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On July 4, President Trump signed the One Big Beautiful Bill Act into law.This followed July 1 passage in the Senate and July 3 passage in the House. Enactment follows days of frantic activity in Congress, with day-long debates, record-setting voting sessions, and many deals to secure passage in the closely divided House and Senate.

COMMENT: One of the final changes to the bill before passage was to strip the name of the Act due to Senate reconciliation rules, so the official name is not the One Big Beautiful Bill Act. This has been done for other recent reconciliation bills, such as the Inflation Reduction Act of 2022 and the Tax Cuts and Jobs Act of 2017.

The Act includes a number of tax changes, including permanent and limited modification of many soon-to-expire tax provisions, new provisions promised by President Trump during his 2024 campaign, elimination or modification of most green energy provisions, and dozens of other changes affecting individuals and businesses. There are many differences outside the tax provisions that have been subject to disagreement within the GOP majority, though the dissenting voices seem to have accepted those changes in order to get the bill across the finish line.

Upon its passage, the majority of the provisions of the Tax Cuts and Jobs Act of 2017 (TCJA) included expiration dates in order to satisfy budgetary requirements. Lower individual rate brackets, higher standard deductions, the elimination of the personal exemption, the cap on the deduction of state and local taxes (SALT), changes to the alternative minimum tax, and many other provisions are all set to expire at the end of 2025. Without legislation, the federal tax system would have largely reverted back to the rules applicable in 2017.

Throughout the 2024 campaign, Trump, as well as many GOP lawmakers, proposed making these soon-to-expire provisions a permanent part of the tax code. The Act does just that, but it comes at a high price tag (some estimates have it at $5 trillion over ten years). Much of this cost is balanced by reduced outlays in many government programs not related to taxation, and by the elimination of many of the "green" tax provisions from the Inflation Reduction Act.

COMMENT: This CCH Tax Briefing is not intended to comprehensively cover all provisions proposed in the approximately 400-page tax portion of the Act, but rather the highlights. See CCH® AnswerConnect for complete coverage of the One Big Beautiful Bill Act.

EXTENDED INDIVIDUAL PROVISIONS

Individual Extenders

Many of the provisions of the TCJA applicable to individuals are among those scheduled to expire at the end of 2025.

These include:

• 10, 12, 22, 24, 32, 35 and 37 percent brackets applicable since 2018;

• Elimination of personal exemptions;

• Increased alternative minimum tax exemption and threshold amounts;

• Lower limitation on the deduction of mortgage interest;

• Limitation on the casualty loss deduction;

• Termination of the miscellaneous itemized deduction; and

• Allowance of rollovers from qualified tuition programs to ABLE accounts.

The Act makes all of these provisions permanent, but does make some modifications. The Act permanently treats mortgage insurance premiums as qualified residence interest for which a deduction could be claimed and allows for unreimbursed educator expenses to be deducted as a miscellaneous itemized deduction. The Act also removes the last seven years of inflation adjustments from the AMT exemption phase-out threshold for joint filers, reverting the threshold to the 2018 amount.

COMMENT: Between 2008 and 2021, mortgage insurance premiums could be treated as qualined residence interest and deducted my homeowners. Also, under current law, teachers are allowed an above-the-line deduction for classroom expenses of up to $300 for 2024 and 2025, but the Act expands that beyond the dollar limitation.

Also, the Act does permanently eliminate the personal exemption amount, but provides a $6,000 deduction amount for seniors age 65 and older after 2024 and before 2029. This deduction would phase out for individuals whose modified adjusted gross income exceeds $75,000 ($150,000 for joint filers).

COMMENT: A similar provision was in the House-passed version of the bill, but was instead an expansion of the standard deduction, and capped at $4,000.

Standard Deduction

The TCJA nearly doubled the standard deduction for tax years beginning after 2017. For 2025 (prior to the Act), the inflation adjusted amounts were $30,000 for joint filers, $22,500 for heads of households, and $15,000 for single taxpayers and married taxpayers filing separately. These higher amounts were set to expire after 2025.

