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H.R.1, more commonly known as the One Big Beautiful Bill (OBBB) Act, was signed into law on July 4, 2025, and introduces sweeping tax reforms. While its provisions span healthcare, energy and immigration, the bill’s tax changes can create opportunities for financial institutions.

From enhanced reporting obligations to new tax incentives and compliance burdens, the bill alters the regulatory landscape for community banks and lenders. Let’s explore the essential specifics.

H.R.1’s regulatory reporting impact on financial institutions

The OBBB changes or affects regulatory reporting for financial institutions in several ways. Here are five major changes or factors you should be aware of:

1. Section 70203: auto loan interest exclusion

In certain situations, car buyers can now deduct auto loan interest from their taxes. Financial institutions issuing qualifying auto loans (passenger vehicles with final assembly in the U.S.) must now comply with new reporting requirements:

• Lenders must report interest payments exceeding $600 annually on Form 1099, provided to the IRS and customers. Guidance will be needed to clarify which Form 1099 to use.
• Information reports must include borrower details, loan origination date, vehicle make, model, year, VIN and outstanding loan principal at the start of the year.
• Financial institutions should review, or potentially add to, the documentation they are keeping in their loan files to comply with the new reporting requirements.
• Customers may be able to deduct $10,000 of personal auto loan interest on individual tax returns. Refinanced loans qualify for the exclusion, while used vehicles do not.
• Applies to auto loans originated after December 31, 2024. The exclusion applies for tax years beginning after December 31, 2024, and before January 1, 2029 (tax years 2025-2028).

2. Section 70433: increased 1099 reporting threshold

H.R.1 raises the 1099 reporting threshold, effective January 1, 2026. Key details include:

• The threshold for information reporting, including forms 1099-NEC and 1099-MISC, increases from $600 to $2,000, indexed for inflation beginning in 2027.
• The higher threshold reduces the number of filings; however, institutions must update vendor and contractor payment systems to reflect this change.

3. Overtime reporting on W-2s

• Individuals will be able to deduct up to $12,500 ($25,000 MFJ) of overtime wages on their personal tax returns. Therefore, overtime reporting rules for W-2s have also changed: Employers must separately report the spread between overtime wages and regular wages for overtime hours on Form W-2.
• Employers will not change how overtime is taxed regarding income and payroll taxes. Employees will receive a deduction on individual tax returns.
• Businesses should work with their payroll providers to update payroll systems to track and report qualified overtime compensation. Misreporting could lead to IRS penalties and/or employee disputes.
• Applies to tax years beginning after December 31, 2024, and ending before January 1, 2029 (tax years 2025-2028).

4. Mortgage interest deduction

The mortgage interest deduction introduced in the 2017 Tax Cuts and Jobs Act (TCJA) was set to expire. Instead, H.R.1 made it permanent.

• The bill preserves the TCJA cap on mortgage interest deductions at $750,000 of acquisition debt.
• Lenders must ensure accurate year-end reporting on Form 1098, especially with the restored mortgage insurance deduction.
• The TCJA mortgage interest deduction cap was originally set to expire after December 31, 2025, but will now remain in effect going forward until repealed.

5. Section 70432: 1099-K de minimis rule reinstatement

H.R.1 changes reporting requirements around the de minimis rule:

• The de minimis threshold for Form 1099-K reporting by third-party settlement organizations is restored to $20,000 in gross payments and 200 transactions per year, reversing the 2021 amendment that lowered the threshold to $600 with no transaction minimum.
• The lower volume of 1099-K filings will reduce administrative burden but may require system updates to track cumulative thresholds accurately.
• This change is retroactive to the 2022 tax year.

H.R.1's income tax filing implications for financial institutions

The OBBB also affects tax filing. Here are seven key updates financial institutions should know:

1. Section 70435: rural and agricultural loan interest exclusion (Section 139K)

This is a new provision that H.R.1 adds to tax law. Under the rural and agricultural loan interest exclusion:

• 25% of interest income on new qualified loans secured by rural or agricultural real property is excluded from federal taxable income for loans made after July 4, 2025.
• Qualified lenders include FDIC-insured banks and savings associates, insurance companies and U.S.-based subsidiaries of bank or insurance holding companies.
• Qualified loans must be secured by real estate that is rural or agricultural in nature, originated after July 4, 2025, issued by a qualified lender and issued to a U.S. customer.
• Currently, refinanced loans are not eligible for exclusion.
• Rural and agricultural loans are more profitable with the new tax exclusion. Institutions must track qualifying loans to ensure compliance and adjust interest income reporting accordingly.
• For more information on this new provision read here: How to maximize the OBBB interest exclusion for rural loans.

