Submitted by Anthony Brunson, P.A. Certified Public Accountant & Business Advisor
The One Big Beautiful Bill Act became law on July 4, 2025. The new law, which is generally regarded as pro-business, contains significant tax changes for businesses and individual taxpayers alike. Here is a summary of some of the important highlights of the OBBBA.
Keep in mind that as with all major legislation, the devil is in the details. Consult your tax professional for the advice that will best fit your circumstances.
Provisions affecting individuals:
- The OBBBA added one year of inflation adjustment for determining the actual dollar amounts for tax brackets.
- The standard deduction enacted by the TCJA was made permanent and increased to $15,750 for single filers or $31,500 for married taxpayers filing jointly. These amounts will be indexed for inflation after 2025.
- The so-called Pease limitation, which essentially reduced deductions for high net worth individuals, has been repealed.
And there’s more:
The state and local tax deduction cap was raised to $40,000 for 2025. It will increase to $40,400 in 2026 and by an additional 1% through 2029. However, unless a future Congress takes action, the cap will revert to $10,000 in 2030. Other key changes:
- The OBBBA creates a charitable contribution deduction of up to $1,000 for single filers or $2,000 for married taxpayers filing jointly who do not itemize. Taxpayers who itemize are subject to a different rule: The amount of an individual’s charitable contributions for a tax year will be reduced by 0.5% of the taxpayer’s contribution base for that year up to a maximum of 10% of taxable income. Higher alternative minimum tax exemptions and phase-out thresholds were added.
- Certain unreimbursed employee expenses for eligible educators are deductible.
- The moving expense deduction is permanently eliminated, with an exception for members of the armed forces and certain members of the intelligence community.
- The TCJA’s provision limiting the itemized deduction for personal casualty losses to losses resulting from federally declared disasters became permanent. However, the OBBBA expands this deduction to include certain state-declared disasters.
- A car loan deduction was created for taxpayers who buy an American-made car between 2025 and 2028. These taxpayers will be able to write off up to $10,000 of interest paid on their auto loan. The deduction will be phased out for taxpayers with modified adjusted gross income in excess of $100,000 or $200,000 for married taxpayers filing jointly.
- However, taxpayers who buy electric vehicles will lose the $7,500 EV tax credit at the end of September 2025. In addition, individual clean energy credits will be terminated for EV-charging equipment placed in service after June 30, 2026. Also, qualified bicycle commuting reimbursements were removed from the list of qualified transportation fringe and other commuting benefits, making them taxable.
- Mortgage interest deduction. The OBBBA also (1) makes permanent the IRC Sec. 163 qualified residence home mortgage debt interest deduction limitation to the first $750,000 or $375,000 for married couples filing separately, (2) permanently excludes interest on home-equity indebtedness from the definition of qualified residence interest, and (3) treats certain mortgage insurance premiums on acquisition indebtedness as qualified residence interest.
- Earnings from gambling. The OBBBA changes how gambling winnings and losses are taxed. Under the new law, the deduction is capped at 90% of losses.
- Tip income and overtime pay. The OBBBA provides temporary above-the-line deductions for:
- Tip income.Up to $25,000 for qualified tips received by an individual in an occupation that customarily and regularly receives tips. The deduction begins to phase out when the taxpayer’s MAGI exceeds $150,000 or $300,000 for a joint return. This deduction is available for tax years 2025 through 2028, and it will expire on Dec. 31, 2028, unless it is extended by Congress.
- Overtime pay.Up to $12,500 or $25,000 for married taxpayers filing a joint return for qualified overtime compensation received by an individual during a given tax year. The deduction begins to phase out when the taxpayer’s MAGI exceeds $150,000 or $300,000 for a joint return. This temporary deduction will be available for tax years 2025 through 2028.
- Student loan debt.Student loan debt discharged because of death or disability is permanently excludible from gross income.
- Social Security.The tax on Social Security income was not eliminated by the OBBBA. However, seniors aged 65 or older with an adjusted gross income of up to $75,000 or $150,000 for married couples filing jointly are eligible for a $6,000 tax deduction or $12,000 for married couples filing jointly. The deduction phases out for people who earn above those amounts. This deduction, which will expire at the end of 2028 unless it is extended by Congress, applies to all of a senior’s income.
Provisions affecting businesses
- IRC Sec. 199A qualified business income deduction.The OBBBA makes the Section 199A 20% qualified business income deduction permanent. In addition, the limitation phase-in window is increased to $75,000 for single filers or $150,000 for married taxpayers filing jointly.
- Capital expenditures and investments. The OBBBA permanently reinstates 100% expensing of qualified assets in the year they were put into service for property acquired beginning Jan. 20, 2025.
- Form 1099 reporting. The OBBBA increases the information-reporting threshold for certain payments to persons engaged in a trade or business and payments of remuneration for services to $2,000 in a calendar year. This amount will be indexed for inflation in calendar years after 2026.
- New markets tax credit. The OBBBA makes the new markets tax credit permanent.
- Research and development. The OBBBA permanently allows domestic research costs to be immediately expensed unless such expenditures are attributable to research conducted outside the United States, in which case the business will be required to capitalize and amortize the expenses over 15 years.
- Foreign tax credits:
- Increases deemed paid credits under IRC Sec. 960 to 90%.
- Renames global intangible low-tax income as net CFC tested income deduction and permanently decreases it to 40%.
- Renames foreign derived intangible income to “foreign-derived deduction eligible income” and permanently decreases it to 33.34%.
- Base erosion and anti-abuse tax.The OBBBA permanently changes the BEAT rate to 10.5%.
- Clean energy tax credits and incentives.The OBBBA limits/eliminates many clean energy tax credits and incentives, including:
- The phaseout of primarily wind, solar and EV clean energy tax incentives created or modified by the Inflation Reduction Act is accelerated.
- Ends the (1) energy-efficient home credit for deductions for qualified property acquired after June 30, 2026, and (2) deduction for energy-efficient commercial buildings for property that begins construction after June 30, 2026.
Estate and gift tax exemption
The OBBBA permanently increases the estate tax exemption and lifetime gift tax exemption amounts to $15 million for single filers or $30 million for married taxpayers filing jointly in 2026. The amount will be indexed for inflation in subsequent years.
In addition, the OBBBA aligned the generation-skipping transfer tax exemption with the estate tax exemption. It also retained the TCJA’s tax brackets for trusts and estates.
This article touches on only some major features in the OBBBA. The law contains many other tax provisions, some affecting narrow constituencies. Also details are still being sorted out, so don’t make any decisions based just on this article — or any other. Work closely with tax and legal professionals to make sure that you are following the correct provisions — and that they are relevant to your situation.