The One Big Beautiful Bill Act has enacted many tax law changes to an already complicated tax system. We believe that many clients will realize limited impact due to eligibility limitations; however, we would like to highlight areas where you may benefit.
What’s in the One, Big, Beautiful Bill Act?
Below is an abbreviated (not all-inclusive) summary of the One, Big, Beautiful Bill Act (OBBBA)
Permanent Tax Benefits (primarily extending 2017 TCJA)
- Individual Income Tax Rates: The current seven tax brackets (10%, 12%, 22%, 24%, 32%, 35%, and 37%) were made permanent, preventing them from reverting to higher, pre-2018 rates.
- Standard Deduction: The nearly doubled standard deduction amounts (e.g., $15,750 for single filers and $31,500 for married couples filing jointly for 2025) were made permanent and will continue to be indexed for inflation.
- Child Tax Credit: The credit was permanently increased to $2,200 per child (up from the pre-TCJA $1,000) and will be adjusted for inflation annually starting in 2026.
- Qualified Business Income (QBI) Deduction: The 20% deduction for QBI from pass-through entities (e.g., sole proprietorships, partnerships, S-corps) was made permanent.
- Estate and Gift Tax Exemption: The higher exemption amount was made permanent and increased to $15 million per person (or $30 million per married couple) starting in 2026, with future inflation adjustments.
- Alternative Minimum Tax (AMT): Higher exemption amounts and phase-out thresholds for the AMT were made permanent.
New Temporary Tax Benefits (2025-2028)
- Deduction for Tips: Eligible tipped workers can deduct up to $25,000 of qualified tip income from their federal income tax, with phaseouts for higher earners.
- Deduction for Overtime Pay: A deduction of up to $12,500 ($25,000 for joint filers) for qualified overtime pay required by the Fair Labor Standards Act (FLSA) is available, also subject to income limitations.
- Senior Deduction Additional or “Senior Bonus”: Taxpayers age 65 and older can claim an additional deduction of up to $6,000 per eligible individual, with income phaseouts. This is in addition to the existing increased standard deduction for seniors. The phase-out limit is based on Modified Adjusted Gross Income (MAGI), and every dollar over the limit will lower the deduction by 6 cents.
- For single filers, the MAGI limit is $75,000, and it's completely phased out at $175,000.
- For joint filers, the MAGI limit is $150,000, and it's completely phased out at $250,000.
- Importantly, this deduction is available whether you take the standard deduction or itemize.
- Deduction for Car Loan Interest: A deduction for up to $10,000 in interest paid on loans for new, U.S.-assembled personal vehicles is available, with income phaseouts. The deduction begins to phase out if your MAGI exceeds $100,000 for single filers, or $200,000 for joint filers.
- Increased SALT Cap: The cap on the State and Local Tax (SALT) deduction was raised from $10,000 to $40,000 for taxpayers with MAGI under $500,000, effective through 2029.
- "Trump Accounts": A new tax-advantaged savings account for children was created, with the government providing a one-time $1,000 contribution for children born between 2025 and 2028 who enroll in a pilot program.
Notable Changes & Eliminations
- Clean Energy Credits Eliminated: Many Inflation Reduction Act (IRA) clean energy tax credits were terminated or phased out, including those for new and used electric vehicles (after September 30, 2025), residential clean energy improvements (after December 31, 2025), and related infrastructure.
- Charitable Deductions Modified:
- Permanent limit on cash donations: The TCJA temporarily capped cash donations to public charities at 60% of a taxpayer's adjusted gross income (AGI). Previously, it was 50% of AGI. The OBBBA makes the 60% limit permanent.
- Deduction Floor: Starting in 2026, donations will be deductible only after they exceed 0.5% of a taxpayer's AGI. For example, if a couple's AGI is $500,000, their first $2,500 ($500,000*0.005=$2,500) of charitable donations won't be eligible for an itemized deduction. This provision will effectively reduce the value of deductions eligible for tax benefits.
- Charitable Deduction for Everyone: Previously, only those who itemized could receive a tax deduction for donations, but the OBBBA changes that. Beginning in 2026, non-itemizers will be able to claim a donation deduction of up to $1,000 for single filers, or $2,000 for joint filers. Unfortunately, donations to donor-advised funds or private non-operating foundations are not eligible for this deduction. (Source: Charles Schwab)
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Our team is always available to address specific questions you may have. Please note that some questions may require input from your tax professional.