On July 4th, 2025, the One Big Beautiful Bill Act (OBBBA) was signed into law by President Trump. This bill introduces new provisions and also extends or makes permanent several of the provisions that were part of the Tax Cuts and Jobs Act of 2017 (TCJA). The TCJA was passed during President Trump’s first term and many of the provisions of that Act were scheduled to expire in 2025.
There are various tax changes resulting from the recent passing of the OBBBA. We wanted to highlight a few that we feel would be most likely to affect our clients.
Below is a summary of some of the key tax changes that may impact individuals and businesses.
Individual Tax Updates:
- No Tax on Tips: This provision is in effect from 2025-2028. Qualified workers may deduct up to $25,000 of tip income.
- No Tax on Overtime: Effective 2025-2028, up to $12,500 ($25,000 for joint filers) of overtime wages are deductible.
- Tax Rates Remain Unchanged: The OBBBA makes the seven standard tax rates permanent from the 2017 TCJA. (10%, 12%, 22%, 24%, 32%, 35%, and 37%)
- Standard Deduction: In 2017, the standard deductions were doubled. The Act makes those changes permanent and increases standard deductions to $15,750 for single filers and $31,500 for joint filers for 2025.
- Personal Exemptions: Makes the elimination of personal exemptions permanent.
- Mortgage Interest Deduction: The limit for mortgage interest deductions is permanently capped at $750,000 of mortgage debt. The limit previously was $1 million of debt.
- Child Tax Credit: The child tax credit will permanently increase to $2,200, up from $2,000 previously.
- Senior Tax Deduction: Those 65 and older will receive a bonus deduction of $6,000, $12,000 for married couples filing jointly. This phases out for single taxpayers whose income is $75,000 or more, or $150,000 or more for married taxpayers.
- State and Local Tax Deduction: This deduction increased to $40,000 through 2029. In 2030, the State and Local Tax deduction will revert to $10,000.
- Car Loan Interest Deduction: From 2025-2028, deduct up to $10,000 in interest on a loan for an automobile that is assembled in the USA. This phases out for single filers with a modified AGI over $100,000 and joint filers over $200,000.
- Trump Accounts: New, tax-advantaged savings accounts that may be opened for children under 18 years old. Can contribute up to $5,000 per account per year. For US citizens born between 2025-2028, the federal government will make a one-time $1,000 contribution per child.
- Green Energy Policies: Many of the clean energy tax incentives from the 2022 Inflation Reduction Act will be terminated. This includes terminating the residential clean energy tax credit as well as the energy efficient home credit.
- Estate and Gift Tax Exemptions: The lifetime gift and estate tax exemption permanently increased to $15 million per person, or $30 million for married couples. This will be indexed for inflation in the future.
- Charitable Contributions: For individuals who do not itemize, an above-the-line deduction of up to $1,000 for single filers or $2,000 for joint filers is allowed for charitable contributions.
Business Tax Updates:
- Bonus Depreciation: The Act reinstates and makes permanent the 100% first-year bonus depreciation for property that was acquired after January 19, 2025.
- Section 179 Increase: The maximum amount a taxpayer may expense is increased to $2.5 million under the Act, (increased from $1.25 million).
- Domestic Research and Experimental Expenditures: Restores businesses ability to deduct domestic research or experimental expenditures paid or incurred beginning in 2025. Businesses with less than $30 million in revenue may elect to apply this retroactively back to January 1, 2022.
- Qualified Business Income: The OBBBA makes the Section 199A deduction permanent.
- 1099 Reporting Threshold Increase: Starting in 2026, the threshold for reporting income on a Form 1099 will increase from $600 to $2,000.
- Opportunity Zones: The OBBBA permanently extends and makes modifications to the Opportunity Zone program, a program which offers tax incentives for investments made in qualified low-income communities.
The summarized list above is only an overview of a fraction of the changes implemented in the OBBBA. The full OBBBA text can be viewed online. We will continue to monitor legislative updates. Please don’t hesitate to contact us if you have any questions regarding these changes or how it may affect you or your business.