July 2026 – The One Big Beautiful Bill Act – 2025 & 2026 Changes Recap

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July 2026 – The One Big Beautiful Bill Act – 2025 & 2026 Changes Recap

OVERVIEW

  • In July of 2025, we sent out a newsletter regarding a broad overview of tax implications from The One Big Beautiful Bill Act.
  • On October 8th, 2025, we also hosted an event where Toby Clary gave an educational presentation on The One Big Beautiful Bill Act.
    • If you would like to view a recording of the presentation, you can do so at this link.
  • With the upcoming 2026 tax year, we want to reach out with reminders of what changed in 2025 and what changes are expected for the 2026 tax year.

AREAS OF IMPACT – INDIVIDUALS

  • Lower income tax rates made permanent (37% is the highest bracket)
    • Was previously scheduled to revert to 39.6% in 2026
    • $640,600 for Single
    • $768,700 for MFJ
  • Standard deduction (2026)
    • Individual/MFS – $16,100
    • MFJ – $32,200
    • HOH – $24,150
  • Personal Exemptions (2025)
    • Permanently suspended
  • Senior Deduction (2025)
    • Based on MAGI
    • Temporary 2025-2028
    • Turn 65 prior to end of the year
    • $6,000 deduction per person
    • Phases out from $150k to $250k for MFJ (half for single/MFS)
    • This is in place of making Social Security non-taxable
  • SALT cap/expiration (2025-2029)
    • Previously at $10,000 regardless of single or MFJ
    • For 2025, this increased to $40,000
    • 2026-2029 cap increases by 1% per year
    • 2030 reverts to $10,000
    • If income is over $500,000 (single or MFJ), the cap will be reduced by 30% of amount of MAGI over $500,000 down to $10,000
      • Over $600,000, cap at $10,000
  • Overall itemized deduction limitations (2026)
    • Taxpayers in the highest tax bracket (37%) will have itemized deductions limited based on an income phase-out
  • Mortgage interest debt limits (2026)
    • Mortgage insurance premiums are now considered interest for the deduction
    • Makes the $750,000 threshold permanent
    • Makes the HELOC debt rules permanent
      • Must be used to acquire or improve the home
  • Additional charitable deductions (2026)
    • For taxpayers taking the standard deduction, can deduct an additional $1,000 for single or $2,000 for MFJ for charitable contributions.
    • Must be cash contributions and cannot be private foundations nor donor advised funds
    • PLANNING TIP – Use QCDs for charitable contributions, plus standard deduction plus additional charitable deduction.
  • Reduction to charitable for itemizers (2026)
    • Taxpayers who itemize, must reduce charitable contributions by .5% of their AGI every year
  • Taxation of tips (2025-2028)
    • Still taxable for SS and Medicare
    • New deduction up to $25,000
    • Phased out based on income limits
    • Must be part of an industry that commonly accepts tips as compensation
  • Taxation of overtime
    • Overtime pay is still taxable, but amounts over normal pay are eligible for a deduction
    • $12,500/$25,000 for single/MFJ
    • Income threshold rules apply as well
      • Phases out from $150,000 – $275,000 for single
      • Phases out from $300,000 – $550,000 for MFJ
    • Reporting difficulties will occur
  • Child Tax Credit (2025)
    • Was scheduled to revert back to $1,000 prior to new legislation.
    • Was $2,000 from 2018-2015
    • New amount is $2,200 and is indexed for inflation
    • Parents and child need to have a SSN to claim
    • Other dependent credit is still $500 and is not indexed for inflation
  • AMT (2026)
    • The TCJA eliminated AMT for most taxpayers from 2018-2025
    • The new legislation made permanent the exemption amount of $500K/$1M in 2026 and indexed for inflation moving forward
  • Auto loan interest (2025-2028)
    • Up to a $10,000 deduction
    • Income phaseouts
    • Debt incurred after December 31, 2024
    • New personal use vehicles with final assembly in the United States
  • 529 Plans (2026)
    • Can now use up to $20,000 per beneficiary for K-12 education. Was $10,000 previously
    • Colorado issues for this though
    • Can now use 529s for postsecondary credentialing costs
  • Trump accounts (July 4, 2026)
    • Tax deferred investment accounts for minor children
    • Annual contributions are capped at $5,000
    • Contributions are not tax deductible, but it grows tax free until the money is taken out. Only growth is taxable.
    • Converts to IRA when child turns 18
  • Estate & Gift Taxes
    • New estate and gift tax exemption (2026)
      • $15,000,000 per person
      • Indexed for inflation moving forward
      • Cannot be lowered with new legislation
    • Rate remains at 40%
    • Portability between spouses is preserved
    • Annual exclusion was not adjusted
      • $19,000 in 2025, will be indexed for inflation
    • Removes the 2025 cliff that was there, but estate planning is still important for lots of other reasons