The Act increases the amount of the standard deduction for tax years beginning in 2025 and subject to inflation thereafter. Under the Act, the standard deduction amounts for 2025 are $31,500 for joint filers $23,625 for heads of households, and $15,750 for single taxpayers and married taxpayers filing separately.

COMMENT: In the bill passed by the House, the amounts would have been temporarily increased for tax years 2025 through 2028 by $2,000, $1,500, and $1,000 respectively. The bill originally proposed by the Senate also increased the deduction by the same amounts, but made them permanent and subject to inflation. The lower amounts ultimately passed reflect an attempt to lower the cost of the provision.

SALT Deduction

One of the most controversial provisions of the CJA was the imposition of a $10,000 cap on the deduction for state and local taxes. Before the ink was dry on the 2017 legislation, lawmakers in higher tax states on both sides of the aisle (the so-called "SALT Caucus") were introducing legislation intended to increase or outright repeal the cap.

The Act increases the cap to $40,000 for 2025, with a one percent increase in the cap each year through 2029 before returning to the $10,000 limit in 2030. The cap is reduced by 30% of the amount by which the taxpayer's modified adjusted gross income exceeds a threshold amount. That threshold amount is generally $500,000 for 2025, with a one percent increase each year through 2029.

COMMENT: This had proven to be one of the stickier points for legislators in their negotiations in both the House and Senate. Members of the SALT Caucus were still outwardly unhappy with the $40,000 limit agreed to in the House bill, but ultimately decided to vote in favor of it. The initial Senate proposal made no increase in the cap, but was eventually increased to match the House bill. In the days leading up to passage in the Senate, members of the SALT Caucus have accepted this final framework.

Child Tax Credit

The TCJA increased the amount of the child tax credit from $1,000 to $2,000 for tax years 2018 through 2025, as well as nearly quadrupling the phaseout thresholds to $400,000 for joint filers and $200,000 for other filers.

The Act permanently increases the base amount of the credit to $2,200, subject to annual inflation increases. The post-2017 base amount of the refundable portion of the child tax credit (the "additional child tax credit") remains at $1,400, and continues to be adjusted for inflation ($1,700 for 2025).

The Act requires the taxpayer claiming the credit, the taxpayer's spouse (if married), and the child for whom the credit is claimed to have Social Security numbers.

Estate Taxes

The estate tax basic exclusion amount, which the TCJA doubled for decedents dying through 2025 (inflation adjusted to $13.99 million in 2025) would revert back to 2017 amounts if the TCJA is allowed to expire.

Under the Act, the basic exclusion amount is increased again to a base amount of $15 million for decedents dying in 2026, adjusted for inflation thereafter.

COMMENT: The $15 million amount is probably not far off from where inflation would have taken the exclusion amount for 2026 if the TCJA was not scheduled to expire.

NEW INDIVIDUAL PROVISIONS

No Tax on Tips

One of the big talking points for President Trump during the campaign was the elimination of the tax on tip income. Historically, tip income was not subject to tax until the early 1980s when legislation passed during the Reagan administration treated it like regular income. The deduction is capped at $25,000, and the deduction begins to phase out when the taxpayer's modified adjusted gross income exceeds $150,000 ($300,000 for joint filers). The deduction is not allowed for tax years beginning after 2028. The Act also extends the employer credit for Social Security taxes on employee cash tips to the beauty service industry (the credit currently only applies to the food and beverage industry).

No Tax on Overtime

During his campaign, President Trump also proposed making overtime compensation tax free. Under the Act, taxpayers are able to claim a deduction for the amount of overtime pay received as required under section 7 of the Fair Labor Standards Act of 1938. Like the deduction for tip income, taxpayers do not have to itemize deductions to claim the deduction, but are required to provide a Social Security number. The deduction is capped at $12,500 ($25,000 for joint filers), and the deduction begins to phase out when the taxpayer's modified adjusted gross income exceeds $150,000 ($300,000 for joint filers). The deduction is not allowed for tax years beginning after 2028.

COMMENT: The Act does not provide extensive rules for the application of this provision, leaving the rules of application up to Treasury Regulations.

