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Legislative bills

House of Representatives Passes Sweeping Tax Changes with H.R. 1

Strategic Insights

— 2 min read

The House of Representatives recently passed H.R. 1, a comprehensive tax bill that aims to reform various tax provisions, affecting individuals, businesses, and energy policy. The bill, known as the "One Big Beautiful Bill," is set to be debated in the Senate and may undergo changes before its final passage. Despite this, the scope of the tax changes warrants consideration for prospective planning purposes.

Individual tax provisions include the permanent extension of the Qualified Business Income (QBI) deduction, which is increased from 20% to 23%, with amended income limits. Additionally, the estate and gift tax exemption is permanently increased to $15 million beginning in 2026, indexed for inflation. The State and Local Tax (SALT) deduction cap is increased to $40,000 for 2025, with an income-based phaseout, and certain state-level SALT cap workaround strategies are targeted.

Business tax provisions include the reinstatement of the 100% bonus depreciation for property acquired after January 19, 2025, and placed in service after January 19, 2025, but before 2030. Section 179 expensing is increased to $2.5 million, with phase-out thresholds raised to $4 million for property placed in service after December 21, 2024. Notably, the bill does not affect carried interest.

The bill also includes provisions for energy credits, such as eliminating the Energy Efficient Home Improvement Credit for property placed in service after 2025, the Residential Clean Energy Credit after 2025, and other credits related to clean vehicles, clean hydrogen production, and commercial clean vehicle credits.

Key Takeaways:

  • The House of Representatives passed H.R. 1, a comprehensive tax bill affecting individuals, businesses, and energy policy.
  • The Qualified Business Income (QBI) deduction is permanently increased from 20% to 23%, with amended income limits.
  • The estate and gift tax exemption is permanently increased to $15 million beginning in 2026, indexed for inflation.
  • The State and Local Tax (SALT) deduction cap is increased to $40,000 for 2025, with an income-based phaseout.
  • The 100% bonus depreciation is reinstated for property acquired after January 19, 2025, and placed in service after January 19, 2025, but before 2030.
  • Section 179 expensing is increased to $2.5 million, with phase-out thresholds raised to $4 million for property placed in service after December 21, 2024.
  • The bill eliminates or phases out various energy credits, including the Energy Efficient Home Improvement Credit, the Residential Clean Energy Credit, and others.
  • The bill does not affect carried interest.

Statistics:

  • The QBI deduction rate is increased from 20% to 23%.
  • The estate and gift tax exemption is permanently increased to $15 million beginning in 2026.
  • The SALT deduction cap is increased to $40,000 for 2025.
  • The 100% bonus depreciation is reinstated for property acquired after January 19, 2025, and placed in service after January 19, 2025, but before 2030.
  • Section 179 expensing is increased to $2.5 million, with phase-out thresholds raised to $4 million for property placed in service after December 21, 2024.

Sources:

  • "One Big Beautiful Bill" (H.R. 1) passed by the House of Representatives
  • "Taft's White House Toolkit"

* "Mondaq Ltd, 2025"

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