AREAS OF IMPACT – BUSINESSES

  • Bonus depreciation (2025)
    • Previously phasing out at 20% a year and was at 40% for 2025
    • As of January 19, 2025, things are back to full expensing of business assets with lives up to 20 years
    • Does not include real estate purchases, contrary to common thoughts (see exception below)
    • Permanent
  • 179 limits (2025)
    • With 100% bonus depreciation, most likely will not use Section 179
      • Maximum is $2.5M per year
      • Total assets placed in service cannot exceed $4M per year
  • Manufacturing property (January 20, 2025)
    • 100% depreciation on manufacturing properties
    • Many rules surrounding this
    • Could increase the value of land zoned industrial
  • 163(j) (2025)
    • Does not affect many taxpayers, but impactful to those it does affect
    • Restores to an EBITDA calculation rather than an EBIT calculation
    • Essentially allows a higher income threshold for determining 30% limitation
  • 174 (2025)
    • Allows for immediate expensing of research and experimental expenditures
    • Previously had to capitalize R&E costs over five years
    • Has no impact and R&D credit
    • Small businesses ($31M) can amend prior years to deduct those costs
    • For any unamortized costs, can deduct over a one- or two-year period
  • QBI
    • First introduced in 2018 as part of the TCJA
    • Equals a 20% deduction on small business income
      • Wage and property limits based on AGI
      • Non allowed for SSTBs based on AGI
    • OBBB added a minimum deduction of $400 and minimum $1,000 of QBI for active trades or businesses
    • Made permanent (was set to expire in 2026)
    • Increased the phase out thresholds which means more people will be able to take the deduction
  • 1099 Reporting Thresholds
    • 1099-MISC and NEC (2026)
      • Previous threshold was $600 in annual pay
      • New threshold is $2,000 for 2026
    • 1099-K (2025)
      • These are payments from third party network transactions
      • Previously it was $2,500 as the de minimis amount
      • The new threshold is $20,000 and 200 transactions
  • QSBS Gain Exclusion
    • Gain exclusion is now the greater of $15M or 10 times the adjusted basis of the stock
    • New tiered holding period
      • 50% of maximum exclusion if the stock is held at least three years
      • 75% of maximum exclusion if the stock is held at least four years
      • 100% for five years or more
    • Gross asset limitation has increased from $50M to $75M
  • Clean Energy
    • Vehicle credits (September 30, 2025)
      • No more federal credits for EVs and PHEVs
      • Applies to both new and used
      • The Inflation Reduction Act limited who could claim these, now fully gone
    • Real estate credits (2026)
      • Residential credits are not allowed after December 31, 2025
      • Includes home improvement credit and clean energy credits
    • Manufacturing credits
      • Still in place, with new restrictions on clear energy manufacturing projects

COLORADO GENERAL

  • Colorado conformity issues
    • Colorado is a rolling conformity state
    • Our taxes begin with federal taxable income
    • Due to decrease in federal taxable incomes, the State is facing budgetary shortfalls.
    • Colorado must have a balanced budget, per the State constitution
    • Special legislative session early this year to address this

OTHER CONSIDERATIONS

As outlined above, the new law includes a variety of tax changes affecting both individuals and businesses.  We hope this summary serves as a helpful starting point in identifying any potential implications for you personally.  If you have questions about how any of the provisions may apply to you or your business, please don’t hesitate to contact us and we will be happy to take a closer look at your specific situation.