Utah legislators are working to understand how the state will be affected by President Trump’s One Big Beautiful Bill(HR1), which was passed in July of this year.
While HR1 addresses the federal tax code, Utah ties much of its tax law to federal definitions and calculations. This means that as federal items are adjusted and revised, those changes flow down into Utah’s tax system and may affect state revenues. Legislators are now working with their staff and the Utah State Tax Commission to determine which provisions will impact the state and whether they could lead to revenue changes.
Many provisions of HR1 still require clarification from the federal government before Utah can decide how to proceed. However, some areas are beginning to take shape, and their impacts on Utah are becoming clearer.
Here is a list of expected changes to Utah from HR1 and their estimated costs for FY2026:
- Increased Standard Deduction: $59.4 million
- State and Local Tax Deduction: $4.7 million
- Restoration of Business Equipment Bonus Depreciation: $95.4 million
- Full Expensing of Domestic Research and Experimental Expenditures: $101.5 million
- Modification of Business Interest Limitation: $13.7 million
- Increased Dollar Limitations for Expensing Certain Depreciable Business Assets: $7 million
- Special Depreciation Allowance for Qualified Production Property: $32 million
- Temporary Deduction of Tip Earnings: $22.7 million (potential)
- Temporary Deduction of Overtime Earnings: $81.7 million (potential)
- Temporary Deduction of Car Loan Interest: $9.1 million (potential)
- Deduction of Charitable Contributions: $36.2 million (potential)
The last four items are noted as potential because the state is still waiting for clarification from the federal government. Specifically, it is unclear whether these items will be calculated “above the line,” which adjusts total income to determine adjusted gross income, or “below the line,” which involves adjustments to AGI to calculate federal taxable income.
These will be key issues to watch during the 2026 legislative session. Utah’s response to HR1 will play a significant role in determining how much benefit Utahns see from the President’s major legislation for 2025. We expect that many of these provisions will provide direct benefits to taxpayers. The critical question, as always, will be: Can Utah afford to allow it to happen? We would argue that Utah cannot afford not to ensure these federal tax changes positively impact the state’s residents and businesses.