After months of debate, the One Big Beautiful Bill Act (OBBBA) has become law, bringing sweeping changes to the U.S. tax code for both individuals and businesses. Below is a breakdown of a few of the most significant provisions, along with actionable planning insights. We will be providing a much deeper dive into this bill in the coming weeks.
Here are just a few of the key provisions you should be aware of, and what you can do now to adapt and optimize your strategy:
Key Provisions for Individuals
Permanent Extension of Lower Individual Tax Rates
- Maintains the seven tax brackets (10%, 12%, 22%, 24%, 32%, 35%, 37%) beyond 2025.
- Bracket thresholds will continue to be adjusted for inflation.
Planning Tip: More certainty allows better timing for Roth conversions, capital gains harvesting, and bracket management.
Increased Standard Deduction
- Permanently raised to $15,750 (single), $31,500 (married filing jointly), indexed for inflation.
Planning Tip: Many taxpayers will no longer itemize—review your deduction strategy accordingly.
Expanded Child Tax Credit
- Increased to $2,200 per child, with $1,700 refundable and indexed for inflation.
Deductions for Tips, Overtime & Social Security
- Overtime pay: Up to $12,500 deductible (2025–2028) (phase out begins at incomes above $150,000 single/$300,000 joint).
- Tips: Up to $25,000 deductible under income limits (phase out begins at incomes above $150,000 single/$300,000 joint)..
- Social Security (Seniors 65+): Bonus deduction of $6,000 (phase out begins at incomes above $75,000 single / $150,000 joint).
Car Loan Interest Deduction
- Up to $10,000 deductible for U.S.-assembled vehicles, with income limits.
State and Local Tax (SALT) Cap Raised
- Increased to $40,000 (from $10,000) for most filers; phased out for income above $500,000. No SALT limitation for pass-through entities.
Estate and Gift Tax Exemption
- Raised to $15 million per individual (indexed); permanent.
Planning Tip: Review estate planning strategies before the end of 2025 to lock in favorable terms.
New “Trump Accounts”
- Tax-free savings accounts for children born 2025–2029, seeded with a $1,000 federal contribution. Still pending regulatory detail.
Key Provisions for Businesses
100% Bonus Depreciation Reinstated
- Permanent full expensing for qualified assets placed in service after January 19, 2025.
Planning Tip: Time purchases in 2025+ to accelerate deductions.
Section 179 Expensing Expanded
- Cap increased to $2.5 million with a $4 million phaseout threshold, reset and indexed to 2024 levels.
Research & Experimental (R&E) Expensing
- Immediate expensing for domestic R&D, retroactive to 2022 (with amended return option); foreign R&D still amortized over 15 years.
Planning Tip: Review prior years’ filings for potential retroactive deductions.
Qualified Business Income (QBI) Deduction
- 20% deduction made permanent with expanded phase-out thresholds.
- Married filers: $150,000; Single: $75,000
- Minimum $400 deduction for small filers with at least $1,000 QBI.
SALT Deduction for Pass-Throughs Preserved
- No limitation for pass-through entities using PTET structure.
Planning Tip: Multi-state owners should evaluate entity structure to leverage this benefit.
Excess Business Loss Limitation (Sec. 461(l)) Made Permanent
- EBLs subject to annual testing. Carryforwards still allowed under NOL rules.
Employee Retention Credit (ERC) Enforcement
- Claims for Q3 and Q4 2021 are barred; increased scrutiny for prior filings.
Planning Tip: Review existing ERC claims for compliance and documentation.
New 1099 Thresholds
- Raises 1099-MISC and 1099-NEC reporting threshold to $2,000 (was $600), indexed after 2026.
- Raises 1099-K reporting threshold to $20,000 and over 200 transactions.
Direct File Program Scaled Back
- Federal Direct File program defunded in favor of public-private partnerships for free filing.
What You Should Do Now
- Schedule a tax planning session. Navigate the expanded deductions and evaluate retroactive opportunities.
- Review capital expenditures. Consider accelerating or bundling purchases in 2025.
- Audit your QBI eligibility. New thresholds may change your deduction eligibility.
- Update estate and gift plans. Make use of the enhanced exemption now that it is permanent.
- Revisit payroll and compensation. Optimize wages, tips, and retirement contributions under the new deductions.
The One Big Beautiful Bill Act offers substantial new planning opportunities—but also introduces added complexity. Your CPA can help you understand how these changes affect your personal and business tax strategy.
If you have questions, leave a comment below, or contact CRR for a mid-year review.