One Big Beautiful Bill Act - 2025
The One Big Beautiful Bill Act introduced 870 pages of sweeping changes to tax provisions and incentives affecting both individuals and businesses. While the scope of these changes is significant, understanding them is critical for effective tax planning and positioning yourself advantageously.
We encourage you to review the highlights below, which outline several of the most impactful provisions.
After reviewing the brief overview of changes below, you may be interested to review the additional details that are provided for each item.
Brief Overview Of Changes
Reduced Income Tax Rates
Lower tax rates from the 2017 law are made permanent
Child Tax Credit
The credit is made permanent, and the 2025 credit amount is increased modestly
New Tax-Deferred Investment Accounts for Children
Taxpayers can open new tax-deferred investment accounts ("Trump Accounts") for children under age 18. The government will also contribute $1,000 to accounts for newborns
529 Account Changes: K-12 Expenses
Tax-free distributions can now be used to cover additional types of K–12 education expenses
529 Account Changes: Postsecondary Expenses
Tax-free distributions can now be used to cover additional types of postsecondary education expenses
New Senior Deduction
For tax years 2025–2028, individuals age 65 or older can claim a new $6,000 senior deduction (subject to income limitations), even if they don’t itemize deductions
Increased State & Local Tax Deduction Cap
The state and local tax (SALT) deduction cap is temporarily increased to $40,000 for 2025 (with modest additional increases through 2029), before reverting to $10,000 in 2030
Casualty Loss Deduction
Several casualty loss deduction provisions have been adjusted
Deduction for U.S.-assembled vehicles
Individuals can now deduct up to $10,000/year of interest on loans for new personal-use vehicles that were assembled in the U.S., even if they don’t itemize deductions
Alternative Minimum Tax - Exemption Amounts
The AMT exemption amounts are permanently increased for 2026 and beyond, but the phaseout rate for higher-income taxpayers doubles from 25% to 50%
Pease Limitation
The Pease limitation, which reduced overall itemized deductions for high earners, is permanently repealed. Instead, a much smaller reduction will apply
Estate & Gift Tax Exclusion Amount
The basic exclusion amount for federal estate and gift tax will increase to $15 million
Wagering Losses
Starting in 2026, only 90% of wagering losses can be deducted against winnings
Qualified Business Income Deduction
The QBI deduction is made permanent, and phase-in amounts are increased
Bonus Depreciation
The Act makes additional first-year (bonus) depreciation for certain qualified property permanent at 100% (under prior law, it was to phase out to zero)
Section 179 Expensing Limits
Expensing limits are increased to $2,500,000, and the phasedown threshold is increased to $4,000,000
Information Reporting, Forms 1099-NEC,
1099-MISC
For payments made after 2025, the reporting thresholds for Forms 1099-NEC and 1099-MISC are increased from $600 to $2,000
Changes to Taxes on Tips and Overtime
The Act created new individual tax deductions for qualified tips and overtime pay, which necessitates new tracking and reporting requirements for employers
Gain on the Sale of Certain Farmland Property
Sellers of qualified farmland property may elect to pay capital gains tax on the sale in four equal annual installments
Details of OBBBA Changes
Reduced Income Tax Rates
The Act permanently extends the lower individual income tax rates and expanded tax brackets originally enacted under the 2017 Tax Cuts and Jobs Act, eliminating the scheduled tax increases after 2025. For example, the top individual tax rate will remain at 37% rather than reverting to 39.6%. In addition, marriage penalty relief is preserved across most tax brackets. As a result, married couples filing jointly will generally not pay more in taxes than they would as single filers.
Child Tax Credit
The child tax credit is now permanent and has been increased to $2,200 per qualifying child for 2025, with the amount indexed for inflation in later years.
New Tax-Deferred Investment Accounts for Children
Taxpayers may establish a new tax-deferred investment account for each eligible child, known as a Trump Account. Contributions of up to $5,000 per- year-per-child may be made using after-tax dollars, and all funds must be invested in a diversified U.S. equity index fund. For children born between January 1, 2025, and December 31, 2028, the federal government will automatically contribute $1,000 to the account. To maximize allowable contributions and ensure eligibility for the government contribution, taxpayers should open the account before the child turns 18.
529 Account Changes: K-12 Expenses
For K–12 education, families may now use 529 funds for a broader range of expenses beyond tuition, including curriculum, books, online learning materials, tutoring, standardized test fees, dual enrollment, and educational therapies for students with disabilities. Beginning in 2026, the annual limit on K–12 distributions doubles from $10,000 to $20,000 per beneficiary. To maximize tax benefits, families should consider timing 529 withdrawals to coincide with qualified expenses in the same tax year, and be sure to coordinate with other education tax credits to avoid overlap.
529 Account Changes: Postsecondary Expenses
For postsecondary education, 529 distributions may now be used tax-free not only for traditional college expenses but also for “qualified postsecondary credentialing expense." This allows funds to cover tuition, fees, books, supplies, and required equipment for certificate, licensing, or apprenticeship programs, even when those programs are not part of a traditional degree track.
