A Closer Look at the One Big Beautiful Bill Act
On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act (OBBBA), following months of negotiation in both the House and Senate. The sweeping legislation reshapes the federal tax code for individuals, business owners, and investors, and it is expected to guide financial and tax planning for years to come. Among its most notable features, the Act makes permanent many provisions of the 2017 Tax Cuts and Jobs Act (TCJA) that were set to expire, while introducing new deductions and phasing out others.
Existing Provisions with Material Changes
State and Local Tax (SALT) Deduction
The SALT deduction cap, a frequent point of debate since 2017, receives a temporary boost. The new law raises the cap from $10,000 to $40,000 beginning in 2025, with a gradual 1% annual increase from 2026 through 2029. However, for high-income households with modified adjusted gross income above $500,000, the cap is reduced, though it never drops below $10,000. In 2030, the cap reverts to $10,000.
Repeal and Phase-Out of Clean Energy Credits
The legislation rolls back multiple clean energy incentives. Credits for new and used clean vehicles, as well as commercial clean vehicles, are eliminated for purchases made after September 30, 2025. Other credits, such as those for energy-efficient home improvements, residential clean energy, and alternative fuel refueling property, are set to expire by mid-2026. These changes mark a significant policy shift away from the energy tax incentives expanded in recent years.
Gambling Losses
Beginning in 2026, gambling losses will no longer be fully deductible. Instead, deductions are limited to 90% of winnings, a change that may impact professional gamblers and hobbyists alike.
Bonus Depreciation and Section 179 Expensing
For businesses, the Act delivers substantial benefits. It makes permanent the 100% first-year “bonus” depreciation for qualifying property acquired after January 19, 2025, reversing the phase-out schedule previously in place. In addition, Section 179 expensing limits are increased: the maximum deduction rises to $2.5 million, with a phase-out threshold beginning at $4 million. These adjustments provide businesses with more flexibility to deduct capital investments immediately.
New Provisions
Deduction for Seniors
From 2025 through 2028, individuals who turn 65 during the tax year may claim a new $6,000 deduction. The benefit phases out once income exceeds $75,000 ($150,000 for joint filers).
Tip Income Deduction
Delivering on the campaign promise of “no tax on tips,” the Act allows service workers to exclude up to $25,000 in reported cash tips from federal income taxes between 2025 and 2028. Married couples filing jointly may each claim the deduction, with phaseouts beginning at $150,000 of income for single filers and $300,000 for joint filers.
Overtime Deduction
Similarly, employees receiving overtime pay may deduct up to $12,500 ($25,000 for joint filers) of qualified overtime compensation between 2025 and 2028. The deduction phases out gradually above $150,000 of income ($300,000 joint).
Investment Accounts for Children (“Trump Accounts”)
Effective in 2026, families can establish tax-deferred savings accounts for minors under 18. Annual contributions are capped at $5,000, indexed for inflation, and may come from parents, relatives, or even employers. For children born between 2025 and 2028, the federal government will seed accounts with a $1,000 contribution. Withdrawals are generally restricted until age 18, and tax rules apply to distributions.
Charitable Deduction for Non-Itemizers
A permanent charitable deduction is reinstated for taxpayers who do not itemize. Starting in 2026, individuals may deduct up to $1,000 in qualifying cash contributions to public charities ($2,000 for joint filers).
Car Loan Interest Deduction
For tax years 2025–2028, taxpayers who purchase qualifying U.S.-assembled new vehicles may deduct up to $10,000 annually in loan interest, subject to income phaseouts beginning at $100,000 for single filers and $200,000 for joint filers.
Looking Ahead
The One Big Beautiful Bill Act introduces broad and lasting tax changes that affect individuals, families, and businesses alike. While the Act focuses heavily on tax policy, it also contains provisions that touch on health care, immigration, and border security, signaling its sweeping scope.
Because the rules are complex and many provisions are temporary or phased in over time, understanding how the OBBBA applies to your situation will require careful analysis. Taxpayers are encouraged to consult with a qualified tax professional to determine how these provisions may impact their planning strategies in the years ahead.