Social Security Income

During his campaign, President Trump also proposed making Social Security income tax free. However, at no point has the Senate bill, nor the version that passed the House, included a provision to eliminate the tax on or provide a deduction for Social Security income.

COMMENT: It is possible that the special personal exemption available for seniors is intended to accomplish the same goal as making Social Security income tax-free.

Itemized Deduction Limitation

Prior to the TCJA, the itemized deduction limitation was subject to a phaseout at higher incomes (the "Pease" limitation). The Act includes a return of the limitation on itemized deductions for taxpayers in the 37 percent income tax bracket, effective after 2025.

Automobile Loan Interest

Previously, interest on an individual's automobile loan was treated as nondeductible personal interest. The Act includes a deduction of up to $10,000 for interest paid on an automobile loan in 2025 through 2028 for a car purchased after 2024. The deduction is available for both itemizers and non-itemizers.

Trump Accounts

The Act also includes provisions for the creation of tax-favored accounts for newborn children, called "Trump Accounts." The accounts are seeded with $1,000 for newborn children. From a tax standpoint, they operate under rules similar to those applicable to individual retirement accounts, but are available to children.

Additional Provisions

The Act also includes:

• A tax credit for contributions to scholarship-granting organizations;

• An expansion of 529 programs to include elementary, secondary, and home schooling expenses; and

• The resurrection of the COVID-era allowance of a charitable contribution deduction for non-itemizers.

BUSINESS PROVISIONS

Bonus Depreciation

The TCJA provided for 100 percent expensing of certain business property through 2022, with a 20 percent stepdown each year after before reaching 0 percent in 2027 (currently set at 40% in 2025). The Act makes 100 percent bonus depreciation permanent for property acquired after January 19, 2025.

Research and Experimental Expenditures

Under prior law, taxpayers are required to amortize research and experimental expenditures. Prior to 2022, a direct expense election was available. The Act permanently reinstates the deduction for domestic research and experimental expenditure costs incurred after 2024. Taxpayers can elect whether to deduct or amortize the expenditures, though the requirement to amortize under prior law is suspended while the deduction is available. Additionally, small businesses with average annual gross receipts of $31 million or less would be able to elect to claim the deduction retroactively to 2022.

Qualified Business Income Deduction

The TCJA's qualified business income deduction under Code Sec. 199A is set to expire for tax years beginning after 2025.

Under the Act, the qualified business income deduction is made permanent. Additional changes expand qualification for the deduction.

Additional Provisions

The Act also includes:

• An increase in the 179 deduction limitations after 2024

• An exclusion of interest received by qualified lenders secured by rural or agricultural real property

• Modifications to the low-income housing credit.International Extensions

The Act makes permanent many international and foreign-related provisions under the CJA, including the:

• Deduction for foreign-derived intangible income (FDII) and global intangible low-taxed income (GILTI); and

• Base erosion minimum tax amount.

However, the Act changes the FDIl rate to 33.34 percent (currently 37.5 percent) and the GILTI rate to 40 percent (currently 50 percent) after 2025.

COMMENT: Under TCJA, these rates were scheduled to drop to 21.875 percent and 37.5 percent, respectively, after 2025. So this actually represents a tax increase for 2026 and beyond. The Act also changes the base erosion minimum tax amount to 10.5 percent from its current 10 percent rate after 2025.COMMENT. Under TCJA, this rate was scheduled to increase to 12.5 percent after 2025, so this represents a tax decrease for 2026 and beyond. The Act also makes changes to the treatment of "tested" CFC income and the foreign tax credit.

GREEN ENERGY TERMINATIONS

The Inflation Reduction Act of 2022 created dozens of new tax credits intended to promote the manufacture and adoption of alternative energy sources. The elimination of these credits by the One Big Beautiful Bill Act is a key method of paying for many of the new taxpayer-friendly provisions. However, the timing of the termination had been another sticking point throughout negotiations, and as the Senate amended its bill, House leaders were pleading for changes to be included to look more like the House bill.

