The One Big Beautiful Bill Act (OBBBA) is one of the most sweeping federal legislative packages in recent years and has major tax impacts—the tax portion alone is 355 pages! In this post, we’ll cover some of the most important tax provisions impacting individuals, estates, and businesses. The aim of this blog is to provide useful descriptions of key tax changes with some detail, but is not meant to cover everything. Before discussing the tax items, it is important to highlight the overall economic and political context of the OBBBA, as it provides a useful framework to understand the tax changes.
President Trump signed the OBBBA into law on July 4th, 2025. The bill was introduced as H.R. 1 and was passed by the House on May 22nd. Senate revisions were passed with a VP tie-breaker vote on July 1st and the House passed the Senate version two days later. “One Big Beautiful Bill Act” is not the official name, the short title was removed before final passage and the bill has a formal legislative heading: An Act to provide for reconciliation pursuant to title II of H. Cons. Rs. 14. This is standard phrasing for a budget reconciliation bill—which is important to note—as the TCJA (2017) and Inflation Reduction Act (IRA) of 2022 were also passed using the budget reconciliation process and directly relate to the OBBBA.
Key factors behind the OBBBA include addressing the “looming tax cliff” of TCJA tax provision sunsets at the end of 2025, a pushback on parts of the IRA passed under the Biden administration (which also had a Senate tie-breaker vote by VP Harris), and an intense political climate.
I am sure campaign promises made during the 2024 election season come to mind—“no tax on tips”, “no tax on overtime”, “no tax on social security”, “deductible car insurance for American-made cars” and more. As we shift to discussing the tax provision updates in OBBBA we will see how some of these campaign promises held up in the new bill. How the IRS will interpret and implement the law is another thing to look out for!
Before discussing the specific tax items, it is important to note that some changes are permanent and some are temporary. The text of the bill uses language like “Beginning after 2017…” to make various tax provisions permanent with no sunset clause. Also keep in mind that “permanent” items can change next election cycle!
We will begin with individuals and estates and then discuss business tax changes. I will highlight if the tax provision is made permanent or temporary, note any phase-downs and limits, and give an effective date where applicable.
Individual Tax Items
Individual Income Tax Rates & Brackets – Permanent
The OBBBA makes permanent the TCJA individual tax rates (10% – 37%). These rates were set to revert to pre-TCJA rates (39.6% top rate) at the end of 2025. The bracket amounts continue to be inflation-adjusted using a consumer price index.
Increased Standard Deduction – Permanent
Before the TCJA of 2017 about 30% of taxpayers itemized deductions. With the TCJA’s large increase to the standard deduction, less than 10% of taxpayers itemized thereafter. The OBBBA makes permanent the larger TCJA standard deduction and increases it. The amount continues to be inflation-adjusted using a consumer price index. The 2025 amounts by filing status are: $31,500 MFJ, $15,750 single, $23,625 HoH. Additional senior (age 65+) amount of $1,600 (for 2025) continues unchanged.
Child Tax Credit Increased – Permanent
Under current law (TCJA) the credit amount was increased to $2,000 through 2025. The OBBBA permanently increases the credit to $2,200 for tax year 2025 and after. The credit phases out $50 for each $1,000 (or fraction thereof) of MAGI above $400k MFJ and $200k others—fully phased out at $440k MFJ and $240k others. The $500 other dependent credit (from TCJA) is made permanent with no inflation adjustment.
SALT Deduction Increased – Temporary (2025 – 2029)
The SALT deduction cap of $10k from the TCJA was a hotly discussed tax item—with taxpayers from high income tax states (California, New York) unhappy. Many individuals with ownership in pass-through entities began using a workaround to the cap, the Pass-Through Entity Tax (PTET) deduction.
The OBBBA increases the SALT cap to $40,000 for both MFJ and single taxpayers (an example of the “marriage penalty”—but also helping single filers—think single professionals in New York City for example). This is a temporary change, for tax years 2025 – 2029. The increased cap is phased out (down to the prior $10k amount) for MAGI from $500k to $600k—note both the cap and phaseout ranges increase 1% a year beginning in 2026.
