The "One Big Beautiful Bill Act": What You Need to Know

The "One Big Beautiful Bill Act" (OBBBA) has officially been signed into law by President Trump on July 4, 2025. This landmark legislation, building on the foundation of the 2017 Tax Cuts and Jobs Act (TCJA), ushers in significant changes to our federal tax code, economic policy, and even certain social programs.

The OBBBA, passed through the budget reconciliation process, reflects a long-term shift in how the government approaches taxation, economic growth, and savings. With its enactment, many of the provisions that were previously proposed are now a reality. Let's dive into the details of what this means for you, your family, and your business.

Individual Tax Changes: Expanded Relief for Workers, Families, and Seniors

The OBBBA delivers on its promise of individual tax relief, though some provisions have specific temporary durations:

• Permanent Extension of 2017 Tax Cuts: A core feature of the OBBBA is the permanent extension of many individual tax provisions from the 2017 TCJA. This means:

  • Lower individual income tax rates are preserved, keeping the top rate at 37% rather than allowing it to revert to 39.6%.

  • The increased standard deduction is now permanent, set at $15,750 for single taxpayers and $31,500 for joint filers beginning in 2025, with annual inflation adjustments.

  • The elimination of personal exemptions remains in effect, offset by other expanded deductions and credits.

  • Caps on itemized deductions, such as the mortgage interest and SALT caps, are largely retained, though the SALT cap sees a significant temporary increase (see below). By making these permanent, the OBBBA offers long-term predictability and ensures millions of households continue to benefit from the lower tax rates introduced in 2017.

• New Deductions for Tips and Overtime Pay (Temporary): The bill offers targeted tax relief for workers, in effect for tax years 2025 through 2028:

  • Tip Income Deduction: Up to $25,000 for joint filers ($12,500 for singles) in tip income can be excluded from taxable income. The benefit phases out beginning at $400,000 in adjusted gross income.

  • Overtime Deduction: A similar deduction allows workers to exclude overtime pay from taxation, subject to the same thresholds. These changes aim to boost take-home pay and acknowledge the realities of the modern labor force, particularly in industries like hospitality and retail.

• Social Security Income Tax Relief for Seniors (Temporary): For seniors aged 65 and over, the OBBBA allows a deduction of up to $6,000 in Social Security income ($12,000 for married couples filing jointly) from their federal taxable income. This deduction is in effect for tax years 2025 through 2028 and phases out if modified adjusted gross income exceeds $75,000 ($150,000 for joint filers). This offers meaningful tax relief for middle-income retirees.

• Expanded State and Local Tax (SALT) Deduction (Temporary): The bill significantly increases the cap on the State and Local Tax (SALT) deduction to $40,000 for most taxpayers, effective for tax years 2025 through 2029. This cap will increase by 1% for each of the years 2026 through 2029 before reverting back to $10,000 in 2030. For taxpayers with modified adjusted gross income over $500,000, the $40,000 cap is phased downward (but not below $10,000) for years 2025 through 2029. This is especially impactful for residents of high-tax states.

• Enhanced Child Tax Credit: The Child Tax Credit (CTC) is increased from $2,000 to $2,200 per child, with annual adjustments for inflation. This is a permanent increase and provides a meaningful benefit for working families to help offset higher living costs.

• New Vehicle Loan Interest Deduction (Temporary): Starting in 2025 and through 2028, businesses can deduct up to $10,000 per year in interest on loans for passenger vehicles. The critical condition for this deduction is that the vehicle must be assembled in the United States. This deduction encourages investment in domestically assembled vehicles.

Business Tax Changes: Strong Incentives for Growth and Innovation

The OBBBA includes powerful incentives for businesses to invest and innovate:

• Full Expensing of Capital Investments (Permanent): The bill permanently reinstates 100% bonus depreciation for capital investments. Companies can now fully deduct the cost of machinery, equipment, technology, and certain buildings in the year of purchase for qualifying property acquired after January 19, 2025. This significantly improves cash flow and lowers the effective cost of expansion, particularly for manufacturing, agriculture, logistics, and tech industries.

• Restoration of R&D Cost Deductions (Permanent): The OBBBA permanently restores the ability for companies to immediately deduct domestic research and development (R&D) expenses. This reverses the 2022 requirement to amortize those costs over five years. Companies with capitalized domestic R&D expenses from 2022–2024 can elect a catch-up deduction, which can significantly improve cash flow for firms engaged in innovation. This change aligns with long-term economic competitiveness goals and provides a major boost to U.S. research ecosystems.

• Expanded Pass-Through Business Deduction (Permanent): The Qualified Business Income (QBI) deduction for pass-through entities is made permanent, ensuring continued tax relief for small business owners, independent contractors, and professionals. This provision allows eligible businesses to deduct up to 20 percent of their qualified business income from federal taxable income. The permanence of this deduction provides stability and predictability for millions of business owners. The bill also expands the phase-in range of the limitation by $50,000 for non-joint returns and $100,000 for joint returns and creates a minimum deduction of $400 for taxpayers with $1,000 or more of qualified business income (QBI) for material participants.

New Rules for 1099 Reporting

The One Big Beautiful Bill Act includes significant updates to information reporting requirements affecting gig workers, freelancers, and small business owners:

• 1099-K Thresholds Raised: The bill raises the Form 1099-K reporting threshold back to $20,000 in gross payments and 200 transactions per year. This reverses the IRS’s planned drop to $600 with no transaction minimum. This applies to third-party payment networks such as PayPal, Venmo, Stripe, Square, and e-commerce platforms like eBay, Etsy, and Airbnb. This change significantly reduces reporting burdens for low-volume or part-time sellers who use these platforms casually.

• 1099-NEC Reporting Threshold Increased: The bill increases the Form 1099-NEC reporting threshold from $600 to $2,000 for payments made to independent contractors, freelancers, and non-employees. This higher threshold applies to payments made after December 31, 2025, and will be indexed annually for inflation starting in 2027. This change is designed to ease administrative burdens without reducing the IRS’s ability to track significant income earned by contractors and freelancers.

Looking Ahead

As your CPA,  my role is to transform these complex legislative changes into clear, actionable strategies for you. We understand that deciphering tax law can be daunting, and the implications of this new bill are extensive.

This is where our expertise becomes your invaluable asset.

We specialize in helping individuals, families, and businesses like yours:

• Maximize your tax savings: By meticulously analyzing your unique situation against the backdrop of the OBBBA's permanent and temporary provisions, we'll identify every opportunity for deductions, credits, and optimal tax structuring.

• Ensure seamless compliance: The new reporting thresholds for 1099-K and 1099-NEC, alongside other updated regulations, require careful attention. We'll guide you through these changes, ensuring you meet all requirements without unnecessary stress.

• Strategically plan for the future: Whether it's understanding the long-term impact of permanent business expensing or preparing for the sunset of temporary individual deductions, we'll help you develop a robust financial plan that accounts for upcoming shifts.

• Gain peace of mind: With a dedicated CPA partner, you can stop worrying about complex tax codes and focus on what matters most to you. Whether that's growing your business, securing your family's financial future, or simply enjoying your retirement.

Contact us today for a personalized consultation. Let's discuss how the One Big Beautiful Bill Act impacts your specific situation and develop a tailored plan to optimize your financial outcomes. We're here to help you navigate this new tax landscape with confidence and precision.