One Big Beautiful Bill Act (OBBBA): Overview of the tax reform of July 4, 2025

On July 4, 2025, the “OBBBA” (One Big Beautiful Bill Act) was signed into law, introducing comprehensive tax reforms, including the permanent extension of several TCJA (Tax Cuts and Jobs Act) provisions and new measures consistent with President Trump’s 2024 campaign platform. Below is an overview of the most important changes for businesses and individuals.

Important changes in corporate tax law

100% special depreciation permanently extended: Companies can now permanently depreciate qualified fixed assets acquired after January 19, 2025, in full. Previously, the special depreciation would have gradually decreased from 100% (2022) to 20% (2026) and 0% (2027). For the first fiscal year ending after January 19, 2025, a reduced special depreciation of 40% or 60% can be selected on a transitional basis (depending on the asset).

Extension of the special depreciation to production properties: The 100% special depreciation now also applies to buildings in which production takes place if: – Construction begins after January 19, 2025, and before January 1, 2029 – Commissioning takes place before January 1, 2031 – “Recapture Rule”: The property is used for the qualified purpose for at least 10 years, otherwise it is taxed retroactively – Office space, administration and sales space are exempt

Section 179 depreciation: The maximum immediate depreciation is increased from USD 1.16 million to USD 2.5 million. The so-called “phase-out” amount, i.e., the amount at which the immediate depreciation begins to phase out, is now USD 4 million instead of USD 2.89 million.

Interest cap (Section 163(j)):

Return to EBITDA calculation for financial years from 2025
Production-related capitalized interest is partially excluded
GILTI (Global Intangible Low-Taxed Income) and Subpart F income are excluded from EBITDA
Priority rule: Calculate the interest barrier before applying any activation rules, except for §§263A(f) and 263(g)

R&D costs:

Immediate depreciation of domestic R&D costs
Accelerated depreciation of remaining capitalized R&D costs from 2022–2024
Foreign R&D costs must continue to be capitalized and depreciated over 15 years
Small businesses can apply the new regulation retroactively from January 1, 2022, under certain conditions.

Limit of donation deduction for corporations : Only donations exceeding 1% of taxable income are deductible.

Increase in the 1099 reporting threshold: Threshold for forms 1099-NEC and 1099-MISC increases from USD 600 to USD 2,000 (starting in 2025, indexed for inflation starting in 2026) (1099 is used to report income that is not received through a regular employment relationship)

Expansion of the Advanced Manufacturing Investment Credit (CHIPS Act):

Increase from 25% to 35% for investments in semiconductor manufacturing.
Applies to plants commissioned from 2026

Opportunity Zone Program – funding program for economically disadvantaged areas – extended and expanded:

“Round two” for so-called Qualified Opportunity Funds (QOFs) 2027–2033
Stricter eligibility criteria, e.g., qualified rural opportunity funds

New Markets Tax Credit: Now permanently incorporated into the tax code. This program promotes investments in economically disadvantaged areas and was originally introduced in 2000.

Credit for family and sickness-related wage payments: The existing credit for companies that offer paid family and sickness-related wage payments will be expanded.

Important changes in international tax law

Repeal of Section 899: The planned “retaliation tax” against countries with Pillar Two taxes was deleted (G7 agreement).

Foreign tax credits (FTCs):

US companies can credit more foreign taxes
Domestic costs (e.g., interest, R&D) no longer need to be offset against foreign income such as GILTI/Subpart F
As a result: higher foreign profit → higher credit possible

GILTI (Global Intangible Low-Taxed Income):

Renamed “Net CFC Tested Income (NCTI)”
Section 250 deduction permanently reduced to 40%

FDII (Foreign-Derived Intangible Income):

Renamed to “Foreign-Derived Deduction Eligible Income (FDDEI)”
Section 250 deduction permanently reduced to 33.34%

