals the credit for construction beginning after 2027.
Zero-emission nuclear power production credit (Sec. 45U).
Section 45U provides a production tax credit for producing nuclear power in facilities placed in service before August 16, 2022.
- Disallows the credit for taxpayers that are foreign entities of concern for tax years beginning after the date of enactment.
- Disallows the credit for taxpayers that are a “foreign-influenced entity” for tax years beginning two years after the date of enactment.
Advanced manufacturing production credit (Sec. 45X).
Section 45X provides a credit for producing and selling certain wind, energy, inverter, and battery components, as well as critical minerals. The credit begins to phase out in 2030, except for critical minerals, for which the credit was permanent.
- Repeals the credit for wind energy components sold after 2027 and phases out the credit for critical minerals, with 75% of the credit available for mineral produced in 2031, 50% in 2032, 25% in 2033, and no credit after 2033.
- Adds new credit for metallurgical coal.
- Modifies the definition of battery module for tax years beginning after July 4, 2025.
- Denies a credit for components manufactured in tax years beginning after July 4, 2025, if “material assistance” was provided by any prohibited entity, with the definition of material assistance including a cost threshold.
- Disallows the credit for specified foreign entities for tax years beginning after July 4, 2025.
- Narrows the provision allowing the sale of an eligible component as part of an integrated component to be treated as a sale to an unrelated person for tax years beginning after 2026.
Qualifying income of certain publicly traded partnerships (Sec. 7704).
Publicly traded partnerships can generally be taxed as partnerships only if 90% of their income comes from qualifying income sources, such as real property or certain traditional energy activity.
Adds to the definition of qualifying income any income from carbon capture facilities, the transportation or storage of alternative fuels, sustainable aviation fuel or hydrogen, or income from nuclear energy, hydropower, or geothermal energy.
Intangible drilling costs for purposes of CAMT (Sec. 56A).
A corporate alternative minimum tax (CAMT) applies based on the adjusted financial statement income (AFSI) for corporations with more than $1 million in average AFSI over a three-year period.
Provides a reduction in AFSI for intangible drilling and development costs under Section 263(c), effective for tax years beginning after 2025.
Provision
Law Prior to OBBBA Enactment
OBBBA Changes
Excise tax on investment income of certain private colleges and universities (Sec. 4968).
Net investment income of certain educational institutions is subject to a 1.4% excise tax.
- Increases rates under a new tiered structure. For institutions with adjusted per-student endowments:
- Over $500,000 but not exceeding $750,000, the rate would remain at 1.4%
- Over $750,000 but not exceeding $2 million, the rate would be 4%
- Over $2 million, the rate would be 8%
- Increases the threshold for the exemption from 500 students to 3000 students, effective for tax years beginning after 2025.
- Includes certain royalty income and student loan interest income in net investment income.
Excise tax on highly paid employees of tax-exempt organizations (Sec. 4960).
A 21% excise tax is imposed on compensation over $1 million paid to “covered employees,” defined as the five most highly compensated employees or former employees of the organization or someone who was a covered employee for any period after 2016.
- Revises definition of covered employee to include all current and former employees employed in tax years beginning after 2016.
- Effective for tax years beginning after 2025.
Credit for scholarship-granting organizations (Sec. 25F).
There was no previous credit for scholarship-granting organizations.
- Creates an income tax credit of up to $1,700 for individual gifts to a newly defined category of tax-exempt entities that must be designated by states and spend 90% of their income on scholarships for elementary and secondary school.
- Exempts certain scholarship income from tax.
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