Federal Tax Reform under the One Big Beautiful Bill Act

By: The Practical Guidance Team

The following article is a summary of the full practice note, available to Practical Guidance subscribers by following this link. Not yet a Practical Guidance subscriber? Sign up for a free trial here.

The complete article is written by the Practical Guidance Attorney Team.

Federal Tax Reform Under the One Big Beautiful Bill Act

The Federal Tax Reform under the One Big Beautiful Bill Act practice note provides a comprehensive explanation of the sweeping tax changes enacted by Pub. L. No. 119-21—better known as the One Big Beautiful Bill Act (OBBBA or Act). It guides practitioners through the Act’s restructuring of individual, business, estate, and international tax rules, and outlines how these reforms interact with the framework established by the Tax Cuts and Jobs Act of 2017. Designed for attorneys, accountants, and compliance professionals, the practice note breaks down each statutory change, identifies practical implications, and highlights planning opportunities under the new law.

Individual Taxation

The practice note begins by describing OBBBA’s extensive updates to the individual income tax system, including the permanent extension of the TCJA tax rate structure and the increased standard deduction. It explains how new above-the-line deductions for tip income, overtime pay, and car-loan interest apply, and provides a detailed discussion of modifications to the Child Tax Credit, Earned Income Tax Credit, and itemized-deduction limitations. The note also covers targeted provisions—such as the Alaska Native whaling expense deduction—and provides analysis of inflation adjustments, thresholds, and compliance requirements.

Estate and Gift Taxation

The practice note also addresses how OBBBA reshapes transfer tax planning. It explains the permanent increase of the unified estate and gift tax exclusion, the continued role of portability, and the strategic implications for irrevocable trusts, intentionally defective grantor trusts, life insurance planning, and charitable structures. It also provides insight into the Act’s overhaul of charitable deduction rules and its significant expansion of the Qualified Small Business Stock exclusion, including new limits, holding-period tiers, and corporate asset thresholds.

Business Taxation

In addition to individual and estate and gift taxation, the practice note analyzes the primary business tax provisions enacted under the Act. This includes the permanent restoration of 100% bonus depreciation, the new full-expensing regime for production property, and the reintroduction of immediate R&E expensing under new I.R.C. § 174A. It also covers changes to business interest limitations, the permanent § 199A QBI deduction, the excess business loss rules, and the revitalized tax credits for advanced manufacturing, clean energy, and semiconductor production. Each section includes statutory references, effective dates, and practical examples.

International Tax Provisions

The practice note outlines the Act’s major updates to the federal tax rules governing income earned outside the United States. It details the restructured international tax provisions, revised deduction amounts, and new rules for claiming credits for foreign taxes. The note also discusses changes to how income is sourced, updates affecting transactions between related foreign entities, modifications to the minimum tax for large multinational businesses, the elimination of certain timing elections, and the introduction of new anti-avoidance measures. The section concludes by highlighting forthcoming compliance guidance expected from Treasury and the IRS.

Tax-Exempt and State & Local Tax Changes

Finally, the practice note analyzes the expanded excise tax rules for tax-exempt organizations, the revised endowment tax for private colleges and universities, and the temporary increase to the SALT deduction cap. It explains governing thresholds, applicability, and how these rules coordinate with existing reporting structures.

The above article is a summary of the full practice note Tax Changes under Public Law No. 119-21 (One Big, Beautiful Bill Act), which is available to Practical Guidance subscribers by following this link.

Practical Guidance subscribers may access the full article here. Not yet a Practical Guidance subscriber? Sign up for a free trial here.