BEAT tax (Base Erosion and Anti-Abuse Tax): Remains permanently at 10.5% (instead of increasing to 12.5% from 2026)

Downward Attribution:

Section 958(b)(4) is reintroduced to eliminate downward attribution.
Introduction of “Foreign Controlled Foreign Corporations” as a new category with possible similar effects for certain taxpayers as “Downward Attribution”

Look-through rule for CFCs (controlled foreign corporations):

Permanently enshrined in US tax law (originally set to expire at the end of 2025)
Rule concerns taxation of dividends, interest, rents, etc. that flow between foreign subsidiaries of a US company -> no classification as passive income within the meaning of Subpart F-Income

Adjustment of the “pro rata” allocation: Taxation of Subpart F income (e.g. income of a US shareholder from foreign subsidiaries in the form of dividends, interest) is now pro rata according to the period of ownership in the year (no longer only for ownership at the end of the year), thus closing a significant tax loophole.

Important energy-related tax changes

Reduction of the green tax incentive from the IRA (Inflation Reduction Act):

Repeal of the Section 30D electric vehicle tax credit (up to USD 7,500) and other credits
Restrictions on Section 45Y & Section 48E for investments & production of electricity from renewable sources
Only projects commissioned by the end of 2027 will be eligible
Safe Harbor for wind/solar construction within one year of entry into force
Prohibition on the transfer of tax credits to foreign-controlled companies (SFEs – Specified Foreign Entities)
Section 25D tax credits for solar thermal and wind leases will be eliminated. Leased solar-only systems will remain.

Important changes for private individuals

Income tax rates will remain permanently low: the rates of 10%, 12%, 22%, 24%, 32%, 35% and 37% will remain in place after 2025.

SALT ( State and Local Taxes) deduction limit:

State and local tax deduction on federal tax – increase to USD 40,000 (USD 20,000 for separate assessments)
Valid until 2029, then adjusted for inflation
Graduated starting from a modified AGI (Adjusted Gross Income) over USD 500,000

PTET elections (Pass-Through Entity Tax Election): No new restrictions

QBI (Qualified Business Income) deduction (Section 199A):

Permanently at 20%
Limitation for Specified Service Trade or Business (SSTB) starts at USD 75,000 (individual) or USD 150,000 (joint)

Limitation of Excess Business Loss (EBL): Determination of how much loss may be offset between different incomes has been permanently extended

Standard Deduction (=employee flat rate) (2025):

USD 31,500 for joint taxation
23,625 USD for so-called heads of household
USD 15,750 for individual tax assessment
→ inflation-indexed

Personal allowances:

Permanent deletion
Introduction of a temporary “senior citizen deduction” of USD 6,000
→ Phasing-out from USD 75,000 (individual) / USD 150,000 (joint)

Alternative Minimum Tax (AMT): Higher allowances permanently from December 31, 2025

Child tax credit:

USD 1,400 (refundable) + USD 2,000 (non-refundable)
-> Inflation-adjusted

Mortgage insurance: Premiums permanently deductible as interest costs

Donation deduction despite employee allowance: From 2026, up to USD 1,000 in donations are deductible in addition to the employee allowance

Tips & Overtime:

New special deduction for 2025–2028
Up to $25,000 in tips
Up to $12,500 overtime pay

Trump accounts:

New tax-advantaged accounts for children under 18 (similar to a Traditional IRA)
The state can contribute an additional USD 1,000 for children (born between 2025 and 2028).

1% consumption tax on foreign money orders (“Money Orders”): Applies to money transfers via Money Orders from private individuals abroad

Interest deduction on car loans:

Up to USD 10,000 interest deduction (2025–2028)
Even when using the employee lump sum
Reduction for higher incomes (from ~150,000 USD AGI)

inheritance tax

Exemption: Increase of the exemption to USD 15 million per person
Applies to deaths from 2026
Permanent and inflation-indexed

Rödl & Partner Tax Matters, Volume 2025-9, published July 7, 2025

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