2025 Update
Below are the IRS mileage rates for 2025:
Business mileage rates 70.0 cents per mile
Medical mileage rates 21.0 cents per mile
Charity mileage rates 14.0 cents per mile
OBBBA 2025 TAX LAW UPDATE (courtesy of Parker Tax Publishing)
With respect to individuals, OBBBA’s most significant changes include:
• Individual Tax Rates. The OBBBA makes TCJA’s individual tax rates permanent and provides for an extra year of inflation adjustments for the 10-, 12-, and 22-percent brackets.
• Standard Deduction. The TCJA’s enhanced standard deduction is made permanent, and for 2025, the deduction amounts are bumped by 5% across the board to $15,750 for single filers, $23,625 for heads of household, and $31,500 for MFJ. These increased amounts will be the new base for inflation indexing for years after 2025.
• Personal and Dependent Exemptions. The OBBBA permanently repeals the deduction for personal and dependent exemptions.
• Estate and Gift Tax Exemption. TCJA’s estate and lifetime gift tax exemption is permanently extended and bumped up to $15 million for 2026.
• SALT Limitation. For 2025-2029, the SALT cap is increased to $40,000 (phased down to $10,000 for MAGI over $500,000). The cap reverts to $10,000 in 2030. The enhanced cap and phasedown threshold are increased by 1% annually after 2025.
• Charitable Contribution Deduction. For tax years after December 31, 2025, OBBBA permanently restores the Code Sec. 170(p) deduction for cash charitable contributions for non-itemizers and increases the limit to $1,000 ($2,000 for MFJ). For itemizers, the OBBBA imposes a new 0.5-percent AGI floor on charitable contributions.
• Deduction for Tip Income. For 2025-2028, the OBBBA creates a new deduction of up to $25,000 for qualified tips received by an employee or independent contractor in an occupation that customarily and regularly receives tips. The deduction, which is available regardless of whether a taxpayer itemizes, begins to phase out for MAGI above $150,000 ($300,000 for MFJ).
• Deduction for Overtime Pay. For 2025-2028, the OBBBA creates a new deduction for up to $12,500 ($25,000 for MFJ) for qualified overtime compensation. The deduction, which is available regardless of whether a taxpayer itemizes, begins to phase out for MAGI above $150,000 ($300,000 for MFJ).
• Deduction for Car Loan Interest. For 2025-2028, the OBBBA creates a new deduction of up to $10,000 for interest paid on debt incurred after December 31, 2024, for the purchase of a new U.S.-assembled passenger vehicle that meets certain conditions. The deduction, which is available regardless of whether a taxpayer itemizes, begins to phase out for MAGI above $100,000 ($200,000 for MFJ).
• Temporary Senior Deduction. For 2025-2028, the OBBBA adds a deduction of $6,000 for individuals who attain age 65 before the end of the tax year. The senior deduction begins to phase out for MAGI above $75,000 ($150,000 for MFJ). The deduction is implemented as a personal exemption.
• Deduction for Mortgage Insurance Premiums. Beginning in 2026, OBBBA permanently restores the deduction for mortgage insurance premiums (previously available from 2018 through 2021) by treating such premiums as interest on acquisition indebtedness. As before, the deduction is phased out for AGI above $100,000 ($50,000 for MFS).
• Enhancements to 529 Plans. Beginning on July 5, 2025, the OBBBA allows distributions to be used for additional K-12 educational expenses (i.e., not just tuition) and also for post-secondary credentialing expenses. For tax years after 2025, the annual limit on withdrawals for K-12 expenses increased from $10,000 to $20,000.
• Child Tax Credit. OBBBA permanently increases the child tax credit to $2,200 per child beginning in 2025 and indexes it for inflation. It also makes $1,700 permanent, the refundable child tax credit, and the $500 nonrefundable credit for dependents who are not a qualifying child.
• Termination of Clean Energy Credits. OBBBA terminates the new clean vehicle credit and the previously owned clean vehicle credit for vehicles acquired after September 30, 2025. It also terminates the energy-efficient home improvement credit and residential clean energy credit on December 31, 2025.
• New Limit on Gambling Losses. Beginning in 2026, OBBBA further limits the term “losses from wagering transactions” in Code Sec. 165 to 90 percent of the amount of such losses. Any deduction for gambling losses remains limited to the amount of gambling winnings.