The major difference between the two chambers largely centered on when credits for "clean" energy producers will be eliminated. The House took the approach that for producers that have already invested in construction costs, the credits should be terminated in 2026 or later.The Senate initially took a much more aggressive approach, with some credits terminating immediately but nearly all terminating before the end of 2025.

Ultimately, the Senate relented and included a longer run-out for energy producers to claim credits, in some cases allowing for construction to begin in 2026.

Where the Senate Act did agree with the House was on the termination of many credits applicable to the consumer side of green energy. Under the Act, the affected credits include the following (termination generally after 2025):

• Previously owned clean vehicle credit;

• Clean vehicle credit;

• Qualified commercial clean vehice credit;

• Alternative fuel refueling property credit;

• Energy efficient home improvement credit;

• Residential clean energy credit; and

• New energy efficient home credit.

IRS PROCEDURAL PROVISIONS

Perhaps the most widely applicable operations provision of the Act is the termination of the IRS Direct File program.

The Act requires the termination of the program within 30 days after passage and appropriates funding for the IRS to research a public-private partnership to replace the current "free file" program.The Act includes specified penalties for fraudulent promoters of retention credit schemes, but at a much lower limit of $1,000 per failure to comply with due diligence requirements (though without a cumulative limit). The Act also includes the termination of the Direct File program.

COMMENT: The version of the bill that was passed by the House included the provision imposing the penalty on ERC promoters with much higher penalty amounts. However, in a subsequent vote on a recissions bill on June 11, a rule adopted in passage struck that provision from the House-passed bill. It isn't clear how that recissions bill will impact this provision.

The House Ways and Means Committee recently offered a window into what the legislative body is working on when it comes to developing legislation to govern the taxation of digital assets, highlighting six bills and a discussion draft covering a range of topics.

The House Ways and Means Committee recently offered a window into what the legislative body is working on when it comes to developing legislation to govern the taxation of digital assets, highlighting six bills and a discussion draft covering a range of topics.

As part of the development, the committee held a June 9, 2026, hearing to solicit commentary from industry on the bills, during which committee Chairman Jason Smith (R-Mo.) called the “digital asset status quo is untenable. America needs clear tax rules of the road to remain the crypto capital of the world.”

Smith stated that cryptocurrency has “a market capitalization of over $2 trillion. That’s a massive industry by any measure, and nearly all other industries of a similar size enjoy clear tax policies.”

Chairman Smith noted that more and more people own cryptocurrency and “nearly a quarter of cryptocurrency holders earn less than $75,000 and the average crypto holder is nearly as likely to work in construction, manufacturing, or food service as tech or finance.”

The bills and discussion draft include:

• The Applying Existing Tax Anti-Abuse Rules to Digital Assets Act (H.R. 9172)
• The Charitable Deductions for Digital Donations Act (H.R. 9173)
• The Digital Assets Voluntary Disclosure Program Act (H.R. 9174)
• The Tax Clarity for Mining and Staking Act (H.R. 9175)
• The Providing Analogous Rules for Digital Assets Act (H.R. 9176)
• The Less Tax Paperwork for Digital Asset Owners Act (H.R. 9178)
• The End Digital Assets Tax Shelters Act (Discussion Draft)

The proposed legislation address “three key gaps in the current tax regime that make it harder for Americans to fully participate in the digital asset ecosystem,”

First, he said, “common digital transactions like mining and staking do not fit clearly into existing tax law. In other places, the tax code is silent as to the treatment of digital assets. The ambiguity creates an opening for taxpayers to exploit the law and avoid paying taxes in some circumstances and creates unfair tax burdens on others.

Second, Smith stated that “digital assets do not receive the tax benefit nor the protection from anti-abuse rules long granted to traditional financial assets. The imbalance between digital assets and traditional financial assets creates a two-tier system that unintentionally favor certain assets over others.”

Third, “crypto owners face burdensome tax compliance that makes using digital assets in ordinary commerce almost impossible.” Smith noted that “31 percent of crypto owners would like to buy a cup of coffee at the local shop, yet each $5 cup of coffee bought with a digital asset generates two new pieces of tax paperwork,” which adds a significant burden to both the IRS and the taxpayer.