New “Senior” Deduction – Temporary (2025 – 2028)
How did the “no tax on Social Security” campaign promise come through? Social Security benefits remain taxable under the OBBBA. Instead, a new “senior” deduction is introduced—relating to the person’s age only—as a relief for elderly Americans on fixed incomes. Taxpayers age 65 and older receive a new $6k deduction for tax years 2025 – 2028. The deduction is “above-the-line” as an adjustment to reach a taxpayer’s AGI. There is a phase-out for high-income earners: MAGI $150k – $250k for MFJ, $75k – $175k others. With the increased standard deduction (including additional amounts) a couple below the threshold could potentially deduct up to $46,700.
Tip Income Deduction – Temporary (2025 – 2028)
No tax on tips? The OBBBA does not exclude tip income from tax but rather provides a temporary non-itemized deduction of up to $25,000 for qualified tip income for tax years 2025 – 2028. Note this deduction is for federal income tax and not for state or payroll taxes. Only certain professions (e.g. hospitality) will qualify—and the Treasury is required to publish a list within 90 days of the OBBBA enactment date. There is a phase-out threshold for MAGI of $300k MFJ and $150k others. It remains to be seen how this tip deduction amount will be identified and coded on the W-2 (possibly box 12 or 14) and how this will impact the payroll process.
Overtime Pay Deduction – Temporary (2025 – 2028)
Like the tip income deduction, the OBBBA does not exclude overtime pay from tax but provides a temporary non-itemized deduction. The deduction is up to $25,000 for MFJ ($12.5k others) for qualified overtime pay for 2025 – 2028. Qualified overtime pay does not include qualified tip income—and it appears the deduction amount relates only to the “half” portion of “time and a half”. Like tips, the deduction is only for federal income tax, phases out at the same thresholds ($300k MFJ, $150k others), and will require changes to W-2 reporting to identify the amount.
Car Loan Interest Deduction – Temporary (2025 – 2028)
Another item discussed on the campaign trail was a new concept for tax—deductible auto loan interest. Interest on personal car loans historically is treated as nondeductible personal interest. The OBBBA introduces a new non-itemized deduction of up to $10,000 of interest a year on loans for purchases of new vehicles after 2024. A few requirements: vehicle must be less than 14,000 lbs. GVW and must undergo “final assembly” in the U.S. (look for VIN that start with 1, 4, or 5). The vehicle must serve as first lien security for the loan and the lender can’t be related. There is a phase-out by $200 for each $1,000 (or portion thereof) of MAGI exceeding $200k MFJ, $100k others.
Trump Accounts – treated like traditional IRAs
Several last-minute changes and adjustments made it into the finalized bill. In 18 pages of new complex tax law, the OBBBA introduces “Trump Accounts” (the name “MAGA Accounts” did not make the final bill). These are new tax-advantaged savings accounts starting in 2026 for any U.S. citizen under age 18 by the end of the year. The account is treated similarly to a traditional IRA: account earnings are tax-deferred, qualified withdrawals are tax-preferred, and earnings on nonqualified distributions taxed as ordinary income plus a 10% penalty.
Additionally, the government will contribute $1,000 one-time to such accounts for citizen-children born in tax years 2025 – 2028. Families may add nondeductible contributions to the account of $5,000 annually (indexed after 2027) with no AGI limitations before the child attains the age of 18. No contributions to the new Trump Accounts are permitted before July 4th, 2026.
In addition to the individual tax provisions mentioned above, there are many others, a few brief highlights to wrap up:
Individual/Estate/Trust AMT exemption amount was increased, broadened phase-out range, and inflation index were introduced under TCJA. OBBBA makes the higher amounts permanent for tax years beginning after 2025. An interesting note—the exemption phase-out thresholds revert to 2018 levels, unwinding seven years of inflation increases. Exemption amounts: $109,400 MFJ, $70,300 single, $24,600 estate/trust. AMTI exemption phaseout ranges are $1,000,000 – $1,218,800 MFJ, $500,000 – $640,600 single and the exemption phase-out percentage increases to 50% from 25% once the threshold is crossed, steepening the claw back of upper-income filers.
