Revisions to the Internal Revenue Code

Signed into law on July 4, 2025, the One Big Beautiful Bill Act (OBBBA), officially called “An Act to provide for reconciliation pursuant to title II of H. Con. Res. 14.”, changes funding for various federal programs, raises the debt ceiling, and makes numerous revisions to the Internal Revenue Code.

This legislation extends many of the business and individual provisions from the 2017 Tax Cuts and Jobs Act that were set to expire at year-end.

Individual and Trust tax rates

The new law permanently extends the current tax rates of 10%, 12%, 22%, 24%, 32%, 35%, and 37% for individuals. The current 10%, 24%, 35%, and 37% rates for estates and trusts are also permanently extended.

Standard deduction

Effective for tax years beginning in 2025, the standard deduction is increased to the following amounts.

• Married Filing Jointly, Qualifying Surviving Spouse: $31,500
• Single: $15,750
• Head-of-household: $23,625
• Married Filing Singly: $15,750

These amounts are adjusted annually for inflation beginning in tax years after 2025.

Personal exemptions

The new law permanently terminates the personal exemption deduction, except for a temporary deduction for seniors. For tax years 2025 through 2028, the deduction is $6,000 for each qualified individual. A qualified individual is:

• A taxpayer who has attained age 65 before the close of the tax year.
• In the case of a joint return, a taxpayer’s spouse, if the spouse has attained age 65 before the close of the tax year.

The $6,000 amount is reduced by 6% of the taxpayer’s modified adjusted gross income (MAGI) that exceeds $75,000 ($150,000 for married-filing-jointly).

Bonus depreciation and Section 179

For property acquired after January 19, 2025, the new law permanently extends the 100% expensing of all property eligible for bonus depreciation. For property placed in service during the first tax year ending after January 19, 2025, the taxpayer may elect to have the prior law 40% limit apply (60% for longer production period property).

Effective for tax years beginning after 2024, the Section 179 deduction limit is $2.5 million, with an investment cap of $4 million. Both thresholds will be adjusted annually for inflation.

University of Minnesota Extension will post a more detailed summary of the new tax legislation later this summer. In the meantime, a thorough overview is available from Iowa State University’s Center for Agricultural Law and Taxation (CALT). The University of Minnesota collaborates with CALT on several initiatives.

The University of Minnesota will address the components of this new legislation at our Fall Tax Schools.