OBBBA: One Big Beautiful Bill Act

While fireworks were lighting up the sky this 4th of July, lawmakers were busy making history with the passage of the One Big Beautiful Bill Act (OBBBA) — a sweeping piece of legislation that reshapes the federal tax landscape for individuals and businesses alike. Signed into law on July 4, 2025, it cements some previous tax reforms, introduces new deductions and credits, and changes both personal and corporate tax structures.

Here are important takeaways you should know.

Personal Tax Changes

Permanent 2017 Tax Cuts and Jobs Act (TCJA) Provisions
The OBBBA makes permanent several TCJA benefits, including lower tax rates for most income levels, expanded income brackets, and an increased standard deduction — nearly double the pre-2017 amount. It also locks in the expanded child tax credit from $1,000 to $2,000 per child with a refundable portion of $1,400.

Standard Deduction Increase
The bill further boosts the standard deduction, making it less necessary for taxpayers to itemize, simplifying the filing process.

Child Tax Credit Expansion
Families will see an additional $200 added to the child tax credit, raising it to $2,200 per child.

Senior Bonus Deduction
For taxpayers 65 and older (regardless of whether they have filed for social security benefits) with a Modified Adjusted Gross Income (MAGI) of $75,000 or less ($150,000 for married couples filing jointly), an extra $6,000 deduction is available on top of the standard deduction. This provision helps offset taxes on Social Security benefits for many middle-income retirees running through the 2028 tax year, when it is set to expire.

Mortgage Interest Deduction
The $750,000 principal limit for the home mortgage interest deduction is now permanent.

Estate & Gift Taxes
Beginning in 2026, the lifetime estate and gift tax exemption will increase to $15 million for single filers and $30 million for married couples, indexed for inflation.

SALT Deduction Cap
For 2025, the cap on the state and local tax (SALT) deduction increases to $40,000, with a 1% annual increase through 2029, with the limit reverting to $10,000 in 2030. This phases out for taxpayers with incomes above $500,000, after which the cap returns to $10,000.

New Rules & Limits on Charitable Deductions (Effective 2026):
The OBBBA significantly reshapes charitable giving incentives. Starting in 2026, taxpayers who don’t itemize can claim an above-the-line deduction—up to $1,000 for individuals and $2,000 for joint filers—allowing many to receive tax benefits even without itemizing. However, itemizers now face stricter rules: charitable contributions must exceed 0.5% of AGI before becoming deductible, and for those in the highest tax bracket (37%), the deduction’s value is capped at 35% of that amount. At the same time, corporations must exceed a 1% AGI (or taxable income) threshold before any donation qualifies. These changes provide incentives for everyday donors while reducing benefits for high-income individuals and businesses.

Overtime & Tip Income Deduction
A new temporary deduction allows up to $25,000/year of qualified tip income to be deducted federally ($12,500 if single), plus a separate above-the-line deduction of up to $12,500 for overtime pay ($25,000 for joint filers). It’s important to note that the deduction applies to the “premium” portion of overtime pay only.  In other words, employees may now deduct on their taxes the “half” portion of the “one and one-half times” compensation due to them under the FLSA; they may not deduct the entire (regular rate) wage amount for overtime hours worked on which the additional half-time premium pay is calculated.

Trump Accounts for Child Savings
Children born between 2025–2028 will receive a one-time $1,000 deposit from the federal government into a special investment account. Parents can contribute up to $5,000/year and employers up to $2,500/year, with tax deferral on any growth. Withdrawals after age 18 are taxed at long-term capital gains rates. Under the law, no Trump account contributions can be accepted until 12 months after enactment of the OBBBA. Therefore, the earliest the date contributions can be made is July 4, 2026.

Other Social & Economic Provisions

Medicaid Work Requirements
Adults ages 19–64 applying for Medicaid must work at least 80 hours per month unless they meet exemption criteria. Parents are only exempt if they have children under the age 14. The Congressional Budget Office estimates up to 7.8 million could lose coverage by 2034.

Corporate Tax Changes

Lower Corporate Tax Rate
A significant reduction in the corporate tax rate aims to encourage investment, growth, and competitiveness.

PTET Deduction Fully Preserved Under OBBBA
The final version of the One Big Beautiful Bill Act does not limit federal deductions for Pass-Through Entity Taxes (PTETs). This means partnerships, S corporations, and other pass-through entities can continue using PTET regimes to bypass the SALT deduction cap through 2029 — a key win for business owners in high-tax states.

QBI Deduction Strengthened—Permanently
The OBBBA makes the valuable 20% Qualified Business Income deduction permanent and widens the income phase-out ranges—up to $75,000 for single filers and $150,000 for married joint filers—while also introducing a guaranteed minimum deduction of $400 for active businesses with at least $1,000 in qualified income.

Bonus Depreciation Restored
100% bonus depreciation is permanently reinstated for qualified property placed in service after January 19, 2025.

Business Interest Expense Deduction
Limit restored to 30% of EBITDA, offering more flexibility for capital-intensive businesses.

Bottom Line
The One Big Beautiful Bill blends tax relief, savings incentives, and business-friendly reforms with targeted limitations and new requirements. For individuals, the changes could mean more take-home pay, increased deductions, and expanded opportunities for savings. For businesses, lower corporate rates and repatriation incentives may create new growth opportunities — but also require careful planning.

As with all tax matters, consult with your tax professional to understand how these changes apply to your specific situation.

ART Tracking #: 786797-01-02