The One Big Beautiful Bill Act (OBBBA), passed in July 2025, delivers lasting clarity for traders and small business owners by locking in and expanding many tax reforms from the 2017 Tax Cuts and Jobs Act (TCJA). OBBBA makes permanent or extends favorable provisions that benefit traders eligible for trader tax status (TTS) and Section 475 mark-to-market (MTM) accounting.

Unless otherwise noted, all tax law changes and provisions discussed below are effective beginning in 2025.

TTS Rules and Section 475 MTM Unchanged

TTS qualifications and Section 475(f) election rules remain intact. The final OBBBA does not reference or alter Section 475(f), meaning the existing Section 475 mark‑to‑market election for traders remains unchanged under current law. In legislative drafting, if no changes are enacted, existing provisions continue to apply.

TTS traders benefit from the tax treatment of business expenses. (See Trader Tax Status: How To Qualify.) With a timely filed Section 475 election, TTS traders receive ordinary loss treatment, which avoids the $3,000 capital loss limitation and exempts them from wash sale loss adjustments on securities. Profitable TTS traders can treat Section 475 ordinary income as qualified business income (QBI), making it eligible for the 20% QBI deduction. TTS is claimed by assessment; no formal election is required. However, an election is necessary for Section 475 MTM accounting. Investors are not eligible for Section 475—only TTS traders can use it.

Section 475 election deadlines for 2025:

• Individuals – April 15, 2025

• Pass-through entities – March 15, 2025

If a deadline falls on a weekend or federal holiday, it is extended to the next business day, by IRS rules.

If you missed the 2025 deadline, consider applying for 2026 instead. Attach the 475 election to the prior year’s tax filing, either the full tax return or extension. A 2025 Form 3115 must be filed with the 2025 tax return in 2026 as the second step of the election process. New entities can elect Section 475 within 75 days of formation, and this internal election does not require Form 3115.

Excess Business Losses Now Permanent

The excess business loss limitation (EBL) under Section 461(l) is now permanent. For 2025, thresholds are $313,000 (single) and $626,000 (married), indexed for inflation. EBL affects TTS traders who deduct business expenses on Schedule C, elect and use Section 475 ordinary losses for trading, or receive pass-through ordinary losses. Excess business losses convert into net operating loss (NOL) carryforwards, which can offset income of any kind. This permanence rejects earlier proposals that sought to limit such offsets.

Net Operating Loss (NOL) Rules Remain Unchanged

NOL rules remain unchanged under OBBBA. TCJA NOLs continue to carry forward indefinitely and are capped at 80% of taxable income. No carrybacks are allowed after 2017, except under the CARES Act, which enables NOLs arising in 2018, 2019, or 2020 to be carried back up to five years. TTS traders using Section 475 have ordinary losses and business expenses that comprise NOLs.

Qualified Business Income (QBI) Deduction Made Permanent

The 20% QBI deduction under Section 199A is now permanent under OBBBA. QBI applies to TTS traders with Section 475 ordinary income, with pass-through entities or sole proprietorships. QBI excludes capital gains, interest, dividends, and foreign exchange transactions.

For 2025, the TCJA income threshold is $394,600 (married) and $197,300 (single), which is indexed for inflation. There is also a non-indexed phase-in, phase-out range of $100,000 (married) and $50,000 (single), subject to wages and property limitations. For 2026, the income threshold will be indexed for inflation. Additionally, OBBBA increases the 2026 phase-in, phase-out range to $150,000 (married) and $75,000 (single), which will be indexed for inflation from 2026. Beginning in 2026, OBBBA also introduces a minimum QBI deduction of $400 (indexed for inflation) for taxpayers with at least $1,000 of qualified business income.

For TTS traders, an S-Corp can utilize the phase-in, phase-out because it is subject to a wage limitation. Only TTS S-Corps pay wages to their owners, whereas partnerships and sole proprietor Schedule Cs cannot pay salaries to their owners.

Bonus Depreciation Fully Restored

100% bonus depreciation is permanently reinstated for qualifying assets placed in service after January 19, 2025. Eligible property includes most new or used tangible business assets with a recovery period of 20 years or less, such as computers, office equipment, furniture, and off-the-shelf software. These assets must be used predominantly for business purposes. Real estate and intangible assets, such as goodwill, are excluded.

For traders, this provision may apply to technology infrastructure used in trading businesses, including multiple monitors, trading computers, and certain types of licensed software.

Section 174A – Internal-Use Software Expensing

Domestic research and experimental (R&E) expenses are fully deductible in the year incurred, including costs for internal-use software. Foreign-developed software must be amortized over a 15-year period.

TTS traders building custom automated trading systems (ATS) benefit, but off-the-shelf ATS without significant customization by the trader may not. TTS requires trader involvement in the trades and self-creation of the ATS system; otherwise, the trader is classified as an investor, and TCJA denies investment expense itemized deductions.

Section 179 Expensing Expanded

The Section 179 limit increases to $2.5 million, with a $4 million phaseout, both indexed. It applies to business equipment and off-the-shelf software, but it cannot generate a loss.

Bonus Depreciation vs. Section 179

• Bonus depreciation: No cap, can create a loss.

• Section 179: Capped and limited to income.

Tip: Use bonus depreciation for large or loss-generating purchases.

SALT Cap Raised

The state and local tax (SALT) itemized deduction cap is increased to $40,000 for 2025 (up from $10,000), with a phaseout for high-income taxpayers. The cap rises to $40,400 in 2026 and then increases by approximately 1% annually through 2029, returning to $10,000 in 2030.