Ranking Member Richard Neal (R-Mass.) had mixed reviews on the bills. He described his initial observation as some of the bills being “quite sensible, providing clear rules of the road for taxpayers looking to comply with the law. Other provisions sought the common sense goal of alleviating burdensome paperwork requirements, especially in situations where it’s highly unlikely that there would be any tax associated with those transactions, and indeed there are provisions that would close loopholes that are specific to the digital asset industry.”

However, Neal also noted that “it appears there are some provisions that deviate substantially from general tax principles, providing a distinct advantage that are beyond some other investments. We want to be careful about putting a thumb on the scale, and as we all know, it’s much easier to put something into the tax code than it is to take it out.”

Lawrence Zlatkin, Coinbase vice president of tax, testified during the hearing that the bills “represent the most comprehensive effort to modernize digital asset taxation that we have seen to date. Most importantly, this legislation recognized a fundamental reality: market structure and tax policy go hand-in-hand.”

In particular, Zlatkin highlighted H.R. 9178, which he testified “is an important step forward towards making stablecoin payments practical while reducing unnecessary reporting noise,” as well as H.R. 9173, which “provides long-needed clarity for mining and staking rewards, helping ensure taxpayers are not forced into tax obligations before they’ve generated liquidity though an actual sale.”

Mike Kaercher, deputy director of the Tax Law Center at New York University, cautioned that as the bills move through the process, “I encourage policymakers to consider three tax policy principles most closely: parity, administrability, and guardrails to prevent abuse. Some of the provisions in these bills would make improvements consistent with these principles.”

Among those, Kaercher testified that for example, “one of the bills would extend anti-abuse regimes, like wash sale rules and constructive sale rules, to digital assets. That’s a good idea. Another example is the de minimis provision on qualifying stablecoins – a targeted approach with guardrails can reduce paperwork and compliance burdens without creating substantial hidden tax subsidies for digital assets, but the rule should remain targeted because a broader de minimis provision risks abuse and would favor investments in digital assets over those in traditional finance.”

On the provision of deferring tax on mining and staking rewards, Kaercher testified that deferral “isn’t just the distortive subsidy, it could also undermine administrability. Deferral increases complexity for taxpayers and makes it harder for the IRS to do its job.”

He also warned about the possibility of government bailouts if guardrails and policy are not correctly developed.

“I think one thing for policymakers to consider on this is that if digital assets become a larger part of retirement accounts and the assets remain highly volatile, or in a worst-case scenario, crash, that would have an enormous impact on households’ retirement savings, and if that were to happen, I think policymakers would have to think about whether to respond with something like a bailout.”

The Treasury Department, Department of Labor, and Department of Health and Human Services finalized regulations implementing the independent dispute resolution (IDR) process established under the No Surprises Act (P.L. 116-260). The regulations provide new disclosure and administration requirements for group health plans and health insurance issuers related to surprise billing protections. Although the final rules are generally effective August 3, 2026, several provisions have delayed applicability dates.

The Treasury Department, Department of Labor, and Department of Health and Human Services finalized regulations implementing the independent dispute resolution (IDR) process established under the No Surprises Act (P.L. 116-260). The regulations provide new disclosure and administration requirements for group health plans and health insurance issuers related to surprise billing protections. Although the final rules are generally effective August 3, 2026, several provisions have delayed applicability dates.

The final rules require plans and issuers to use claim adjustment reason codes (CARCs) and remittance advice remark codes (RARCs), as specified in guidance, when providing any paper or electronic remittance advice to an entity that does not have a contractual relationship with the plan or issuer. These disclosures must be included along with the initial payment or notice of denial of payment for certain items and services subject to the surprise billing protections in the No Surprises Act.

The regulations also make several procedural updates to the federal IDR process. These include refinements to the open negotiation period, the formal initiation of the IDR process, and the dispute eligibility review procedures. Further, the rules address the payment and collection of administrative fees as well as certified IDR entity fees.

