The One Big Beautiful Bill: Key Tax and Planning Changes After July 2025
On July 4, 2025, the president signed the One Big Beautiful Bill into law, enacting one of the most expansive tax and policy packages in recent memory. While the headlines have focused on political implications, the legislation introduces a number of material changes to the tax code, some of which are permanent, others temporary, and many that require immediate planning to fully leverage.
This summary outlines several provisions of particular interest, with a focus on their practical implications for business owners and those managing complex income portfolios.
Permanent Extension of the QBI Deduction
The 20% Qualified Business Income (QBI) deduction, originally set to expire in 2026, has been made permanent. This is a significant development for pass-through business owners, especially those operating S corporations, partnerships, or sole proprietorships. The deduction remains subject to wage, income, and industry limitations, but its permanence offers a measure of predictability in an otherwise shifting landscape.
It’s worth noting that the deduction is still governed by complex thresholds. For high-income taxpayers in service-based businesses, the phaseouts still apply. Those with multiple entities or variable income streams may benefit from revisiting how compensation and profits are distributed across structures.
Expanded Deductibility for Business Expenses
New deductions have been introduced for categories of spending that were previously nondeductible or only partially available. These include:
Auto loan interest on vehicles used in business, which can now be deducted more broadly.
Overtime wages, which receive their own standalone deduction for qualifying employers.
These provisions are aimed at operational businesses with employees or active asset use. Implementation details are still developing, and as always, the IRS is expected to issue further guidance. In the meantime, businesses that regularly incur these expenses should consider tracking them with greater granularity and consulting on whether existing accounting methods capture them effectively.
SALT Deduction Cap Increase
The cap on state and local tax (SALT) deductions has been temporarily increased from $10,000 to $20,000 for single filers and to $40,000 for joint filers. While not a permanent fix, this change offers meaningful relief for high-income earners or those with significant property tax burdens. For business owners who pay state-level income taxes on pass-through income, the expanded cap may create new deduction opportunities on the personal return—particularly in years with large capital gains or sale events.
Because the increased cap is temporary, any strategy built around it should take the phase-out timeline into account. Bunching deductions, accelerating income, or managing property tax timing could prove beneficial in the short term.
Social Security Tax Provisions
A notable feature of the legislation is the creation of a new “senior deduction,” which reduces taxable income by $6,000 for qualifying individuals and $12,000 for joint filers over a specified age threshold. This has been widely described as the elimination of tax on Social Security benefits. That claim is imprecise.
The deduction functions by lowering adjusted gross income, which may reduce or eliminate the amount of Social Security benefits subject to tax. However, the benefits themselves are not excluded outright. Taxability still depends on how much additional income is reported—whether from business activity, retirement account distributions, capital gains, or passive investments.
This provision offers real relief, particularly for those with more modest secondary income. For those with higher earnings or continued business involvement, the effect may be limited. As with other elements of the bill, the deduction is not permanent and should be viewed as a temporary planning opportunity rather than a long-term structural shift.
Broader Implications
While the legislation includes dozens of provisions—many of them narrowly targeted—what stands out is the overall posture of the law: short-term relief paired with long-term ambiguity. Several of the most generous deductions are set to expire within a few years. Others, such as the QBI extension, are permanent in theory but could be revised by future Congresses.
The result is a highly dynamic planning environment. Business owners in particular should be evaluating entity structure, compensation methods, income timing, and expense classification. For those managing complex personal finances, especially where income is layered across various sources, even subtle shifts in thresholds and deduction rules can have outsized effects.
Those who act now may be able to position themselves advantageously. Those who delay may find that the most favorable terms have already begun to unwind.