Itemized Deductions, Charity – OBBBA makes permanent the TCJA repeal of most miscellaneous itemized deductions. Charitable deductions are revised—the new law allows a $2,000 MFJ, ($1,000 others) charitable deduction for non-itemizers for tax years beginning after 2025. This deduction does not apply to donations to a donor advised fund (DAF). The 60% of AGI limitation for cash contributions is also made permanent. For itemizers, charitable contributions are deductible only to the extent they exceed a new 0.5% floor of the taxpayer’s “contribution base” which generally equals AGI.
The personal exemption is permanently eliminated for tax years beginning after 2025. Interest on home mortgage debt is permanently limited to the TCJA $750k value amounts—deduction of mortgage insurance premiums are reinstated after 2025. Personal casualty losses and moving expense deductions are permanently disallowed, with narrow exceptions (government declared disasters for losses, and active-duty military for moving expenses). Wagering losses are now limited to 90%–can never exceed winnings—beginning after 2025.
Estate, GST, and Gift Tax Exemptions – Permanent
Remember that the TCJA doubled the estate, GST, and gift tax lifetime exclusion amounts through 2025—this was a provision set to expire at the end of 2025 and cut in half. The OBBBA permanently increases the estate, GST, and gift tax exemptions to $15,000,000 ($30 million for spouses) for 2026, indexed for inflation thereafter.
Business Tax Items
To finish this post, let’s go through some of the business tax provisions. As discussed in the beginning of this blog, the overall political and economic context of the OBBBA is important here. With the results of the 2024 election resulting in a GOP controlled House, Senate, and White House—the OBBBA pushes back against the major “green” clean energy priorities of Biden’s Inflation Reduction Act. Republicans thought the IRA went too far in favoring clean energy industries with desirable tax credits and incentives in the solar, wind, electric vehicles, and “green energy” space.
The OBBBA repeals many of these credits and will have a major impact on the clean energy industries, taxpayers who plan to claim these credits, and for billions of dollars of potential investment.
Electric Vehicles – The $7,500 (new) and $4,000 (used) EV tax credit terminates for vehicles acquired after 9/30/2025. Taxpayers wanting to claim the credit have two months left from the date this blog was written to acquire a qualifying EV.
Energy Efficient Home Improvements – The 30% energy efficient home improvement credit terminates for property placed-in-service after 12/31/2025. The typical expenditures for this credit are upgrades to existing homes like insulation, windows, doors, skylights, HVAC, furnace, etc.
Similarly, the 30% residential clean energy credit terminates for expenditures made after 12/31/2025. Think of solar panels, renewable energy systems, battery storage, wind turbines, geothermal heat pumps, etc.
Energy Efficient Commercial Buildings Deduction – The repeal of energy credits and tax incentives also hits the commercial side. The special deduction based on the cost of energy efficient commercial building property under Sec 179D terminates for property that begins construction after 6/30/2026.
Energy Efficient Home Credit – Current law permits the home builder/developer to claim a tax credit under Sec 45L for Energy Star Certified or Zero Energy Ready Homes ranging from $2,500 to $5,000 per home or $500 to $1,000 per multifamily units. The OBBBA terminates these credits for homes acquired after 6/30/2026.
Now for business tax provisions other than the repeal of clean energy tax incentives:
QBI Deduction – The OBBBA makes permanent the 20% Qualified Business Income (QBI) deduction after 2025.
Bonus Depreciation – Permanent
Under the TCJA, bonus depreciation has been phasing down over the past few years (40% for 2025, 20% for 2026, and zero for 2027). The OBBBA permanently allows 100% bonus depreciation for the cost of qualified property acquired after 1/19/2025. There is a special transitional election that allows taxpayers to use the 40% bonus amount for the first tax year ending after 1/19/2025.
The OBBBA also creates a new category eligible for 100% bonus depreciation: qualified production property. This is generally domestic nonresidential real property used in manufacturing. Construction must begin after 1/19/2025 and before 1/1/2029 with the property being placed in service before 1/1/2031.