The agencies also finalized the definition of bundled payment arrangements, amended requirements related to batched items and services, and amended the rules for extensions of timeframes due to extenuating circumstances. Additionally, the regulation finalizes provisions that require plans and issuers to register in the federal IDR portal.

T.D. 10049

The IRS has published the inflation adjustment factor and reference prices for determining the credit for renewable electricity production for calendar year 2026 sales of kilowatt hours of electricity produced in the U.S. or a U.S. possession from qualified energy resources.

The IRS has published the inflation adjustment factor and reference prices for determining the credit for renewable electricity production for calendar year 2026 sales of kilowatt hours of electricity produced in the U.S. or a U.S. possession from qualified energy resources.

The inflation adjustment factor for qualified energy resources is 2.0570. The reference price for facilities producing electricity from wind is 3.17 cents per kilowatt hour. The reference prices for facilities producing electricity from closed-loop biomass, open-loop biomass, geothermal energy, solar energy, municipal solid waste, qualified hydropower production and marine and hydrokinetic renewable energy have not been determined for calendar year 2026.

Phaseout Limits

For electricity sold during the calendar year 2026, the renewable electricity production credit is not subject to a phaseout under Code Sec. 45(b)(1) for electricity produced from wind. This is because the 2026 reference price for electricity produced from wind, 3.17 cents per kilowatt hour, does not exceed 8 cents multiplied by the inflation adjustment factor (2.0570). The phase-out of the credit also does not apply to electricity sold in 2026 and produced from closed-loop biomass, open-loop biomass, geothermal energy, solar energy, municipal solid waste, qualified hydropower production and marine and hydrokinetic renewable energy.

Credit Amount Adjustments

The credit for renewable electricity production for calendar year 2026 under Code Sec. 45(a) is 3.1 cents per kilowatt hour on the sale of electricity produced from the qualified energy resources of wind, closed-loop biomass and geothermal energy. The credit is 1.5 cents per kilowatt hour on the sale of electricity produced in open-loop biomass facilities, landfill gas facilities, trash facilities, qualified hydropower facilities and marine and hydrokinetic renewable energy facilities.

Notice 2026-37

The IRS updated guidance relating to the energy community provisions in:

• Code Sec. 45 production tax credit for electricity produced from certain resources;
• — the resource-neutral Code Sec. 45Y clean electricity production credit that largely replaces the Code Sec. 45 credit for property placed in service after 2024;
• — the Code Sec. 48 business energy investment credit for investments in property that produces electricity from certain resources; and
• — the resource-neutral Code Sec. 48E clean energy investment credit that largely replaces the Code Sec. 48 credit for property placed in service after 2024.

The IRS updated guidance relating to the energy community provisions in:

• — the Code Sec. 45 production tax credit for electricity produced from certain resources;
• — the resource-neutral Code Sec. 45Y clean electricity production credit that largely replaces the Code Sec. 45 credit for property placed in service after 2024;
• — the Code Sec. 48 business energy investment credit for investments in property that produces electricity from certain resources; and
• — the resource-neutral Code Sec. 48E clean energy investment credit that largely replaces the Code Sec. 48 credit for property placed in service after 2024.

Annual Statistical Area Category and Coal Closure Category Update

Notice 2026-39 publishes information taxpayers may use to determine whether they meet certain requirements under the Statistical Area Category or the Coal Closure Category for purposes of qualifying for energy community bonus credit amounts or rates.

• (1) Appendix 1 lists counties and county-equivalents that qualify as energy communities because they meet the Fossil Fuel Employment threshold and the unemployment rate requirement for calendar year 2025.
• (2) Appendix 2 lists newly identified census tracts with either a coal mine closure or a coal-fired electric generating unit retirement, and census tracts directly adjoining those tracts.
• (3) Appendix 3 lists census tracts that newly qualify as coal closure census tracts because of location-data corrections issued since the publication of Notice 2025-31.

Notice 2026-39

The Treasury Department and the IRS have announced plans to issue proposed regulations under Code Sec. 4960 expanding the definition of a covered employee for purposes of the excise tax on excessive compensation paid by applicable tax-exempt organizations (ATEOs). The guidance follows amendments made by section 70416 of the One, Big, Beautiful Bill Act and applies to taxable years beginning after December 31, 2025.

