One Big Beautiful Bill Act

Why it happened

The 2017 law’s individual provisions were due to expire on December 31, 2025. Without action, the 2026 return would have reverted to 2017 rates, half the standard deduction, personal exemptions, no SALT cap and a $1,000 child credit — a tax increase for most households and a tax cut for some. With one party again controlling the White House and both chambers, the bill moved under budget reconciliation and passed on the narrowest margins in both chambers on the eve of the July 4 holiday. Unlike 2017, most of the core provisions were made permanent, with a handful of new deductions written to expire after 2028.

Made permanent from 2017

• The rates and brackets — 10% to 37% — with an extra year of inflation adjustment for the lower brackets. The 37% rate begins at $640,600 single and $768,700 joint for 2026.
• The standard deduction, raised to $15,750 single and $31,500 joint for 2025 and $16,100 / $32,200 for 2026. The personal exemption stays at zero.
• The child tax credit, raised to $2,200 and indexed, with the $500 credit for other dependents; both the parent and the child now need a Social Security number.
• The mortgage interest cap at $750,000, with mortgage insurance premiums again deductible as interest.
• No miscellaneous itemized deductions (educator expenses carved out), no moving expense deduction except military, and casualty losses only in declared disasters — now including state-declared ones.
• The alternative minimum tax exemption kept high, though the phase-out thresholds were reset to $500,000 / $1,000,000 and the phase-out rate doubled from 25 to 50 cents per dollar, which pulls some high earners back in from 2026.
• The estate and gift exemption set at $15 million per person for 2026, indexed, permanent.
• The 20% qualified business income deduction, permanent, with a wider phase-in range ($75,000 single, $150,000 joint) from 2026 and a $400 minimum for small active businesses. See the QBI deduction and specified service businesses.
• The 60% limit on cash charitable gifts; the excess business loss limit; the gambling loss limitation; the student loan exclusions.

Changed

• The SALT cap raised from $10,000 to $40,000 for 2025, rising 1% a year through 2029, but phased down for income over $500,000 and never below $10,000; it reverts to $10,000 in 2030. See the SALT cap.
• A new limit on itemized deductions for taxpayers in the 37% bracket, from 2026: deductions are worth 35 cents on the dollar instead of 37 (the law takes back 2/37 of the deductions that fall in the top bracket, applied after the SALT cap and the charitable limits). The same haircut is subtracted from taxable income before the 20% business deduction is figured, which can shrink that deduction too.
• Charitable giving: a permanent deduction for non-itemizers of $1,000 ($2,000 joint) from 2026 — the third time this idea has been enacted — and, for itemizers, a floor of 0.5% of income below which gifts do not count — the floor is applied first to gifts of property with the lower 20% and 30% limits, then to cash; gifts carried over from before 2026 are not reduced by it. Corporations get a 1% floor. The non-itemizer deduction excludes gifts to donor-advised funds. See charitable giving.
• The dependent care credit raised to a maximum of 50% from 2026, and the dependent care FSA limit from $5,000 to $7,500.
• 529 plans usable for more K–12 expenses, up to $20,000 a year, and for professional credentials.
• Qualified small business stock: the exclusion phases in at three years and is complete at five for stock issued after July 4, 2025, with the cap raised to $15 million. See C corporations.
• Information returns: the 1099-NEC and 1099-MISC threshold raised from $600 to $2,000 starting with 2026 payments (indexed after 2026), and the 1099-K threshold restored to $20,000 and 200 transactions, retroactively — as if the $600 rule had never been enacted.
• A 1% excise tax on remittances — cash and similar transfers sent abroad — for transfers after December 31, 2025, collected by the transfer company.
• Education credits: from 2026 both the American Opportunity and Lifetime Learning credits require Social Security numbers for the taxpayer and the student, and the American Opportunity Credit requires the school’s employer identification number.
• Gambling: the 90% limit on losses from 2026 also covers a gambler’s related expenses (travel, entry fees), professional or not.

