September 17, 2025

The One Big Beautiful Bill Act (OBBBA): What You Need to Know

On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was signed into law, bringing some of the biggest tax law changes in years. This sweeping legislation impacts individual taxpayers, small business owners, and international companies. Some provisions are permanent, while others are temporary, and they may dramatically affect your tax planning for 2025 and beyond.

Here’s a clear breakdown of what you need to know.

Key Tax Changes for Individuals

2017 Tax Cuts Made Permanent
The lower tax brackets and higher standard deduction are here to stay. For 2025, the standard deduction is $15,750 (single) and $31,500 (married filing jointly). The top rate remains 37%.
New Senior Deduction
Seniors age 65+ can claim an extra $6,000 deduction through 2028.
Child Tax Credit Increased
Permanently raised to $2,200 per child, with annual inflation adjustments.
Estate & Gift Tax Relief
Exemption doubled to about $14 million in 2025, rising to $15 million in 2026.
Alternative Minimum Tax (AMT)
Higher exemption thresholds made permanent, with updated rules starting in 2026.

💡 Planning tip: These provisions create new opportunities for retirement planning, estate planning, and family tax strategies.

Temporary Individual Tax Deductions (2025–2028)

Deduct up to $25,000 of qualified tips per year.
Deduct up to $12,500 ($25,000 joint) of overtime pay.
Deduct up to $10,000 in interest on loans for new U.S.-assembled passenger vehicles.
SALT cap raised: up to $40,000 ($20,000 MFS) from 2025–2029, before dropping back to $10,000.

These short-term breaks make 2025–2028 a key window for maximizing deductions.

Other Important Individual Tax Updates

Miscellaneous itemized deductions remain suspended (except expanded educator expenses).
New above-the-line charitable deduction of $1,000 ($2,000 joint).
Mortgage interest cap remains $750,000; mortgage insurance premiums now deductible as interest.
Casualty losses limited to federally or state-declared disasters.
Expanded child & dependent care tax benefits.

Business Tax Breaks for 2025 and Beyond

100% Bonus Depreciation: Permanent.
Section 179 Expensing: Increased to $2.5 million with higher phaseout.
R&D Expensing: Immediate domestic expensing restored permanently.
Temporary Real Estate Deduction: 100% write-off for certain nonresidential property used in production (2025–2028).
Interest Limitation: EBITDA-based rule restored permanently.
Pass-Through Deduction (Section 199A): Permanent, with at least a $400 minimum deduction for active business income.

💡 Planning tip: These changes give small business owners and entrepreneurs powerful tools to reduce taxable income. Strategic timing of purchases and investments is more important than ever.

International Tax Provisions

GILTI replaced with new “net CFC tested income” regime.
FDII deduction reduced, with narrower eligibility.
Foreign tax credit expanded but with new restrictions.
Look-through rule for related CFCs made permanent.

Credits and Other Provisions

Many green energy credits scaled back, but clean fuel production credit extended through 2029.
Family & medical leave credit, low-income housing credit, and new markets credit made permanent.
“Trump Accounts” for children under 18 introduced: $5,000 annual contribution limit, plus a $1,000 government-funded deposit for newborns (2025–2028).
New 1% excise tax on certain cash remittances abroad.
Federal debt ceiling raised by $5 trillion.

Economic Outlook

Middle-income households expected to see the largest after-tax income boost.
Law projected to stimulate long-run growth, but also increase the federal deficit by $3 trillion over the next decade.
IRS and Treasury face implementation challenges, and many states will need to adjust their tax codes accordingly.

Permanent vs. Temporary Provisions

Permanent: TCJA extensions, bonus depreciation, Section 179, R&D expensing, 199A deduction, international changes.
Temporary: Deductions for tips, overtime, car loan interest, senior deduction, higher SALT cap.

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