Understanding the One Big Beautiful Bill Act: What It Means for You

On July 4th, 2025, President Trump signed the One Big Beautiful Bill Act (“OBBBA”) into law. This sweeping legislation reshapes U.S. tax law, providing households and businesses with a mix of certainty, changes, and new opportunities. Many provisions from the 2017 Tax Cuts and Jobs Act (TCJA) that were set to expire are now permanent, while new deductions and limits add planning considerations for years ahead.

Key Permanent Provisions

Lower tax brackets remain in place:

Note: The 10% and 12% brackets will receive an extra inflation adjustment in 2026.

Standard Deduction: The new rates for 2025 (will be indexed for inflation in future years).

Other permanent provisions:

• Personal exemptions: The deduction for personal exemptions was initially eliminated as part of the TCJA in 2017 – this deduction is now permanently eliminated.
• Child tax credit: The original temporary increases to the child tax credit, refundable portion of the credit, and income phase out ranges are now solidified. The child tax credit will increase to $2,200 for each qualifying child beginning in 2025.
• Mortgage interest deduction: The limit on qualifying mortgage debt for the mortgage interest deduction will remain at $750,000 ($375,000 for MFS). Mortgage insurance premiums will be eligible for a deduction beginning in 2026.
• Estate and gift tax exemption: The federal estate and gift tax exemption will increase to $15 million ($30 million for married couples) in 2026 and will adjust annually for inflation.
• Alternative minimum tax (AMT): The AMT exemption remains at $88,100 for single filers and head of household / $137,000 for married filing jointly.
• Itemized deduction limit: The “Pease limitation”, which was an overall limit on itemized deductions suspended from 2018-2025, has been replaced with a percentage reduction that applies to taxpayers in the 37% bracket beginning in 2026. The reduction essentially caps the value of each dollar of itemized deductions at $0.35.
• Qualified business income deduction (Section 199A): The new legislation makes the deduction permanent (20% of QBI). Phase-in thresholds have been increased, and a new minimum deduction of $400 is available for certain individuals with at least $1,000 in qualified business income (QBI). 

Existing Provisions with Material Changes

State and Local Tax (SALT) deduction

Starting in 2025, the SALT cap increases from $10,000 to $40,000. The cap will increase by 1% from 2026-2029 and reverts back to $10,000 in 2030.

• The cap phases down for those with modified adjusted gross income over $500K ($250K for MFS). However, the cap will not reduce below $10K ($5K for MFS).

Clean Energy Credit Phase-Out

While not a new benefit, it’s important to note the reverse – many clean-energy tax incentives are being eliminated or phased out early:

Gambling losses

Effective 2026, the deduction for gambling losses will be limited to 90% of total losses (up to total gains). Previously, individuals could deduct up to 100% of losses against winnings.

Bonus Depreciation

For qualifying property, the new law permanently establishes a 100% additional first-year depreciation deduction for businesses for property acquired after January 19, 2025.

Additionally, for property placed in service in 2025, the limit for expensing under IRC Section 179 has increased from $1 million to $2.5 million (indexed for inflation). The phase-out threshold for this increases to $4 million (indexed for inflation).

AGI Floor on Charitable Deductions

Beginning in 2026, 0.5% of AGI will be subtracted from charitable contributions. Contributions must exceed the floor to be deductible.

New Tax Provisions

Below are new tax deductions that are temporary for the tax years 2025-2028.

• Standard Deduction Boost for Seniors: Taxpayers 65 or older now receive an additional $6,000 deduction per individual ($12,000 for married filing jointly). This is layered on top of the existing senior deduction ($2,000 for single filers and $1,600 for each eligible married filer), with a phase-out starting at $75,000 (individual) or $150,000 (joint). 
• Tip Income Deduction: For individuals who receive qualified cash tips working in occupations that “traditionally and customarily” receive tips as of December 31,2024, may now deduct up to $25,000 in reported tip income. The deduction begins to phase out at $150,000 of MAGI for single filers and $300,000 for joint filers.

• Overtime Deduction: Individuals can now deduct up to $12,500 ($25,000 for married filing jointly) in qualified overtime compensation. The deduction phases out for individuals with a modified adjusted income over $150,000 ($300,000 for MFJ). This deduction is reduced by $100 per $1,000 of income above the threshold.

• Auto loan interest deduction: Individuals who purchase qualifying new vehicles that are assembled in the U.S. for personal use can deduct up to $10,000 of interest on their auto loan. The deduction phases out for income starting at $100,000 for single filers and $200,000 for joint filers.

Other new tax provisions:

• Charitable deduction for non-itemizers: Beginning in 2026, individuals who do not itemize their deductions can now deduct up to $1,000 ($2,000 for joint filers) in cash only donations to public charities.
• Investment accounts for children “Trump accounts”: Effective January 1, 2026, a new tax-deferred account for children under 18 will be created. The federal government will contribute $1,000 per child into accounts for eligible children who are born between 2025 and 2028. Parents, relatives, and employers can make after-tax contributions up to $5,000 in aggregate annually (indexed for inflation). There are restrictions and guidelines that determine how and when the funds can be used for the child’s benefit.

Final Thoughts

Tax law changes can often feel overwhelming—but you don’t have to navigate them alone. Whether you’re a retiree, a parent, a business owner, or someone just trying to maximize your refund, understanding how these updates apply to your specific situation can make all the difference.

If you have questions about how the One Big Beautiful Bill may impact your tax situation—or want help planning around these changes—please reach out. Working with your tax professional is important and we are available to assist in tax planning opportunities.