New, and temporary (2025 through 2028)

• No tax on tips: a deduction of up to $25,000 of qualified tips, phasing out above $150,000 of income ($300,000 joint). Not available for tips earned in a specified service business.
• No tax on overtime: a deduction of up to $12,500 ($25,000 joint) for the premium portion of overtime pay, with the same phase-out.
• Car loan interest: up to $10,000 of interest on a loan for a new, U.S.-assembled personal vehicle.
• A $6,000 deduction for each taxpayer 65 and older, phasing out above $75,000 ($150,000 joint). This is the provision described as “no tax on Social Security”; it does not change how benefits are taxed, but it does reduce taxable income for many retirees. See how Social Security is taxed.
• Trump accounts: a new savings account — legally a traditional IRA with special rules until the child turns 18 — for any child under 18 with a Social Security number, with a $1,000 federal deposit for U.S.-citizen children born 2025 through 2028 and contributions of up to $5,000 a year from July 4, 2026 ($2,500 of it may come from an employer). See the child tax credit and Trump accounts.

The four deductions are written to expire after 2028, and the $1,000 deposit is only for children born through 2028; the Trump accounts themselves are permanent. Whether the deductions are extended is a question for a future Congress — and, on this timeline, the pattern is that temporary provisions usually are.

Business

• 100% bonus depreciation, permanent, for property acquired after January 19, 2025. Property bought under a binding contract signed before January 20, 2025 is stuck with the old phase-down (40% in 2025, 20% in 2026, nothing after); a business may also elect 40% instead of 100% for its first tax year ending after January 19, 2025. Section 179 to $2.5 million, phasing out at $4 million, indexed from 2026.
• Research costs deductible again for domestic research from 2025, reversing the 2017 amortization rule; software development always counts as research. Small businesses (under about $31 million of receipts) may amend 2022–2024 and deduct what they amortized, but must elect by July 4, 2026; everyone else takes the leftover balance over 2025 or 2025–2026. Foreign research stays on 15-year amortization.
• The business interest limit back to an EBITDA base, which allows more interest to be deducted.
• Employer-provided meals lose their deduction from 2026. Office coffee and snacks, meals brought in for the staff, meals for the employer’s convenience — 50% deductible through 2025, zero from 2026 (crews of ships, rigs and fishing boats excepted). Meals with clients stay at 50%; holiday parties stay at 100%.
• Employee retention credit cleanup: no payment of claims filed after January 31, 2024 for the last two quarters of 2021, a six-year statute of limitations on those claims, a 20% penalty on erroneous employment-tax refund claims, and a $1,000 penalty per failure for promoters who skipped due diligence.
• The FICA tip credit for employers of tipped workers extended from restaurants to barber, hair, nail, esthetics and spa businesses from 2025.
• A permanent paid family leave credit, which from 2026 may be figured on insurance premiums instead of wages and covers employees after six months; a larger employer child care credit (40%, or 50% for small businesses, capped at $500,000 / $600,000); 100% expensing for new U.S. factory and production buildings begun 2025–2028 and placed in service by 2030; a four-year installment plan for the tax on selling farmland to a working farmer (sales in tax years beginning after July 4, 2025); and a three-year completion window for residential construction contracts to avoid percentage-of-completion accounting.
• For corporations, the 1% charitable floor and controlled-group aggregation under the executive pay cap.

Ended

• The clean vehicle credits — $7,500 new, $4,000 used, and the commercial credit — for vehicles acquired after September 30, 2025.
• The home energy credits — solar, batteries, heat pumps, windows and doors — for property placed in service after December 31, 2025. See the energy credits that ended.
• The commercial building deduction, the energy-efficient home credit, and the EV charger credit — for construction beginning, homes acquired, or charging equipment placed in service after June 30, 2026. Wind and solar facilities lose their credits unless placed in service by the end of 2027 or begun by July 4, 2026, and leased residential solar gets no credit after July 4, 2025.
• Not extended: the enhanced Marketplace premium credit from 2021, which expired on schedule at the end of 2025. The law did not address it, and 2026 premiums rose for many enrollees. See Marketplace insurance.

What it meant

For the great majority of households the first effect was that nothing changed: the rates, the standard deduction and the child credit that would have reverted in 2026 stayed where they were. A retired couple over 65 with $80,000 of income picked up a $12,000 deduction for four years. A server or a nurse working overtime got a deduction on part of her pay. A family in a high-tax suburb got its state taxes back on the return, up to $40,000. A business owner finally got a 20% deduction with no expiration date, and a manufacturer got equipment expensing with no phase-down. And anyone who had been planning solar panels, a heat pump or an electric car in 2026 lost the credit that would have paid for part of it.

Colorado does not automatically follow all of this. The state starts from federal taxable income but has its own additions and subtractions, and the legislature responded to the federal law with changes of its own. See changes coming for Colorado in 2026.