The One Big Beautiful Bill Act ("OBBBA") is a comprehensive piece of legislation that aims to reform various aspects of the tax code. This bill has been designed to simplify the tax filing process, provide relief to individuals and businesses, and encourage investments in sustainable practices.
While the bill covers a wide range of topics, we're going to focus exclusively on the tax legislation portions. Understanding these key aspects can help you navigate the changes and make informed decisions about your financial strategy.
We strive to provide the most up-to-date information available. However, this article is not meant to cover every detail or provision of the OBBBA. We strongly recommend consulting a qualified tax strategist to understand how this legislation may affect your specific tax situation.
Contents |
| Summary of Key Tax Provisions |
| Details of Each Tax Provision |
| How to Maximize Your Tax Savings |
| The Bottom Line |
Below is a summary of the bill's key tax provisions. Be sure to review the details to understand how they may affect your situation.
| Provision |
Quick Summary |
| Impacts To Business Owners | |
| Bonus Depreciation | 100% depreciation on most fixed assets and property improvements. |
| Research & Development Costs | Immediate expensing of costs instead of amortizing. Retroactive write off for 2022 through 2024 costs being amortized. |
| Qualified Small Business Stock | Reduced capital gains for early investors in C-Corps starting at a 3-year holding period instead of 5-year. |
| Charitable Deductions | C-Corps can't deduct charitable contributions on the first 1% of their taxable income. |
| Pass Through Investment Deduction | No change to the 20% deduction. Modified calculation to include more taxpayers. |
| Impacts To Those With Kids | |
| Child Tax Credit | Credit increased to $2,200 per qualifying child. |
| "Trump" Child Savings Accounts | Children born from 2025 through 2028 will get $1,000 deposited into their account courtesy of Uncle Sam. An additional $5,000 per year can also be contributed. |
| Impacts To Those 65 or Older | |
| Senior Bonus Deduction | Regardless if you take the standard deduction or itemize, those 65 or older can claim an additional $6k in deductions. |
| Impacts To Those That Itemize |
|
| Charitable Deductions | Individuals that itemize can't deduct charitable contributions on the first 0.50% of their adjusted gross income. |
| State & Local Income Tax Deduction | State, local and property tax deduction cap raised from $10,000 to $40,000 (limits apply after $500,000 of MAGI). |
| Impacts To All Individual Taxpayers | |
| Standard Deduction | Increase to the standard deduction for 2025 and forward. |
| Charitable Deductions | Individuals that don't itemize can deduct $1,000 ($2,000 for married filing jointly) in charitable contributions. |
| No Tax on Tips | Deduction for up to $25,000 on tip income. |
| No Tax on Overtime | Deduction for up to $12,500 in overtime pay. |
| Car Loan Interest Deduction | Deduct up to $10,000 in car loan interest paid. |
| Estate Tax Limitations | Sunsetting provisions removed for 2026 and exemption reset at $15,000,000 per individual for 2026 forward. |
| Provisions Going Away | |
| Vehicle & Energy Tax Savings | Vehicle tax credits, energy efficient tax credits, etc. will be going away. Dates vary based on the credit. |
There are a few tax breaks going away, but for the most part the legislation is providing plenty of additional ways for both individual and business taxpayers to save. Let's walk through each one.
Impacts to most fixed assets
Starting January 20th, 2025, most assets will once again qualify for 100% bonus depreciation. This is major for business owners, allowing them to fully deduct things like furniture, fixtures, equipment, machinery, vehicles, heavy construction equipment, airplanes and more.
Impacts to real estate investors
For real estate investors owning rental properties (commercial, industrial, residential, apartments, etc.), bonus depreciation will once again allow you to maximize write offs to you and your investors (material participation rules apply). You can take this on new properties or major improvements to existing properties that have been placed in service on January 20th, 2025 or after. To qualify for this treatment you generally must perform a cost segregation study.
Prior to the new law, research & development ("R&D") costs had to be expensed (amortized) over a period of time. This negatively impacted certain taxpayers where performing an R&D tax credit study didn't make sense.
Now, under the new law:
While some businesses will benefit from taking an immediate expense deduction, it's important to note that if you have a highly profitable business, it might make more sense to claim R&D tax credits instead.
The bill expands the qualified small business stock provisions under IRC Sec. 1202. Under the qualified small business stock exemption, investors in small businesses structured as a C-Corp for tax purposes are able to exclude certain amounts of gain when they sell their shares in the future. The new provisions are:
The 20% qualified business income deduction under IRC. Sec. 199A remains unchanged. However, there have been minor adjustments to how the phase-out is calculated. These changes may result in a slightly larger deduction for some taxpayers.
