How will the “One, Big, Beautiful Bill Act” H.R.1 Impact Taxes?
On July 4, 2025, the sweeping U.S. tax and spending package – officially titled the “One Big Beautiful Bill Act” H.R.1 (OBBBA) was signed into law by the President. The legislation has far-reaching impact on businesses and taxpayers of all income levels.
At the center of the tax portion of the 870-page Act is an extension of the 2017 Tax Cuts and Jobs Act, which was slated to sunset at the end of the year. The legislation would make most of the tax cuts permanent, while increasing spending for immigration enforcement, border security, defense and energy production. The legislation also raises the debt ceiling by $5 trillion. The Congressional Budget Office estimates the bill would add $3.4 trillion to federal deficits over the next 10 years. The bill is partially paid for by significant cuts to health care and nutrition programs, like Medicaid and the Supplemental Nutrition Assistance Program, or SNAP.
Here’s an overview of some of the key provisions within the OBBBA which may impact your personal and business taxes. We will be issuing separate detailed articles related to OBBBA’s key provisions in the coming weeks.
Tax Cuts and Jobs Act of 2017 extensions
During Trump’s first term, the Tax Cuts and Jobs Act of 2017, or TCJA, enacted sweeping changes to the U.S. tax code that lowered taxes for many households.
Some of the key provisions included lower tax brackets, bigger standard deductions, a more generous child tax credit, a higher estate and gift tax exemption and a 20% deduction for pass-through businesses, among other measures. These provisions were scheduled to expire after 2025 without action from Congress. (Absent extensions for the TCJA provisions, more than 60% of taxpayers could have seen higher taxes in 2026, according to a 2024 report from the Tax Foundation.)
The “One Big Beautiful Bill Act” makes permanent the 2017 tax cuts while providing these tax breaks, among others:
Top Individual Tax Provisions of the “One Big Beautiful Bill Act”
- Standard Deduction: The OBBBA makes permanent the near doubling of the standard deduction amounts from the TCJA and provides a further increase for 2025 (e.g., $15,750 for single filers). These amounts will be indexed for inflation after 2025. The deduction for personal exemptions, which was repealed by the TCJA, remains permanently repealed.
- SALT Deduction Cap: The limitation on the deduction for state and local taxes (SALT) is temporarily increased to $40,000 (with adjustments for inflation) until 2029, after which it will revert to $10,000. OBBBA also preserves the pass-through entity tax SALT deduction and does not attempt to limit or address the various workarounds that taxpayers are currently using to avoid the SALT cap.
- Child Tax Credit (CTC): The TCJA’s increased child tax credit ($2,000 per child) is made permanent, and the maximum credit is temporarily increased to $2,200 per child in 2025, with inflation indexing after that year.
- Estate and Gift Tax Exemption: The OBBBA permanently increases the estate, gift, and generation-skipping tax exemption amounts to $15 million (per individual), with inflation adjustments starting in 2026.
- Tips and Overtime Pay Deductions: The Act introduces temporary deductions for certain qualified tip income (up to $25,000) and overtime pay (up to $12,500) for tax years 2025-2028, with income phaseouts.
- Senior Bonus Deduction: A temporary additional deduction of $6,000 is available for individuals aged 65 and older for tax years 2025-2028, with income-based phaseouts.
- Auto Loan Interest Deduction: A new deduction allows taxpayers to deduct up to $10,000 in interest paid on loans for new vehicles assembled in the U.S., applicable from 2025 to 2028, with income phaseouts.
- “Trump Accounts” for Children: The OBBBA establishes tax-advantaged savings accounts for children under 18 with a one-time $1,000 federal credit for qualifying children born between 2025 and 2028.
Top Business Tax Provisions of the “One Big Beautiful Bill Act”
- Qualified Business Income (QBI) Deduction: Makes permanent and expands the 20% QBI deduction for owners of pass-through entities (such as partnerships, limited liability companies and S corporations) and sole proprietorships
- Bonus Depreciation: The OBBBA restores and makes permanent 100% bonus depreciation for businesses, allowing them to immediately expense the full cost of qualifying assets put in service after January 19, 2025.
- R&D Expensing: Immediate expensing of domestic research and development (R&D) costs is restored and made permanent (retroactive to 2022 for eligible small businesses)
- Sec. 179 Expensing: Increases the Sec. 179 expensing limit to $2.5 million and the expensing phaseout threshold to $4 million for 2025, with annual inflation adjustments going forward
- Business Interest Limitation: The “One Big Beautiful Bill Act” restores a more favorable calculation for the business interest deduction limit, based on EBITDA, starting in 2025.
- Clean Energy Incentives: The OBBBA terminates or curtails several clean energy tax credits and incentives from the Inflation Reduction Act.
The AICPA has published charts comparing tax and personal financial planning provisions of the OBBBA with current law (free site registration required).
Important Considerations of the “One Big Beautiful Bill Act”
- Temporary Provisions: Several provisions, such as the deductions for tips, overtime, and auto loan interest, are only temporary, generally lasting through 2028.
- Income Limits: Many new deductions and credits have income limitations and phaseouts, meaning higher earners may not be able to claim them or may only receive a reduced benefit.
- Reconciliation Process: The OBBBA was passed using the budget reconciliation process, which allows for a simple majority vote in the Senate. This limits the types of provisions that can be included in the bill.
- Deficit Impact: The legislation is estimated to increase budget deficits over the next 10 years.
Buckle Up
We’ve only briefly covered some of the most significant OBBBA provisions here. There are additional rules and limits that apply. Note, too, that the OBBBA will require a multitude of new implementing regulations. We will continue to closely monitor developments related to “One Big Beautiful Bill Act” H.R.1. Turn to us for help navigating the new law and its far-reaching implications to minimize your tax liability. If you have any questions related to the OBBBA’s impact on your tax situation, Contact your W&D advisor at (847) 267-9600 or [email protected].
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