Aug. 13, 2025

This piece is sponsored by Eide Bailly LLP.

A version of this article originally appeared on eidebailly.com.

On July 4, President Trump signed into law major tax legislation that materially will affect both individuals and businesses. Here’s what you need to know about key legislative provisions in the new tax bill.

Extension of current tax rates, other individual tax items

The Tax Cuts and Jobs Act of 2017, or TCJA, temporarily reduced individual income tax rates, decreasing, for example, the top individual rate from 39 percent to 37 percent. These rate reductions, originally set to expire at the end of the 2025 tax year, are permanent now.

There also are now temporary deductions and exemptions for overtime pay, tips and auto loan interest — all subject to certain limitations.

‘Big 3’ business tax provisions

Qualified assets are eligible again for 100 percent bonus depreciation. Since 2022, bonus depreciation had been subject to a phasedown, with 60 percent allowed for the 2024 tax year.

Additionally, research and development expenditures, required to be amortized over five years since 2022, now can be fully expensed. The business interest expense limitation rules will allow a business to deduct business interest without accounting for depreciation and amortization — meaning, for example, businesses with heavy amounts of depreciation and amortization may be able to fully deduct their business interest — subject to certain limitations.

Qualified business income deduction

A 20 percent deduction for qualified business income, introduced by the TCJA, can lower the effective rate paid by owners of pass-through businesses — partnerships, S corporations and sole proprietors — from 37 percent to 29.6 percent. This 20 percent QBI deduction, originally set to expire at the end of the 2025 tax year, is permanent now.

SALT cap

Perhaps the most contentious issue debated by the House and Senate is the treatment of state and local tax, or SALT, deductions. A $10,000 SALT deduction cap was introduced by the TCJA, and since then, House members from states with higher income taxes have advocated for a larger cap.

Ultimately, a new $40,000 SALT deduction cap now applies, subject to certain taxable income phaseouts — for example, a married couple with taxable income above $500,000 could have their SALT deduction cap reduced from $40,000 to $10,000. This new $40,000 SALT deduction is not permanent, though, and expires after the 2029 tax year.

So-called pass-through entity taxes, where certain states allow partnerships and S corporations to elect to pay income taxes at the entity level, allowing for a full entity level deduction, are not subject to this $40,000 SALT limitation.

Energy credits

Many of the energy credits introduced as part of the Inflation Reduction Act of 2022 will be phased out and eliminated by this new legislation. The transferability of energy credits, though, is retained until these credits are phased out.

International

An often debated “retaliatory tax,” aimed at certain foreign governments and businesses, is not included in this legislation, but there are other changes to the international tax regime, including an increase in the tax on global intangible low-taxed income and a reduction in the deduction for foreign-derived intangible income.

Opportunity Zones

The TCJA incentivized investments into economically distressed areas — known as Opportunity Zones — by allowing for certain gain deferrals and gain exclusions for qualifying investments. Originally proposed to expire in 2026, the Opportunity Zone investment program is now permanent with new incentives.

Estate and gift tax

The new estate and lifetime gift tax exemption is set to $15 million per individual, indexed for inflation.

Qualified small-business stock gain exclusion

The gain exclusion for the sale of Section 1202 qualified small-business stock is enhanced. The definition of a qualifying business also has been increased.

Next steps for new tax legislation

The Treasury Department and the Internal Revenue Service now will be tasked with implementing this legislation by issuing new forms and instructions and updating regulatory guidance.

This process will extend into the 2026 tax year and beyond, meaning there likely will be debates and unanswered questions concerning the nuances of these various provisions for years to come. Eide Bailly’s national tax team will continue to review the implications of this tax legislation and help you make sense of what it means for your organization and situation.