Jessica I. Marschall, CPA, ISA AM
August 13th, 2025
Executive summary. Treasury and the IRS have started to roll out operational guidance for the One Big Beautiful Bill Act (OBBBA). For Tax Year 2025, the government is not changing individual information returns or federal withholding tables; most practical form changes are being pushed to 2026. Meanwhile, practitioners are digesting what the new law made permanent or enhanced on both the individual and business sides, and how that plays against a fast-rising federal debt backdrop.
What Treasury/IRS just clarified
- No 2025 form or table changes. IRS says Forms W-2/1099/941 stay the same for TY2025 and withholding tables are not being updated for OBBBA provisions this year. New reporting mechanics for overtime and tips are targeted for TY2026 so employers should continue current procedures for 2025.
- Temporary deductions remain, logistics later. The Journal of Accountancy recap underscores that the temporary overtime and tip relief (2025–2028) is intact, but the reporting mechanics are what Treasury intends to stage into 2026 to avoid filing-season disruption.
Individuals: What changed—and how to plan
- TCJA rate structure preserved. Rather than sunsetting, TCJA-era brackets are extended, shifting many clients back to the traditional playbook of deferring income and accelerating deductions where appropriate.
- SALT cap lifted (but phased down). OBBBA temporarily raises the SALT deduction cap from $10,000 to $40,000, with a phase-down beginning around $500,000 AGI; higher-income households may see little benefit. Pass-through entity (PTE) SALT workarounds remain available.
- “New Pease-like” itemized-deduction limit. A revived limitation targets top-bracket filers and, unlike the old rule, could impact trusts and estates because their 37% bracket arrives at low income levels. Charitable strategy may need to be shifted into 2025 given a new “charitable floor.”
- Overtime and tips relief. OBBBA introduced temporary deductions (2025–2028), up to $12,500 single / $25,000 MFJ for qualified overtime, with phase-outs starting at $150k/$300k MAGI, and a separate deduction for qualified tips (employees and certain contractors). Mechanics are delayed to 2026, but tracking should begin now.
Businesses: The headline wins
Practitioners highlight four “big-lever” changes that are either enhanced or made permanent:
- 100% bonus depreciation returns as a planning anchor.
- §174 domestic R&D expensing is restored beginning in 2025.
- §163(j) interest-limitation relief eases debt-heavy industries.
- §199A (QBI) deduction is made permanent, keeping the top effective rate for qualifying pass-through income near 29.6%.
Additional pro-startup tweaks include stronger QSBS (§1202) rules, includingan exclusion cap raised to $15 million, tiered exclusions for shorter holding periods, and a higher gross-assets threshold so more companies qualify. Estate-tax exemptions are also permanently higher, improving succession planning, while the excess business loss limitation for non-corporate taxpayers becomes permanent, an oft-overlooked constraint that still requires planning around loss strategies.
Payroll & HR: What to do right now
- Keep current systems for 2025. Continue today’s W-2/1099/941 processes and existing federal tables. Start tracking FLSA-qualified overtime separately (only the premium portion over the regular rate)—that data discipline will matter when 2026 reporting forms land.
- Educate tipped employees and managers. The temporary tip deduction covers W-2 employees and certain 1099 recipients; expect updated W-2 instructions and possibly a dedicated line or code in 2026.
Fiscal context: why the implementation is staged
The national debt just surpassed $37 trillion, reaching that level years earlier than pre-pandemic projections. Analysts attribute the pace to pandemic borrowing and the new tax-and-spending mix, with estimates that the current package could add trillions over the next decade, pressure that likely explains Treasury’s bias for gradual rollout.
Planning checklist for the 2025 season
- Re-model SALT for clients under the AGI phase-down; consider PTE elections where available.
- Revisit year-end giving (charitable floor + itemized-deduction limitation) and consider accelerating 2025 gifts.
- For founders/investors, refresh QSBS roadmaps—new higher caps and thresholds may change entity and holding-period decisions.
- Capex and financing: time large asset purchases for bonus depreciation; stress-test models under looser §163(j).
- Payroll: keep 2025 processes; pilot overtime/tip data capture to be 2026-ready.
Open questions we are still watching
- Final form changes for 2026 (and whether the IRS adds dedicated boxes/lines for overtime and tips).
- Detailed regs on the itemized-deduction limitation for trusts and estates.
- QSBS implementation specifics for the new exclusion tiers and the increased asset ceiling.
Sources
- IRS: No 2025 changes to affected information returns or withholding tables; 2026 targeted for reporting updates. IRS
- Journal of Accountancy: Effective dates and thresholds for overtime/tip deductions; 2026 timing rationale. Journal of Accountancy
- Accounting Today (individual side): SALT cap to $40k with phase-down; TCJA rate preservation; new itemized-deduction limitation and planning notes. Accounting Today
- Accounting Today (business wins): Bonus depreciation, §174 fix, §163(j) relief, permanent §199A, and QSBS enhancements. Accounting Today
- AP (debt context): Treasury reports U.S. debt at a record $37T. AP News