There is a phaseout of the increased SALT cap benefit for modified AGI above $500,000 (or $250,000 for MFS), adjusted upward annually. The cap is reduced by 30% of the excess income above that threshold:
Phaseout amount = 0.30 × (MAGI – $500,000)
For example, on a 2025 joint return with MAGI over $600,000, you will get the minimum $10,000 deduction.

The SALT deduction includes:

• State and local income taxes

• Real estate taxes on personal and certain investment property

• Personal property taxes based on value (e.g., vehicle registration fees in some states)

Taxpayers may elect to deduct state and local sales taxes instead of income taxes, but not both. Foreign income taxes may also be deducted instead of claiming a foreign tax credit. The SALT deduction does not include federal taxes, Social Security or Medicare taxes, fines, or state business taxes like B&O tax or PTET, though PTET can be deducted at the entity level.

PTET Deduction Preserved

There is an IRS-sanctioned workaround to avoid the SALT cap, and OBBBA continues to allow its use. OBBBA preserves the full pass-through entity tax (PTET) deduction for pass-through business entities, including specified service trades or businesses (SSTBs), such as trading firms eligible for TTS.

PTET payments for state and local income taxes are deducted at the entity level as business expenses, with state tax credits flowing through to owners, reducing both regular tax and AMT income.

TTS traders using S-Corps or partnerships in states such as New York, California, New Jersey, and Connecticut can continue leveraging PTET elections to bypass the federal SALT cap. Thirty-seven states offer SALT cap workaround opportunities.

AMT Rules Preserved, SALT Still Disallowed

OBBBA permanently locks in the TCJA-era AMT exemption amounts, indexed for inflation. However, it does not change the disallowance of the SALT deduction for AMT purposes.

Even with the higher $40,000 SALT deduction under regular tax, SALT remains a preference item disallowed when calculating AMTI. This means high-income taxpayers subject to AMT may not benefit from the increased SALT cap unless their AMT exposure is otherwise reduced.

Using a SALT cap workaround in a pass-through entity, you can deduct state and local taxes as PTET rather than as a SALT itemized deduction that’s not deductible for AMT.

Wash Sale (WS) Rules & Crypto

No changes to WS rules on securities. Crypto remains exempt from wash sale rules under Section 1091, as it is not treated as a security for tax purposes.

Carried Interest Rules Unchanged

Carried interest retains its current long-term capital gain treatment, provided a three-year holding period is met.

Broker Reporting & Crypto

No changes to Form 1099-B. IRS Form 1099-DA for crypto remains set for 2026 implementation.

Senior Deduction and Retirement Highlights

New senior bonus deduction: $6,000 (single ) / $12,000 (married) through 2028, phased out starting at $75,000 / $150,000, not indexed for inflation.

Retirement plan rules remain unchanged. 

Other Notable OBBBA Tax Changes

• Standard deduction increase: Now approximately $15,750 (single) / $31,500 (married), indexed annually

• Child tax credit: Increased to $2,200 per qualifying child

• Trump Account: New birth-based custodial savings accounts with tax-deferred growth; annual contribution cap of $5,000 per child, indexed from 2027

• QSBS exclusion: Increased from $10 million to $15 million

• Auto loan interest deduction: Up to $10,000 on loans for U.S.-assembled vehicles; phased out over $100,000 / $200,000 AGI

• Estate tax exemption: TCJA-level exemption of $13.6 million per individual extended through 2033; indexed to $15 million starting in 2026

Summary of Key OBBBA Tax Provisions

Provision	Effective Date	Expiration / Sunset	Notes
Section 475 MTM	2025	None	Remains unchanged; not mentioned in OBBBA
Excess Business Loss Limitation	2025	None	Made permanent; indexed for inflation
QBI Deduction	2025	None	Made permanent; phaseout thresholds indexed from 2026
Bonus Depreciation	Jan 19, 2025	None	Fully reinstated for qualifying assets
Section 179 Expensing	2025	None	Limit increased and indexed
SALT Cap	2025	2029 (reverts 2030)	Increased to $40,000; indexed; phaseouts for high income
PTET Deduction	2025	None	Preserved under OBBBA
Senior Deduction	2025	2028	$6,000 / $12,000; phaseout not indexed

Conclusion

OBBBA solidifies trader-friendly provisions, including trader tax status and Section 475 MTM, QBI deductions, bonus depreciation, EBL treatment, a higher SALT cap, and PTET SALT cap workarounds, as well as pass-through entity strategies. These reforms enhance tax certainty and planning for active traders.

Take Action: Plan Your 2025 Tax Strategy Today.

Don’t wait until the last minute to take advantage of the trader-friendly reforms in OBBBA. Whether you need help with Section 475 elections, TTS qualification, entity formation planning, or SALT workaround strategies, GreenTraderTax is here to guide you.

📅 Schedule a consultation
🧾 Download Green’s 2025 Trader Tax Guide
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Visit GreenTraderTax.com or call 888-558-5257 to get started.

Sources: Senate OBBBA text; IRS QBI FAQ; RSM US analysis; Forbes (Kelly Phillips Erb, July 4 & 5, 2025); Gibson Dunn summary; Yeo & Yeo analysis; KBKG commentary.

Author: Robert A. Green, CPA
GreenTraderTax.com

Darren Neuschwander, CPA, contributed to this blog post.