The “One Big Beautiful Bill” Passes Senate—Heads to House for Final Vote

On July 1, the Senate passed the much-anticipated “One Big Beautiful Bill Act” (OBBB), a sweeping package that extends and reshapes many provisions of the 2017 Tax Cuts and Jobs Act (TCJA). This brings the legislation one step closer to becoming law, as it now advances to the House of Representatives for final consideration. While passage is not guaranteed, the bill’s momentum signals potential changes ahead for individuals, businesses, and nonprofits.

We’re tracking this development closely and are committed to helping our clients understand its implications for their planning and operations.

What’s in the “One Big Beautiful Bill”?

The Senate’s bill version builds on the House proposal with several notable revisions and additions. Key highlights include:

Individual Provisions

• Permanent Tax Rates: TCJA’s seven-bracket system becomes permanent, with inflation adjustments. The 10% and 12% brackets receive an extra year of indexing.
• Standard Deduction & Senior Bonus: The higher standard deduction is locked in. A $6,000 “senior bonus” deduction applies from 2025–2028, phasing out at $150,000/$300,000 MAGI.
• Child Tax Credit: Increases to $2,200 per child ($1,700 refundable), indexed for inflation. One spouse must have an SSN when filing jointly.
• Child & Dependent Care Credit: Expanded to 50% of eligible expenses with tiered AGI-based phaseouts.
• Estate & Gift Tax: Exemption rises to $15 million per individual in 2026, indexed.
• Tips & Overtime Deductions: Above-the-line deductions up to $25,000 (tips) and $12,500 (overtime) for 2025–2028. Phases out at $150,000/$300,000 MAGI.
• Car Loan Interest: Deduct up to $10,000 on interest for U.S.-assembled personal vehicles (2025–2028), with MAGI-based phaseouts.
• Charitable Contributions: Non-itemizers can deduct up to $1,000 ($2,000 joint). Itemizers must exceed a 0.5% AGI floor.
• SALT Deduction Cap: Temporarily raised to $40,000 from 2025–2029, with inflation adjustments and a phase-down above $500,000 MAGI. PTET workaround remains intact.
• QBI Deduction: Section 199A is made permanent at 20%, with expanded phase-in limits and a $400 minimum deduction.
• Pease Limitation: Permanently repealed. A new cap limits itemized deduction value to 2/37 of excess income.
• Trump Accounts: Tax-deferred IRAs for minors with a $1,000 federal contribution (2025–2028) and structured withdrawal rules.

Business & Nonprofit Provisions

• Bonus Depreciation: 100% expensing restored permanently for property placed in service after Jan. 19, 2025.
• Section 179: Expensing limit increased to $2.5M with a $4M phaseout.
• R&D Expensing: Full expensing for domestic R&D from 2025. Retroactive relief to 2022 available for small businesses.
• Interest Deductibility: Section 163(j) returns to an EBITDA-based limit permanently.
• Childcare Credit: Credit expanded to 40% of expenses ($500K cap; $600K for small businesses), inflation-adjusted.
• Qualified Small Business Stock: Gains now excluded 50% (3 years), 75% (4 years), 100% (5+ years). Asset limit raised from $50M to $75M.
• Nonprofit UBIT Changes: Transportation fringe benefits and royalty income may again trigger unrelated business taxable income (UBTI).
• University Endowment Tax: Institutions with large endowments may face higher tax liabilities.

Clean Energy Credits

Multiple energy credits are terminated or phased out, including EV, solar, hydrogen, and energy-efficient property credits. See the full list at the IRS Clean Energy Credits Page here.

International Tax Changes

The bill introduces several international tax provisions that could impact Canadians with U.S. business operations, investments, or assets:

• GILTI and FDII renamed to “net CFC tested income” (NCTI) and “foreign-derived deduction eligible income,” (FDDEI) with reduced deductions and a 14% effective U.S. tax rate — increasing tax costs for Canadian businesses with U.S. subsidiaries or cross-border structures.
• Foreign tax credit rules tightened, raising the risk of double taxation for Canadian individuals and corporations with global income subject to both U.S. and Canadian tax.
• BEAT expansion lowers the threshold to 2% and removes the scheduled rate hike — potentially impacting more Canadian-owned U.S. entities making cross-border payments for services, royalties, or interest.
• Revised sourcing rules for U.S.-produced goods may affect Canadian manufacturers operating in the U.S. and exporting abroad, with implications for inventory and transfer pricing.
• Estate tax exposure for Canadians remains high through 2025, particularly for those owning U.S. real estate, securities, or interests in U.S.-based businesses.
• Treaty benefit erosion may arise due to conflicts between the bill and the U.S.-Canada tax treaty — complicating tax relief claims and increasing reporting burdens for cross-border taxpayers.

Economic Outlook and Legislative Path

The bill is projected to reduce federal tax revenue by $5 trillion over 10 years on a conventional basis. Supporters cite potential boosts in GDP, job creation, and capital investment. Opponents warn of rising deficits and reduced health care and social program funding.

As the bill heads to the House, several elements remain under negotiation, including the future of the state and local tax (SALT) deduction cap and the treatment of pass-through entities. With budget reconciliation rules in play, the legislation could advance with a simple majority vote.

What This Means for You

The “One Big Beautiful Bill” has broad implications across income levels and sectors. Whether you’re an individual planning for retirement, a business investing in growth, or a nonprofit navigating compliance, proactive planning will be key as the legislation takes shape.

These are just a few of the many potential changes we expect over the coming months. We’re closely monitoring developments and will continue to provide updates with clarity, context, and a focus on what matters most to you.

If you have questions about how this legislation could impact your strategy or next steps, we encourage you to connect with your advisor.