The child tax credit is a dollar-for-dollar reduction of the tax liability for taxpayers with qualifying children. Under the OBBBA the credit will increase to $2,200 per qualifying child.
A new type of tax favored account has been designed to benefit children under the age of 18 to be utilized for education, small business investments and first home purchases.
The annual contribution limit to the account is $5,000. And employers have a way to make tax free contributions to these accounts as well (we're waiting on more details to be able to fully explain this to you - but see some great planning opportunities here).
In addition, the government will contribute $1,000 per qualifying child born from 2025 through 2028.
Taxpayers who are 65 or older will get a $6,000 bonus deduction per person ($12,000 for a couple filing jointly where both qualify). This applies regardless of you taking the standard deduction or the itemized deduction.
Phase-out limits start when gross income exceeds $75,000 ($150,000 for married filing joint). Applies for 2025 through 2028.
Increases the 2025 standard deduction to:
Individuals: Non-Itemizers
Taxpayers claiming the standard deduction would qualify for up to $1,000 ($2,000 if married filing joint) in charitable contribution deductions, even if you didn't itemize your deductions.
Individuals: Itemizers Individual Floor
Taxpayers who itemize their deductions will now be subject to a 0.5% floor for all charitable contributions. This means that you can only deduct charitable contributions made in excess of 0.5% of your adjusted gross income.
C-Corporation Floor
C-Corps will now be subject to a 1% floor for all charitable contributions. This means that C-Corps can only deduct charitable contributions made in excess of 1% of their taxable income.
The SALT deduction will allow taxpayers that itemize their deductions to write off up to $40,000 of their state and local income taxes (including property taxes), up from $10,000 under the prior rules. Hopefully this gives everyone some breathing room here.
A phase out begins once modified adjusted gross income is $500,000 or more.
The bill lets service-industry workers deduct up to $25,000 of tip income from federal taxable income each year for 2025 through 2028. If your adjusted gross income is $150,000 or more ($300,000 or more on a joint return), a phase out of 10% of the excess will occur, potentially limiting the deduction for higher earners.
You do not need to itemize to take this deduction.
Most tipped professions qualify such as food servers, beauticians, etc. A full list will be published.
The bill gives taxpayers a break on overtime earnings of up to $12,500 per taxpayer (up to $25,000 if you are married filing jointly) for 2025 through 2028. If your adjusted gross income is $150,000 or more ($300,000 or more on a joint return), a phase out of 20% of the excess will occur, potentially limiting the deduction for higher earners.
You do not need to itemize to take this deduction.
Individual taxpayers can deduct up to $10,000 for interest paid on new car loans for 2025 through 2028. Phase-out limits begin at $100,000 ($200,000 for married filing joint).
The key piece is the vehicle must be assembled in the United States for it to qualify.
Most borrowers only pay a few thousand dollars a year in interest expense on vehicle loans, so this might not provide a huge tax benefit. However, any benefit is better than none.
The estate, gift and generation skipping tax exemptions for 2025 will remain in place. Starting in 2026 they will increase to $15,000,000 per taxpayer ($30,000,000 per married couple) and will be adjusted for inflation annually.
The One Big Beautiful Bill cuts short several popular clean-energy incentives.
The credit for new electric vehicle purchases and used electric vehicle purchases has been scrapped effective September 30, 2025.
The credit for residential efficiency credits that cover items like rooftop solar, heat pumps and high-performance windows has also been scrapped effective December 31, 2025.
For taxpayers looking to utilize these credits, you must purchase the applicable items before the dates show - otherwise these credits are gone.
To make the most of the tax benefits included in the OBBBA, it is essential to stay informed and plan ahead. Consulting with a tax professional can help you understand how these changes apply to your specific situation and identify opportunities for savings.
Additionally, keeping thorough records of your expenses and investments can ensure you take full advantage of the available deductions and credits. By proactively managing your finances, you can maximize your tax savings and achieve your financial goals.
While not all provisions in the One Big Beautiful Bill are permanent, many of them create meaningful, although temporary, opportunities for effective tax planning. The scope of the changes—from expanded deductions to the elimination of certain credits—makes it important to assess how your specific financial picture fits into the new framework.
Staying informed and taking action early—especially on time-limited provisions—can help you make the most of what the legislation offers. A qualified tax advisor can help you interpret the changes and apply them to your situation with clarity and confidence.