"One Big Beautiful Bill Act"

The “OBBBA” makes several important changes to federal taxes for individuals and businesses. Most provisions start for the 2025 tax year and many permanently extend or modify rules from the 2017 Tax Cuts and Jobs Act.​

Individual tax rates and deductions

• The lower individual tax rate structure from the 2017 Tax Cuts and Jobs Act (TCJA) is made permanent, keeping seven brackets with a top rate of 37% instead of reverting to higher pre-TCJA rates.​

• The larger standard deduction is made permanent and further increased starting in 2025 (for example, around $15,750 for most single filers, $23,625 for heads of household, and $31,500 for married filing jointly in 2025, with future inflation adjustments).​

SALT, itemized deductions, and credits

• The state and local tax (SALT) deduction cap is temporarily raised from $10,000 to roughly $40,000 for 2025–2029, with small annual increases, before reverting back to $10,000 in 2030 and later years.  Itemizing required.  Phases out for taxpayers with modified adjusted gross income (MAGI) over $500,000.

• The prior overall cap on itemized deductions (the Pease limitation) remains repealed, but a new rule effectively limits the tax benefit of itemized deductions to about a 35% rate for high‑income taxpayers.​

• Several green energy tax credits, including the clean vehicle credit and some home energy credits, are scheduled to phase out or end after 2025.​

One, Big, Beautiful Bill Act: Tax Deductions

·       “No tax on Tips” – maximum annual deduction is $25,000.  Must be in an occupation that customarily and regularly receives tips.  Available whether itemizing or not.

·       “No Tax on Overtime” – maximum annual deduction is $12,500 ($25,000 for joint filers). Deduction phases out based on income threshold. $150,000 ($300,000 for joint filers).  Deduction is based on compensation that is in excess of the regular rate you are paid.  In other words, it’s available for the “half” portion of “time-and-a-half” pay.

·       “No Tax on Car Loan Interest” – maximum annual deduction is $10,000.  Must be a    qualified vehicle – new, not a lease, final assembly in the United States and purchased for personal use. 

·       Deduction for “Seniors” 65+ – additional deduction of $6,000 for individuals age 65 and older.  Available to both itemizing and non-itemizing taxpayers.  A married couple where both spouses’ quality will get a $12,000 additional deduction.  Phases out based on income greater than $75K single/$150K joint.

·       The Child Tax Credit is increased modestly from $2,000 to about $2,200 per qualifying child. $1,700 of which is available as refundable credit if applicable.

·       Charitable deduction for non-itemizers of $1,000 for single filers and $2,000 for joint filers.  (Begins in 2026).

·       Mortgage Insurance Premiums – Deduct mortgage insurance premiums as mortgage interest (Begins in 2026).

Business tax provisions

• The 20% qualified business income (QBI) deduction for many pass‑through businesses (section 199A) is made permanent, with revised income thresholds and mechanics for phasing down the deduction at higher income levels.​

• Bonus depreciation: 100% expensing (bonus depreciation) for qualified property is restored for property placed in service after Jan. 19, 2025

• Section 179 expensing: The maximum amount a business may expense for qualifying expenses is increased to $2.5 million, with the phaseout threshold raised to $4 million, both indexed for inflation after 2025.

• R & E expenditures: Immediate deduction of domestic research or experimental expenses paid or incurred in 2025 is allowed.  R & E conducted outside the United States will continue to be capitalized and amortized over 15 years.

• Renewed opportunity zones: Opportunity zone provisions are made permanent.

• Clean energy & IRS credits: Energy efficient building, clean energy, and clean/electric vehicle credits are set to expire in 2025 with some provisions extending into 2026.