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One Big Beautiful Bill Act (OBBBA) - A Must Read

One Big Beautiful Bill Act signed into law on July 4, 2025

Below are listed some of the key provisions of the One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025.  Our list is not all inclusive, but highlights the provisions that will impact most of our clients.

 INDIVIDUAL PROVISIONS:

The OBBBA extends many of the individual tax cuts and reforms of the Tax Cuts Jobs Act (TCJA) of 2017:

  • Permanently extends the rates and brackets for individuals, with annual adjustment for inflation as well as a one-time additional inflation adjustment for 10%, 12%, and 22% brackets.
  • Permanently extends the larger standard deduction, with annual adjustments for inflation.  The 2025 amounts are $15,750 for single and married filing separately; $23,625 for head of household; and $31,500 for joint filers and surviving spouses.  These amounts are before considering the age 65+ and/or blind adjustment, which is $2,000 for single and head of household and $1,600 each for married filing jointly or separately.
  • Permanently eliminates personal exemptions.
  • Permanently keeps the limitation on some itemized deductions such as mortgage interest (only interest on acquisition debt up to $750,000 is deductible for any mortgage obtained after December 15, 2017; acquisition debt secured prior to December 16, 2017 continues to be capped at $1 million), personal casualty losses (in 2025, this deduction is only allowed for qualified federally declared disaster losses.  Beginning in 2026, this deduction is only allowed for federally declared disaster and certain state-declared disaster losses), certain moving expenses (since 2018, only certain US Armed Forces active-duty members have been eligible for this deduction; beginning in 2026, certain intelligence community members will also be eligible; otherwise this deduction is permanently repealed), as well as the termination of the 2% miscellaneous itemized deductions.
  • Increases the State and Local tax deduction (SALT) cap from $10K to $40K for tax years 2025 – 2029 (adjusted by 1% annually) for modified adjusted gross income (MAGI) under $500K ($250K for married filing separately).  Beginning in 2030, the deduction reverts to $10K permanently. 
  • Permanently extends the alternative minimum tax (AMT) exemption as well as the AMT phaseout thresholds, with a reset to 2018 values in 2026, with annual adjustments for inflation.  

New Perks:

  • Up to a $25,000 deduction against qualified tip income for certain occupations effective for 2025 through 2028, subject to limitations.  Read more here.
  • Up to a $12,500 deduction, $25,000 for joint filers, against qualified overtime pay effective for 2025 through 2028, subject to limitations.  Read more here.
  • Up to $10,000 is deductible from adjusted gross income (AGI) for car loan interest paid for the purchase of a qualified vehicle effective for 2025 through 2028, subject to limitations.  Read more here. 
  • New $6,000 deduction for tax years 2025-2028, in addition to the standard deductions, for individuals who are 65 or older, subject to limitations.  This deduction begins phasing out once modified adjusted gross income (MAGI) exceeds $75,000 for singles and heads of household, and $150,000 for marrieds filing jointly; the deduction completely phases out once MAGI reaches $175,000 for single and heads of household and $250,000 for married filing jointly.  Note that if you are married filing separately, you are not eligible for this new $6,000 deduction.
  • Beginning in 2025, boosts the child tax credit by $200, to $2,200 per qualifying child under age 17, and makes the enhanced credit permanent, with annual adjustments for inflation.  Up to $1,700 of this credit is refundable.  The $500 Other Dependent Credit is made permanent, without inflation adjustments.
  • Beginning in 2025, up to $5,000 of the calculated adoption credit is refundable, subject to limitations.  Previously, this credit was non-refundable.  Additionally, the credit will be adjusted for inflation after 2025.
  • Expands the types of educational expenses that can be paid from section 529 plans (qualified tuition plans) beginning July 5, 2025.  Beginning in 2026, the total limit for all K-12 expenses will increase to $20K from the current $10K.
  • Beginning in 2026, a permanent $1,000 above-the-line deduction for charitable contributions ($2,000 for married filing joint) for non-itemizers is created.  This deduction only applies to cash donations made to public charities.
  • Beginning in 2026, mortgage insurance premiums will be treated as mortgage interest.
  • Introduces “Trump Accounts,” beginning in 2026, which are new savings accounts for children that allow parents and others to contribute up to a combined $5,000 yearly for the child to use after turning 18 years old.  A $1,000 government-provided baby bonus will be deposited for children born after 12/31/2024 and before 1/1/2029.  The accounts grow tax-deferred until the account owner makes a withdrawal (only after reaching age 18) at which point, essentially, the individual retirement accounts (IRA) rules are followed.  Read more here.

New Limitations:

  • Effective 9/30/2025, the new and used electric vehicle credits are terminated.
  • Effective 12/31/2025, the energy efficient home improvement credit and residential clean energy credit are terminated.
  • Beginning in 2026 creates a .5% floor on itemized deductions for charitable contributions.  Only contributions more than .5% of AGI will be deductible, and then may be further limited by the Pease limitation, which is discussed next.
  • Beginning in 2026, the phase out of allowable itemized deductions is back.  This limitation, also known as the Pease limitation, was temporarily suspended under the TCJA.  Itemized deductions will be reduced by 2/37ths of the lesser of 1) total itemized deductions; or 2) the amount by which taxable income plus all itemized deductions exceeds the 37% bracket threshold.  This limitation will be applied after any other limitations on itemized deductions.  The effect of this provision is to reduce allowable itemized deductions for individuals in the top marginal tax bracket.  
  • Beginning in 2026, health insurance premium tax credits will be reduced and eligibility rules tightened, unless Congress intervenes.
  • Beginning in 2026, the combined federal estate, gift, and GST tax exemption is set at $15 million per individual, with annual adjustments for inflation beginning in 2027.  State levels may be different.


Estate and Gift Taxes:

  • Beginning in 2026, the combined federal estate, gift, and GST tax exemption is set at $15 million per individual, with annual adjustments for inflation beginning in 2027.  State levels may be different.


BUSINESS PROVISIONS:

  •  Beginning in 2025, employers will need to report tip and overtime income on employee W-2 forms, so that an employee is able to secure a deduction on his/her personal tax return. Guidance should be forthcoming.
  •  Beginning in 2025, Form 1099-K reporting is only required when gross payments reach $20,000 and there are more than 200 transactions with a particular vendor.
  • Beginning in 2026, Forms 1099-MISC/NEC are required when payments reach $2,000 to a particular vendor. For 2025, the reporting threshold remains at $600. Beginning in 2027, the reporting threshold will be adjusted for inflation.
  •  Beginning in 2025, the maximum section 179 expense is $2.5M, with a phaseout beginning at $4M of property placed in service. The deduction is also limited to net business income. These limits will be adjusted annually for inflation.
  • Beginning in 2025, permanently restores immediate expensing for domestic research and development (R&D), subject to limitations.
  • Permanently restores 100% bonus depreciation for qualified assets purchased after 1/19/2025. Assets purchased from 1/1/2025 – 1/19/2025 are subject to a 40% bonus depreciation rate.
  • Temporarily provides 100% expensing of qualifying structures associated with tangible production of goods in the US, subject to limitations. Applies to property whose construction begins after 1/19/2025 and before 1/1/2029, and placed in service after 7/4/2025 and before 1/1/2031.
  • Effective in 2026, makes the 20% qualified business income (QBI) deduction permanent with a $400 minimum deduction for taxpayers with $1,000 or more of active qualified business income. Additionally, the taxable income phase-out limitations are also increased. The minimum deduction is indexed for inflation beginning in 2027. For 2025, the current QBI rules are in place.