New Senior Deduction
For tax years 2025-2028, individuals age 65 or older may claim a new $6,000 senior deduction, regardless of whether they itemize deductions. Married taxpayers must file a joint return to claim the deduction, and each qualifying spouse may claim the full $6,000 amount. The deduction is phased out by 6% of the amount by which the taxpayer’s modified adjusted gross income (MAGI) exceeds $75,000 for single filers or $150,000 for joint filers. To maximize the benefit, seniors should seek to keep their MAGI below these thresholds.
Increased State & Local Tax Deduction Cap
The state and local tax (SALT) deduction cap is temporarily increased to $40,000 for tax year 2025 and $40,400 for 2026, with 1% annual increases through 2029, before reverting to $10,000 in 2030. For taxpayers with modified adjusted gross income (MAGI) above $500,000 in 2025, the deduction is phased out by 30% of the amount exceeding that threshold, but it will not be reduced below $10,000. To maximize the available tax benefit during this limited period, taxpayers may consider managing income and deductions to remain below the phaseout threshold or timing large transactions to occur in years when the cap is higher.
Casualty Loss Deduction
Deduction for U.S.-assembled Vehicles
For tax years 2025-2028, individuals may deduct up to $10,000 per year in interest paid on loans for new personal-use vehicles, even if they do not itemize deductions. The deduction phases out for single filers with modified adjusted gross income (MAGI) above $100,000 and for joint filers with MAGI above $200,000. To qualify, the loan must be for a new U.S.-assembled car, SUV, van, pickup truck, or motorcycle weighing under 14,000 pounds; must be secured by a first lien; and must list the taxpayer as the original owner. The vehicle identification number (VIN) must be reported on the tax return. Taxpayers planning to purchase a new vehicle may benefit from timing the purchase and financing within the eligible years, and from managing income to remain below the phaseout.
Alternative Minimum Tax - Exemption Amounts
The alternative minimum tax (AMT) exemption amounts are permanently increased (for 2026 and thereafter); however, the phaseout rate for higher-income taxpayers increases from 25% to 50%. As a result, taxpayers should review their potential AMT exposure and consider planning strategies—such as timing income or exercising options in lower-income years—to reduce the risk of unexpected AMT liability.
Pease Limitation
The Pease limitation, which previously reduced itemized deductions for high-income taxpayers, is permanently repealed. Beginning in 2026, taxpayers will see a more limited reduction equal to 5.4% of the lesser of (i) the taxpayer’s itemized deductions or (ii) the amount by which taxable income exceeds the threshold for the 37% tax bracket. Because this new limitation is generally less severe than the former Pease rules, taxpayers may consider bunching deductible expenses into a single year.
Estate & Gift Tax Exclusion Amount
For estates of decedents dying, and for gifts made after December 31, 2025, the federal estate and gift tax basic exclusion amount increases to $15 million, indexed for inflation. Taxpayers should review and update their estate plans and consider making substantial lifetime gifts to take advantage of the higher exclusion amount.
Wagering Losses
Beginning in 2026, taxpayers may deduct only 90% of their total wagering losses against total winnings, even if losses equal or exceed winnings. To maximize deductions, maintain detailed records of wagering activity.
Qualified Business Income (QBI) Deduction
The Act makes the QBI deduction permanent. It also establishes a minimum deduction of $400 for active QBI for “applicable taxpayers.” An applicable taxpayer is defined as one whose aggregate QBI from all active qualified trades or businesses in a tax year is at least $1,000. The minimums will be indexed for inflation after 2026. The Act also increases the phase-in thresholds from $50,000 to $75,000 for single filers and from $100,000 to $150,000 for joint filers.
Bonus Depreciation
Additional first-year (bonus) depreciation for certain qualified property is now permanent at 100% for property acquired after January 19, 2025. Furthermore, the Act introduces a new 100% bonus depreciation for “qualified production property” (QPP) — certain nonresidential real property used in the manufacturing, production, or refining of certain tangible personal property — for property placed in service after July 4, 2025.
Section 179 Expensing Limits
The Section 179 expensing limit is increased to $2,500,000, and the phasedown threshold is raised to $4,000,000, for property placed in service after 2024. Both amounts will have future inflation adjustments.
Information Reporting, Forms 1099-NEC, 1099-MISC
The reporting thresholds for Forms 1099-NEC and 1099-MISC will be increased from $600 to $2,000 (and adjusted thereafter for inflation) starting in 2026.
Changes to Taxes on Tips and Overtime
The Act establishes new individual tax deductions for qualified tips and overtime pay. Employers must be aware of new requirements for reporting on W-2 forms and update their internal tracking accordingly. Payroll systems may also need to be updated due to new withholding tables. However, note that employers must still continue to withhold Social Security and Medicare (FICA) taxes and state/local taxes, even on qualified tip/overtime amounts. Please also note that provisions may apply retroactively beginning January 1, 2025.
Gain on the Sale of Certain Farmland Property
Sellers of qualified farmland property may elect to pay the capital gains tax from the sale in four equal annual installments, for property sales occurring after July 4, 2025. The first installment is paid in the year of the sale, with the following three payments paid in each of the next three years. If any payment is missed, the full balance becomes due immediately.
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