Trump signed the “One Big Beautiful Bill” into law on 4 July 2025, which makes his 2017 tax cuts permanent and introduces new tax breaks promised during his 2024 campaign.

US President Donald Trump signed a major tax and spending bill dubbed “One Big Beautiful Bill” into law on 4 July 2025.

This legislation, a key achievement of Trump’s second term, includes funding for his immigration policies, makes his 2017 tax cuts permanent, and  cuts health  programmes, which is expected to leave millions of Americans without health insurance. This bill also eliminates green energy incentives and adds USD 3.4 trillion to the national debt, now at USD 36.2 trillion.

Some of the key tax measures are:

  • Tax Rates and Breakpoints: The income tax rate schedules and breakpoints for net capital gains and qualified dividends under the Tax Cuts and Jobs Act (TCJA) are now permanent. The key updates are:
    • The increases to the basic standard deduction under the TCJA will become permanent. Additionally, there will be a slight bump in the base standard deduction amounts, such as USD 15,750 for single filers.
    • The TCJA’s changes to the Child Tax Credit (CTC) will also be made permanent. On top of that, the nonrefundable CTC per qualifying child will rise to $2,200 starting in 2025, with adjustments for inflation to follow in later years.
  • Alternative Minimum Tax (AMT): The increased AMT exemption amounts are permanent, but the phaseout thresholds will revert to 2018 levels (USD 500,000 for individuals, USD 1,000,000 for joint filers).
  • SALT Deduction Cap: The State and Local Tax (SALT) deduction cap temporarily increases to USD 40,000 (USD 20,000 for married filing separately) from 2025 to 2029. After 2030, it will permanently return to USD 10,000.
  • Excise Tax on Transfers: Starting in 2026, a 1% excise tax will apply to electronic fund transfers from the US to non-US recipients, with some exemptions (e.g., transfers using U.S.-issued debit/credit cards or FDIC-insured bank accounts).
  • The Section 199A deduction for Qualified Income: Also known as the pass-through deduction, will now be permanent for tax years starting after 31 December 2025. The deduction rate will stay at 20%, avoiding the previously suggested increase to 23%.
  • Advanced Manufacturing Credit: The investment credit for advanced manufacturing under Section 48D now increases to 35% for property placed in service after 2025.
  • Qualified Opportunity Zones (QOZ): The QOZ programme is now permanent, with new zones designated every 10 years starting in July 2026.
  • Foreign Tax Credit (FTC) Basket Deductions: Limits FTC basket deductions to Section 250, allowing only directly allocable deductions. Interest, research and experimentation (R&E) expenses cannot be allocated unless they are directly related.
  • Deemed-Paid FTC Increase: Raises the deemed-paid FTC on net CFC tested income from 80% to 90%.
  • Foreign-Source Income Treatment: Treats 50% of profits from U.S.-made goods sold abroad as foreign-source income for FTC purposes.
  • Controlled Foreign Corporations (CFCs): 
    • The CFC look-through rule is permanent.
    • US shareholders must include their share of subpart F income for any day the corporation is a CFC (eliminating the “last day” rule).
    • The reinstated Section 958(b)(4) prevents downward attribution of stock ownership from foreign to U.S. persons for CFC determination
    • The new Section 951B applies CFC inclusion rules to foreign-controlled U.S. shareholders of foreign-controlled CFCs, effective after 31 December 2025.
  • Global Intangible Low-Taxed Income (GILTI) Adjustments:  GILTI deduction is permanently set at 40%, resulting in a 12.6% rate. GILTI is renamed as “net CFC tested income.”
  • Foreign Derived Intangible Income (FDII) Adjustments: FDII deduction is set at 33.34%, resulting in a 13.9986% rate. FDII is renamed as “foreign-derived deduction eligible income.”
  • Section 250 Deduction Cuts: Reduces Section 250 deductions to 40% for GILTI and 33.34% for FDDEI.
  • BEAT Rate: The Base Erosion Anti-Abuse Tax (BEAT) rate drops to 10.5% after 2025, with favourable treatment for certain credits.
  • R&E Expenses: The immediate expensing of domestic research and experimental (R&E) costs is reinstated for tax years starting after 2024, with an option to capitalise over 60 months.
  • Business Interest Limitation: The EBITDA-based calculation for adjusted taxable income is permanently reinstated, effective 1 January 2025.
  • Special Depreciation for Manufacturing: A 100% depreciation deduction is introduced for nonresidential real property used in manufacturing, production, or refining, available until 2031.
  • Electric Vehicle Credits: The phase-out for various EV-related credits accelerates after September 2025.
  • Clean Energy Tax Credits:
    • Clean electricity and fuel production credits are extended or adjusted, with some limitations on eligibility.
    • The clean hydrogen credit ends for facilities starting construction after 2028.
    • The Section 45X advanced manufacturing production credit will phase out wind energy components after 2027 and critical minerals gradually from 2031.
  • Energy-Efficient Buildings: The deduction for energy-efficient commercial buildings ends for projects starting after June 2026.
  • Tips and Overtime Deductions:  For tax years starting after 31 December 2024, and ending on December 31, 2028, two new income tax deductions will be available:
    • A deduction of up to USD 25,000 is offered for qualified tips. However, this benefit begins to phase out for individuals with a modified adjusted gross income (MAGI) over USD 150,000, or USD 300,000 for those filing jointly.
    • A deduction of up to USD 12,500 for qualified overtime compensation is available, with the limit increasing to USD 25,000 for joint filers. Similar to the tip deduction, this also phases out when MAGI exceeds USD 150,000 for single filers or USD 300,000 for joint filers.

The signing took place just a day after the Republican-led House of Representatives passed the bill with a 218-214 vote on 3 July 2025.

During the ceremony, Trump expressed his excitement, saying, “I’ve never seen people so happy in our country because of that, because so many different groups of people are being taken care of: the military, civilians of all types, jobs of all types.”

Trump highlighted the bill’s impact, calling it “the biggest tax cut, the biggest spending cut, the largest border security investment in American history.”

Earlier, the Senate passed the bill with Vice President JD Vance casting the tiebreaking vote on 1 July 2025.

On 28 June 2025, the Senate Budget Committee Chairman, Lindsey Graham, released the updated text of Trump’s tax and spending bill, with potential amendments.

The key amendments involved a temporary increase in the state and local tax (SALT) deduction cap to USD 40,000, an accelerated phase-out of certain green energy credits, and the removal of proposed Tax Code Section 899, also known as the “revenge tax.” Section 899 would have imposed higher US taxes on foreign countries with extraterritorial taxes like the Pillar Two UTPR, digital services taxes (DSTs), and diverted profits taxes (DPTs).