The Treasury Department and the IRS have announced plans to issue proposed regulations under Code Sec. 4960 expanding the definition of a covered employee for purposes of the excise tax on excessive compensation paid by applicable tax-exempt organizations (ATEOs). The guidance follows amendments made by section 70416 of the One, Big, Beautiful Bill Act and applies to taxable years beginning after December 31, 2025.

Before the legislative change, a covered employee generally was one of an ATEO’s five highest-compensated employees for the tax year at issue or an individual who previously held that status. The amended law broadens the definition to include any employee of an ATEO and certain former employees for taxable years beginning after 2025. However, individuals who were not covered employees under the pre-2026 rules will not become covered employees solely because they worked for an ATEO before 2026.

The forthcoming regulations are expected to eliminate references to the five highest-compensated employees standard and make conforming changes. The agencies intend to retain exceptions similar to the current limited-hours and non-exempt funds exceptions, but discontinue the limited-services exception because its rationale no longer applies. Until proposed regulations are issued, ATEOs may rely on Notice 2026-36. The Treasury Department and the IRS requested comments on the proposed rules by August 4, 2026.

Notice 2026-36

IR 2026-73

The IRS has issued the 2025 Data Book detailing the agency’s activities during fiscal year 2025. The report provided an overview of the agency’s operations to meet statutory responsibilities. The revenue collected by the Service exceeded $5.3 trillion.

The IRS has issued the 2025 Data Book detailing the agency’s activities during fiscal year 2025. The report provided an overview of the agency’s operations to meet statutory responsibilities. The revenue collected by the Service exceeded $5.3 trillion.

“Fiscal Year 2025 was a pivotal year, as we began the process of implementing tax relief for hardworking Americans enacted as part of the Working Families Tax Cuts Act (WFTC),” said IRS CEO Frank J. Bisignano. “The numbers in the Data Book tell the story of an organization that serves as a key partner in the administration’s mission,” he added. The CEO also highlighted efforts to transform the IRS into a digital-first agency. These efforts would reduce paper processing through the “zero paper” initiative.

During the 2026 filing season, around 45 percent of individual tax returns claimed one or more of the new tax benefits from the WFTC. The average refund on a return claiming one of these deductions was over $3,200, as of May 27.

Further, online tools, including the IRS Online Account were upgraded to expand access and add new features. Expanded technology and advanced analytics would allow the Service to identify high-risk areas of non-compliance and tax fraud. Finally, more information can be found here.

IR 2026-74

The IRS announced the release of a new calculator to determine interest rates for large, multi-year construction and manufacturing projects. The calculator is named Percentage-of-Completion Method (PCM) Look-Back Interest Calculator and is MS Excel based. It supports calculations for Form 8697, Interest Computation Under the Look-Back Method for Completed Long-Term Contracts. However, it does not address all fact patterns or complexities associated with look-back interest calculations.

The IRS announced the release of a new calculator to determine interest rates for large, multi-year construction and manufacturing projects. The calculator is named Percentage-of-Completion Method (PCM) Look-Back Interest Calculator and is MS Excel based. It supports calculations for Form 8697, Interest Computation Under the Look-Back Method for Completed Long-Term Contracts. However, it does not address all fact patterns or complexities associated with look-back interest calculations.

“The IRS is focused on improving and enhancing how we serve taxpayers,” said IRS Chief Executive Officer Frank J. Bisignano. “We are transforming the IRS into a digital-first agency that provides the best possible experience for taxpayers, and tools like this calculator are an important step in that effort,” he added.

The look-back interest is determined using a three-step process:

• Hypothetically reallocating income to prior tax year based on actual revenues and costs;
• Computing hypothetical tax overpayments or underpayments of tax; and
• Calculating interest on tax underpayments or overpayments.

Taxpayers and tax practitioners may submit feedback about the calculator, by emailing Stakeholder Liaison and including "Look-Back Interest Workbook Feedback" in the subject line. More information can be found here.

