The One Big Beautiful Bill Act (OBBBA) was officially passed into law on July 4, 2025. The bill provides sweeping income tax ramifications for many taxpayers.
Most of the tax provisions that serve as current law enacted in the Tax Cuts and Jobs Act of 2017 (TCJA) which were set to expire at the end of 2025 have been made permanent. Examples include:
- Qualified business income deduction
- Elimination of personal exemptions
- Expanded standard deduction amounts (indexed for inflation)
- Current tax brackets
- Increased estate tax exemption, indexed annually for inflation (2026 will be $15M/person)
- 100% bonus depreciation for business property placed into service after 1/19/2025
- Retention of the pass-through entity tax (PTET) for businesses
Here is a summary of the biggest tax law changes resulting from the OBBBA:
- Beginning in 2026 – charitable contribution deduction of $1,000 ($2,000 for MFJ) permitted for taxpayers that do not itemize.
- Deduction up to $25,000 for qualified tips (industries where tips are customarily) received. Will begin to phase out when AGI reaches $150,000 ($300,000 MFJ). Available years 2025 – 2028.
- Deduction for overtime pay up to $12,500 per taxpayer for tax years 2025 – 2028.
- Deduction up to $10,000 on new car loans opened during tax years 2025-2028. Phased out for taxpayers with modified adjusted gross income of $100,000 ($200,000 MFJ). Vehicle must have had final assembly in the US.
- For taxpayers 65 or older – $6,000 deduction for tax years 2025 – 2028. Phased out for higher income taxpayers.
- Certain qualifying children born between 2024 – 2029 will receive a $1,000 one-time payment into a tax-favored account at birth (*Note action required to obtain this).
- State and local tax deduction cap increased to $40,000 for 2025 and increased 1% per year thereafter until 2030 when the cap reverts to $10,000. Cap is reduced for higher income taxpayers, but deduction will not be reduced below $10,000.
- 1099 reporting threshold increased to $2,000 from the current $600.
- Full expensing for domestic research and experimental costs for businesses
Please contact us to learn how these changes will impact your unique tax situation.