Semi-conductor Manufacturing – To further boost domestic manufacturing of semiconductors, the OBBBA also increases the Sec 48D qualified investment tax credit percentage from 25% to 35% for property placed-in-service after 2025. This applies to the construction/purchase of a new facility for which the primary purpose is to manufacture semi-conductors or related manufacturing equipment.
Section 179 Expensing – OBBBA increases the Sec 179 expense amount to $2,500,000 of qualifying property with the phase-out threshold increased to $4,000,000. This is for property placed-in-service (not acquisition date) for tax years beginning after 2024.
R&D Expensing, Sec 174 – Permanent
The TCJA made major (and unpopular) changes to Sec 174 research and development expensing. Under the TCJA, domestic research and development (R&D) expenses had to be capitalized and amortized over 5 years (15 years for foreign R&D). With the passage of the OBBBA, domestic R&D expenses are immediately deductible for tax years beginning after 2024—which is great news to a lot of businesses and start-ups.
A few other OBBBA changes: Foreign R&D must still be amortized over 15 years. Software development costs are deductible if developed domestically. Mid-year convention is no longer required for domestic costs.
There is an election available for small businesses (average gross receipts $31 million or less) to claim full R&D expensing retroactively back to the 2022 tax year through amended tax returns. The small business election must be made by July 4th, 2026.
Opportunity Zones – Revised & Restarted – Permanent
Opportunity Zones (OZ) created by TCJA allowed tax deferral of reinvested capital gains through 12/31/2026. Beginning in 2027, the OBBBA establishes a permanent OZ policy, creating a rolling 10-year OZ designation.
The OBBBA did not add any new zones—it in fact freezes creation of new OZ tracts—only existing zones remain eligible. Under the OBBBA the capital gain deferral period differs on if the OZ investment is held for at least 5 years or 10 years. If held for at least 5 years, the basis is increased by 10% of the deferred gain. If held for at least 10 years and sold before 30 years, the basis is stepped up to the sales price—so there is no taxable gain.
Form 1099 Reporting Thresholds
Current law uses a $600 threshold for 1099-NEC, 1099-MISC. The OBBBA increases this to $2,000 effective for payments after 2025. This increased threshold is indexed for inflation after 2026. The Form 1099-K (Third-Party Network) payment threshold of $2,500 was set to revert to $600 starting in 2026. The OBBBA provides new 1099-K filing requirements: when the participating payee exceeds $20,000 for the year AND the aggregate number of such transactions exceeds 200. The effective date of the 1099-K specific change is retroactive to 2022.
Conclusion and Tax Planning Ideas
There is a lot to consider with the new legislation. This blog post is not meant to be exhaustive, and there are many other provisions and details in the OBBBA. To conclude, here are a few tax planning ideas to help clients navigate the impacts of the new bill.
Small businesses should analyze whether to apply the new R&D expensing law retroactively to 2022 by filing amended tax returns by 7/4/2026. For fixed assets, businesses should analyze whether to elect 40% bonus for the first tax year ending after 1/19/2025 or use 100%.
For taxpayers in pass-through entities, to avoid itemized SALT cap limitations and phase-outs (even though it is increased) consider use of the PTET payments as discussed above.
Purchase EVs by 9/30/2025. Install home energy efficient property by 12/31/2025.
Alert your clients of the new increased thresholds for 1099-MISC, 1099-NEC effective for 2026.
I hope this summary of tax provision changes under the OBBBA has been beneficial. Please reach out to me or other members of our firm, Teuscher Walpole, with questions about the OBBBA. Our office number is 801-619-1400 and I can be reached by email at [email protected].
About the Author: Dan Beaudoin
Dan joined Teuscher Walpole in July 2023, bringing with him a strong background in tax preparation and compliance for both individuals and businesses. With prior experience at firms like KPMG and Squire & Company, he’s worked across a range of industries including real estate, construction, and technology. Dan holds a Master’s in Taxation from Weber State and a Bachelor's in Accounting from the University of Utah. He’s passionate about helping clients navigate complex tax situations with clarity and confidence.