IR 2026-70

The 2025 cost-of-living adjustments (COLAs) that affect pension plan dollar limitations and other retirement-related provisions have been released by the IRS. In general, many of the pension plan limitations will change for 2025 because the increase in the cost-of-living index due to inflation met the statutory thresholds that trigger their adjustment. However, other limitations will remain unchanged.

The IRS reminded individual retirement arrangement (IRA) owners aged 70½ and older that they can make tax-free charitable donations of up to $105,000 in 2024 through qualified charitable distributions (QCDs), up from $100,000 in past years. 

The IRS reminded individual retirement arrangement (IRA) owners aged 70½ and older that they can make tax-free charitable donations of up to $105,000 in 2024 through qualified charitable distributions (QCDs), up from $100,000 in past years. For those aged 73 or older, QCDs also count toward the year's required minimum distribution (RMD). Following are the steps for reporting and documenting QCDs for 2024:

• IRA trustees issue Form 1099-R, Distributions from Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., in early 2025 documenting IRA distributions.
• Record the full amount of any IRA distribution on Line 4a of Form 1040, U.S. Individual Income Tax Return, or Form 1040-SR, U.S. Tax Return for Seniors.
• Enter "0" on Line 4b if the entire amount qualifies as a QCD, marking it accordingly.
• Obtain a written acknowledgment from the charity, confirming the contribution date, amount, and that no goods or services were received.

Additionally, to ensure QCDs for 2024 are processed by year-end, IRA owners should contact their trustee soon. Each eligible IRA owner can exclude up to $105,000 in QCDs from taxable income. Married couples, if both meet qualifications and have separate IRAs, can donate up to $210,000 combined. QCDs did not require itemizing deductions. New this year, the QCD limit was subject to annual adjustments based on inflation. For 2025, the limit rises to $108,000.

Further, for more details, see Publication 526, Charitable Contributions, and Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs).

IR-2024-289

For 2025, the Social Security wage cap will be $176,100, and social security and Supplemental Security Income (SSI) benefits will increase by 2.5 percent. These changes reflect cost-of-living adjustments to account for inflation.

For 2025, the Social Security wage cap will be $176,100, and social security and Supplemental Security Income (SSI) benefits will increase by 2.5 percent. These changes reflect cost-of-living adjustments to account for inflation.

Wage Cap for Social Security Tax

The Federal Insurance Contributions Act (FICA) tax on wages is 7.65 percent each for the employee and the employer. FICA tax has two components:

• a 6.2 percent social security tax, also known as old age, survivors, and disability insurance (OASDI); and
• a 1.45 percent Medicare tax, also known as hospital insurance (HI).

For self-employed workers, the Self-Employment tax is 15.3 percent, consisting of:

• a 12.4 percent OASDI tax; and
• a 2.9 percent HI tax.

OASDI tax applies only up to a wage base, which includes most wages and self-employment income up to the annual wage cap.

For 2025, the wage base is $176,100. Thus, OASDI tax applies only to the taxpayer’s first $176,100 in wages or net earnings from self-employment. Taxpayers do not pay any OASDI tax on earnings that exceed $176,100.

There is no wage cap for HI tax.

Maximum Social Security Tax for 2025

For workers who earn $176,100 or more in 2025:

• an employee will pay a total of $10,918.20 in social security tax ($176,100 x 6.2 percent);
• the employer will pay the same amount; and
• a self-employed worker will pay a total of $21,836.40 in social security tax ($176,100 x 12.4 percent).

Additional Medicare Tax

Higher-income workers may have to pay an Additional Medicare tax of 0.9 percent. This tax applies to wages and self-employment income that exceed:

• $250,000 for married taxpayers who file a joint return;
• $125,000 for married taxpayers who file separate returns; and
• $200,000 for other taxpayers.

The annual wage cap does not affect the Additional Medicare tax.

Benefit Increase for 2025

Finally, a cost-of-living adjustment (COLA) will increase social security and SSI benefits for 2025 by 2.5 percent. The COLA is intended to ensure that inflation does not erode the purchasing power of these benefits.