Tax Update: One Big Beautiful Bill Passes Senate – Next Up, House Vote

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On July 1, 2025, the Senate passed the much-anticipated “One Big Beautiful Bill Act” (OBBB), a sweeping package that extends and reshapes many provisions of the 2017 Tax Cuts and Jobs Act (TCJA). This brings the legislation one step closer to becoming law, as it now advances to the House of Representatives for final consideration. While passage is not guaranteed, the bill’s momentum signals potential changes ahead for individuals, businesses, and nonprofits.

Grimbleby Coleman’s Tax team is tracking this development closely, and we are committed to helping our clients understand its implications for their planning and operations.

What’s in the “One Big Beautiful Bill”?

The Senate’s version of the bill builds on the House’s proposal with several notable revisions and additions. Key highlights include:

Individual Provisions

Permanent Tax Rates: TCJA’s seven-bracket system becomes permanent, with inflation adjustments. The 10% and 12% brackets receive an extra year of indexing.
Standard Deduction and Senior Bonus: The higher standard deduction is locked in. A $6,000 “senior bonus” deduction applies from 2025–2028, phasing out at $150,000/$300,000 Modified Adjusted Gross Income (MAGI).
Child Tax Credit: Increases to $2,200 per child ($1,700 refundable), indexed for inflation. One spouse must have a Social Security Number when filing jointly.
Child and Dependent Care Credit: Expanded to 50% of eligible expenses with tiered Adjusted Gross Income (AGI)-based phaseouts.
Estate and Gift Tax: Exemption rises to $15 million per individual in 2026, indexed.
Tips and Overtime Deductions: Above-the-line deductions of up to $25,000 (tips) and $12,500 (overtime) for 2025–2028. Phases out at $150,000/$300,000 MAGI.
Car Loan Interest: Deduct up to $10,000 on interest for US-assembled personal vehicles (2025–2028), with MAGI-based phaseouts.
Charitable Contributions: Non-itemizers can deduct up to $1,000 ($2,000 joint). Itemizers must exceed a 0.5% AGI floor.
State and Local Tax (SALT) Deduction Cap: Temporarily raised to $40,000 from 2025–2029, with inflation adjustments and a phase-down above $500,000 MAGI. Pass-through Entity Tax (PTET) workaround remains intact.
Qualified Business Income (QBI) Deduction: Section 199A is made permanent at 20%, with expanded phase-in limits and a $400 minimum deduction.
Pease Limitation: Permanently repealed. A new cap limits itemized deduction value to 2/37 of excess income.
Trump Accounts: Tax-deferred Individual Retirement Accounts (IRAs) for minors with a $1,000 federal contribution (2025–2028) and structured withdrawal rules.

Business and Nonprofit Provisions

Bonus Depreciation: 100% expensing restored permanently for property placed in service after Jan. 19, 2025.
Section 179: Expensing limit increased to $2.5M with a $4M phaseout.
Research and Development (R&D) Expensing: Full expensing for domestic R&D from 2025. Retroactive relief to 2022 available for small businesses.
Interest Deductibility: Section 163(j) returns to an earnings before interest, taxes, depreciation, and amortization (EBITDA)-based limit permanently.
Childcare Credit: Credit expanded to 40% of expenses ($500K cap; $600K for small businesses), inflation-adjusted.
Qualified Small Business Stock: Gains now excluded 50% (3 years), 75% (4 years), 100% (5+ years). Asset limit raised from $50M to $75M.
Nonprofit UBIT Changes: Transportation fringe benefits and royalty income may again trigger unrelated business taxable income (UBTI).
University Endowment Tax: Institutions with large endowments may face higher tax liabilities.

Clean Energy Credits

Multiple energy credits are terminated or phased out, including electric vehicles (EVs), solar, hydrogen, and energy-efficient property credits. See the full list at the IRS Clean Energy Credits Page here.

International Tax Changes

The bill introduces several international tax provisions that could impact Canadians with US business operations, investments, or assets:

GILTI and FDII renamed to “net CFC tested income” (NCTI) and “foreign-derived deduction eligible income” (FDDEI) with reduced deductions and a 14% effective US tax rate — increasing tax costs for Canadian businesses with US subsidiaries or cross-border structures.
Foreign tax credit rules tightened, raising the risk of double taxation for Canadian individuals and corporations with global income subject to both US and Canadian tax.
Base-erosion and anti-abuse tax (BEAT) expansion lowers the threshold to 2% and removes the scheduled rate hike — potentially impacting more Canadian-owned US entities making cross-border payments for services, royalties, or interest.
Revised sourcing rules for US-produced goods may affect Canadian manufacturers operating in the US and exporting abroad, with implications for inventory and transfer pricing.
Estate tax exposure for Canadians remains high through 2025, particularly for those owning US real estate, securities, or interests in US-based businesses.
Treaty benefit erosion may arise due to conflicts between the bill and the US-Canada tax treaty — complicating tax relief claims and increasing reporting burdens for cross-border taxpayers.

Economic Outlook and Legislative Path

The bill is projected to reduce federal tax revenue by $5 trillion over 10 years on a conventional basis. Supporters cite potential boosts in gross domestic product (GDP), job creation, and capital investment. Opponents warn of rising deficits and reduced health care and social program funding.

As the bill heads to the House, several elements remain under negotiation, including the future of the state and local tax deduction cap and the treatment of pass-through entities. With budget reconciliation rules in play, the legislation could advance with a simple majority vote.

What This Means for You

The “One Big Beautiful Bill” has broad implications across income levels and sectors. Whether you’re an individual planning for retirement, a business investing in growth, or a nonprofit navigating compliance, proactive planning will be key as the legislation takes shape.

These are just a few of the many potential changes we expect over the coming months. We will continue to provide updates with clarity, context, and a focus on what matters most to you.

If you have questions about how this legislation could impact your strategy or next steps, we encourage you to connect with your advisor or accountant or contact the Grimbleby Coleman team to get guidance.