• Trump Accounts. OBBBA creates Trump accounts, a new type of tax-advantaged savings account for children that is similar to traditional IRAs (but subject to different contribution rules and other modifications). Contributions to Trump Accounts can be made beginning on July 4, 2026. Under a pilot program, for U.S. citizens born between January 1, 2024, and December 31, 2028, the federal government will contribute $1,000 per child into every eligible account.
With respect to businesses, OBBBA’s key changes include:
• Section 179 Expensing. For property placed in service in tax years beginning after December 31, 2024, the OBBBA increases the maximum amount a taxpayer may expense under Code Sec. 179 to $2.5 million, reduced by the amount by which the cost of qualifying property exceeds $4 million. The $2.5 million and $4 million amounts are adjusted for inflation for tax years beginning after 2025.
• Bonus Depreciation. The additional first-year depreciation deduction is permanently extended. The allowance is increased to 100 percent for property acquired after January 19, 2025, as well as for specified plants planted or grafted after that date.
• Qualified Production Property. OBBBA allows taxpayers an additional first-year depreciation deduction equal to 100 percent of the adjusted basis of “qualified production property.” Qualified production property is essentially nonresidential real property in the United States (or any possession) used for manufacturing and placed in service after July 4, 2025, and before January 1, 2031.
• Research or Experimental Expenses Deduction. The OBBBA allows taxpayers to immediately deduct domestic research or experimental expenditures (R&E expenditures) paid or incurred in tax years beginning after December 31, 2024. The provisions give taxpayers multiple options for accelerating the write-off of domestic R&E expenditures capitalized under TCJA rules.
• Section 199A Deduction. The OBBBA permanently extends the qualified business income deduction (QBI) under Code Sec. 199A at the current 20 percent rate and increases the deduction limit phase-in range from $100,000 to $150,000 for MFJ and $50,000 to $75,000 for all others. In addition, OBBBA introduces a new $400 minimum deduction for taxpayers who have at least $1,000 of QBI from an active trade or business in which the taxpayer materially participates.
• Limit on Business Interest Deduction. For tax years beginning after December 31, 2024, the OBBBA increases the cap on the deductibility of business interest by calculating “adjusted taxable income” in a way that corresponds with the financial accounting concept of earnings before interest, taxes, depreciation, and amortization (EBITDA). But, for tax years beginning after December 31, 2025, it provides that the cap is calculated prior to the application of any interest capitalization provision and prioritizes capitalized interest over currently deductible interest in applying the limit.
• Excess Business Loss Limitation. OBBBA makes permanent the excess business loss limitation for noncorporate taxpayers under Code Sec. 461(l).
• New Threshold for Forms 1099-MISC and 1099-NEC. For payments made after December 31, 2025, OBBBA increases the threshold for reporting payments on Forms 1099-MISC and 1099-NEC for services performed by independent contractors from $600 to $2,000.
• Repeal of De Minimis Rules for Form 1099-K. The OBBBA repeals the de minimis reporting requirement for third-party settlement organizations retroactive to its enactment as part of the American Rescue Plan of 2021.
• Qualified Small Business Stock Gain Exclusion. The OBBBA enhances the Code Sec. 1202 qualified small business stock gain exclusion for stock acquired after July 4, 2025, by allowing a 50 percent exclusion after three years, 75 percent after four years, and (as under prior law) 100 percent after five years. It also increases the per-issuer exclusion cap from $10 million to $15 million for stock issued after July 4, 2025.
• Permanent Extension of Qualified Opportunity Zones (QOZ). QOZs are permanently extended with a rolling decennial designation process beginning on July 1, 2026. Gains deferred by investment in qualified opportunity funds are included in income no later than the fifth anniversary of the investment (on which date 10 percent of the deferred gain is permanently excluded (30 percent for qualified rural opportunity funds).
• One Percent Floor for Corporate Charitable Contributions. For tax years beginning after December 31, 2025, the OBBBA reduces the deduction for corporate charitable contributions by one percent of taxable income.
• Termination of Clean Energy Credits. OBBBA terminates an array of business-related clean energy tax credits enacted by the Inflation Reduction Act of 2022, including the commercial clean vehicle credit, which now expires on September 30, 2025. ERTC Enforcement Provisions. The OBBBA imposes due diligence requirements on ERTC promoters and applies a $1,000 penalty for each failure to comply. It also bars the IRS from issuing any additional unpaid claims under Code Sec. 3134, unless a claim for a credit or refund was filed on or before January 31, 2024.