2. Depreciation enhancements

Depreciation rules have now changed, including:

• Section 179 expensing limit increased to $2.5 million, with a phaseout starting at $4 million.
• 100% bonus depreciation is reinstated and made permanent.
• Businesses may accelerate capital purchases to take advantage of fully expensing cost, leading to higher demand for commercial loans, equipment financing, and leasing products.
• Financial institutions should seek to take advantage of the favorable federal tax depreciation rules going forward.
• Section 179 takes effect on January 1, 2025, and is indexed for inflation starting in 2026. 100% bonus applies to qualified property placed in service after January 19, 2025.

3. Charitable contributions (Sections 70424–70426)

The rules around charitable contributions have been adjusted for both individuals and businesses:

• Above-the-line deduction for non-itemizers: $1,000 (individuals), $2,000 (joint filers).
• 0.5% AGI floor for individuals who itemize.
• 1% taxable income floor for corporations on charitable deductions with a 5-year carryforward for unused deductions above the 10% federal taxable income cap.
• The individual and corporate floors mean that taxpayers can only deduct charitable contributions that exceed the respective floors. Financial institutions should evaluate their current charitable giving plans.
• Applies to tax years beginning after December 31, 2025.

4. Section 70603: excessive employee remuneration (Section 162M)

H.R.1 modifies existing rules around compensation for certain employees at publicly traded companies:

• Expands the $1 million deduction limit on executive compensation for public companies, mandating that all companies within a controlled group are aggregated for purposes of applying the $1 million limit.
• Restructuring compensation packages and executive compensation planning will be necessary to manage the tax impact.
• Applies to tax years beginning after December 31, 2025.

5. SALT cap increase and PTET laws

Individuals and businesses will both be affected by changes to state and local tax (SALT) and pass-through entity tax (PTET) rules:

• The SALT deduction cap for individual taxpayers temporarily increases to $40,000, with phaseouts starting at $500,000 AGI. Full phaseout at $600,000 AGI for single or married filing joint taxpayers, where the cap reverts back to $10,000. The cap will increase by 1% annually through tax year 2029.
• The bill does not prohibit or restrict state-level PTET tax laws, preserving federal deductibility for many businesses. However, certain states have PTET law expiration dates that lined up with the previous December 31, 2025, SALT cap expiration. Legislative action will be required to extend the laws in these states. CA has already extended its PTET law through 2030, for example.
• State by state, PTE laws should be reviewed to determine if they remain in effect. Pass-through entities must evaluate whether their PTE elections remain beneficial for their shareholders under the new federal SALT cap.
• Effective for tax years beginning after December 31, 2024, and ending before January 1, 2030 (tax years 2025-2029). The SALT cap reverts to $10,000 in tax year 2030.

6. Estate and gift tax exemption threshold

The estate and gift tax exemption threshold has been raised:

• The exemption permanently increases to $15 million per individual (from $13.99 million) or $30 million for married filing jointly.
• Clients and shareholders will seek trust planning, wealth transfer strategies, and fiduciary reporting.
• Effective on January 1, 2026, and indexed for inflation.

7. Qualified business income (QBI) deduction

The QBI deduction is now permanent:

• The QBI deduction (Section 199A) is permanently extended, allowing for a 20% deduction for qualified business income from pass-through entities.
• S corporation versus C corporation was a popular topic over the last few years. Financial institutions should work with their tax advisors to understand the best entity type for them going forward.
• QBI deduction was in effect through December 31, 2025, and will remain in effect going forward until repealed.

Next steps

H.R.1 introduces both opportunities and obligations for financial institutions. While some provisions offer tax relief and planning certainty, others impose new compliance burdens and reporting complexities. Institutions should:

• Update systems for new forms and thresholds.
• Train staff in revised reporting and filing requirements.
• Consult tax advisors to navigate strategic tax planning under the new law.

How Wipfli can help

We help financial institutions navigate change, mitigate risk and improve performance. Work with us to strengthen your tax strategy and your business in our fast-changing economic climate. Learn more here or visit our policy center for further insights into tax law.

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