The Big Beautiful Bill: How 2025’s Tax Reform Will Affect Your Finances

On July 4, 2025, President Trump signed a major piece of tax reform legislation into law. Nicknamed the “One Big Beautiful Bill,” it represents the largest update to the U.S. tax code in decades.

Starting in 2026, these changes will touch nearly every taxpayer—whether you’re an individual filing a simple return, a high-net-worth family with complex planning needs, or a small business owner juggling multiple income streams.

While tax policy can be dense, this overview is designed to make the key points clear and practical so you can start thinking about how they might apply to you. We’ll look first at the personal side of the law, then the business side, and wrap up with what to watch for next.

What the Big Beautiful Bill Means for Individuals

The new law makes several significant updates for individuals, many of which will apply from 2026 through 2033 unless extended by future legislation.

Bigger Standard Deduction

The standard deduction—the flat amount you can subtract from your income before calculating taxes—will see a notable increase:

• $31,500 for married couples filing jointly
  
• $23,625 for heads of household
  
• $15,750 for all other filers
  

These amounts will be adjusted each year for inflation.

For many taxpayers, this larger deduction will mean they no longer need to itemize deductions, which should simplify their filing process. This higher and permanent standard deduction may also allow taxpayers to use a stacking method of increasing charitable giving in one year to use itemized deductions, and then use the standard deduction in the next year. 

State and Local Tax (SALT) Deduction Cap Raised

One of the most talked-about changes is the increase to the SALT deduction limit. This deduction allows you to write off state and local income, sales, and property taxes on your federal return.

Under the previous law, the deduction was capped at $10,000—a limitation that hit taxpayers in high-tax states particularly hard. The new bill raises the cap to $40,000, but there’s a catch: for those with incomes between $500,000 and $600,000, the deduction phases back down to $10,000.

Changes to Charitable Contribution Deductions

Expanded 529 Education Savings Plans

529 plans, which let you save for education with tax advantages, can now be used not just for college or vocational school but also for elementary, secondary, and homeschooling expenses. This flexibility could make them a more useful planning tool for families.

“Trump Accounts” for Children

Starting in 2026, every child born between 2025 and 2028 will receive a $1,000 federally funded savings account, nicknamed “Trump Accounts.” Families can contribute up to $5,000 per year, and some employer contributions may be excluded from taxable income.

The accounts are invested in a U.S. stock index fund and can generally be accessed at age 18. Withdrawals before age 59½ may face taxes and penalties unless used for certain purposes like education, a first home, disability, or starting a business. Unlike 529 plans, Trump Accounts can be used for a broader range of goals but offer fewer tax advantages.

Estate Tax Exemption Permanently Increased

The federal estate tax exemption has been gradually increasing—$13.61 million per person in 2024, rising to $13.99 million in 2025. Beginning in 2026, the exemption is permanently set at $15 million per person, or $30 million for married couples. This higher threshold means that far fewer estates will be subject to federal estate taxes, at least through 2033.

Automobile Loan Interest Deduction

From 2025 through 2028, individuals can deduct up to $10,000 per year in interest paid on loans for new, U.S.-assembled vehicles. The deduction is available even if you don’t itemize, but phases out for incomes above $100,000 (single) or $200,000 (joint). Vehicles must be for personal use, not leased or used for business, and the loan must be secured by the car itself.

Tax Treatment of Tips and Overtime Pay

From 2025 through 2028, certain tips and overtime pay will be partially shielded from federal income tax.

Tips – Workers in occupations that regularly receive tips can deduct up to $25,000 of qualified tips per year from taxable income. The deduction begins phasing out at $150,000 in modified AGI for single filers ($300,000 for joint filers) and applies only to tips received after December 31, 2024, in qualifying industries. Tips still count toward Social Security and Medicare taxes.

Overtime – Under the new overtime rule, employees who are paid hourly and receive time-and-a-half for overtime work will benefit from a partial tax exemption. (if they meet certain income requirements) Specifically, the premium portion of the overtime pay (the “half time” component) is exempt from federal income tax. Ex: If your standard pay rate is $30 per hour, your overtime rate becomes $45 per hour (time and a half). The additional $15 per hour (the “half time” premium) you receive for overtime hours worked is now exempt from federal income tax. The base rate ($30/hour) remains fully taxable. 

What the Big Beautiful Bill Means for Businesses

Many of the business-focused changes are permanent, giving companies more certainty for long-term planning.

Qualified Business Income (QBI) Deduction Made Permanent

The popular 20% deduction for pass-through business income (covering sole proprietorships, partnerships, and S corporations) is now a permanent part of the tax code. It will still be subject to wage and income limitations, but the permanence means owners can make longer-term planning decisions with more confidence.

100% Bonus Depreciation Becomes Permanent

Bonus depreciation has been phasing down in recent years—80% in 2023 and 60% in 2024. However, 100% bonus depreciation will be reinstated for assets placed into service after January 19, 2025, allowing businesses to fully expense qualifying assets immediately.

Limits on Business Interest Deductions

The deduction for net interest expenses remains generally capped at 30% of adjusted taxable income. This limitation is designed to prevent excessive borrowing while still allowing flexibility for reasonable financing.

Changes to Green Energy Tax Incentives

The bill rolls back several renewable energy incentives. Wind and solar projects must start construction by July 4, 2026, or be operational by the end of 2027 to qualify for major credits. Residential credits for solar, electric vehicles, and energy-efficient home upgrades will be phased out by the end of 2025. Some incentives for battery storage, geothermal, and nuclear remain but face new restrictions on foreign ownership and sourcing.

Bringing It All Together

The Big Beautiful Bill makes changes that will touch nearly every tax return filed in the U.S. starting in 2026. Some, like the higher standard deduction and permanent QBI deduction, may simplify tax planning and reduce liabilities. Others, like the charitable contribution floor for high earners or the phaseout of the SALT cap increase, may require more detailed calculations to maximize benefits.

For individuals, the changes offer new ways to save—whether that’s through expanded 529 plans, the return of a charitable deduction for non-itemizers, or the introduction of Trump Accounts for children. For businesses, the permanence of certain deductions and credits creates a clearer path for long-term planning.

What’s Next

This is just the first look. The bill spans hundreds of pages, and many provisions will require further guidance from the IRS before taxpayers and businesses can fully understand how they apply.

In the coming weeks, we’ll release Part Two of this series, focusing on individual planning opportunities—with practical tips for how to make the most of the new deductions, credits, and savings vehicles.

If you’re wondering how these changes might affect you or your business, now is the time to start the conversation. The earlier you plan, the better positioned you’ll be when the new rules take effect in 2026.

The CJBS team will continue monitoring developments and providing updates so you can make informed decisions.