The greatest thing about the passage of the One Big Beautiful Bill Act (OBBBA) is that we shouldn’t have to constantly hear about it in the news any longer. Still, you should take some time to find out what’s in it to see what it means to you, and here I will go over the major tax related items.
What is old will not be new again
Do you remember what your taxes looked like in 2016? No? Well, the good news is that you don’t need to remember.
When the Tax Cuts and Jobs Act (TCJA) was passed in 2017 there were some rather sweeping changes made to the Internal Revenue Code, including lowered tax rates, a nearly doubled standard deduction, increased child tax credits, increased estate and gift tax exemptions, and a new 20% Qualified Business Income deduction. All of which were set to expire in 2026. The primary goal of the OBBBA, then, was to prevent that expiration, and thus the passage of this law is less about being the largest tax cut in history and more about avoiding the largest tax increase. But either way you want to look at it, that expiration date is no longer hanging over our heads and those provisions have been made permanent, or at least, the automatic expiration date has been removed.
Some old favorites with slight modifications
There is a slight increase to the standard deduction for those under 65, an additional $750 for single filers and $1,500 for those filing jointly. As for those 65 or older, an extra $6,000 deduction will be added to your standard deduction, but only if your modified gross income is under $75,000 if single, $150,000 if joint, with phase outs above that. And this extra $6,000 deduction is set to expire in 2029.
The previously increased Child Tax Credit wasn’t just made permanent, it was increased from $2,000 to $2,200.
The Qualified Business Income deduction was made permanent, and remains at 20%, but the phase out of the deduction for a specified service trade or business was increased by 50%, to $75,000 or $150,000 for joint filers, thereby helping out those struggling attorneys and accountants and whatnot.
And for those that itemize, but were limited by the TCJA to only $10,000 in deductions for state and local taxes (The “SALT” deductions you may have heard about), you can now deduct up to $40,000 for 2025. This limit goes up by 1% every year, but then it reverts back to $10,000 in 2030.
And now for something completely different
No tax on tips! Up to a $25,000 deduction, if your adjusted gross income is under $150,000, or $300,000 on a joint return. And only on “qualified tips” which are defined to include only tips where such tips are customarily and regularly received. So, hospitality, yes. Doctors and lawyers, no. Oh, and this only runs through 2028.
No tax on overtime! Up to a $12,500 deduction, if your adjusted gross income is under $150,000, $300,000 for a joint return. And yes, it’s only through 2028. I’m sensing a pattern…
A deduction for car loan interest. Up to a $10,000 deduction, for those with modified adjusted gross income under $100,000, or $200,000 joint. You don’t need to itemize to claim the deduction. Oh, and it expires after 2028.
Trump accounts. A new investment account for the kids in which the parents can contribute up to $5,000 per year, including $2,500 tax free from a parent’s employer. There is a lot that could be said here, but the fun part is, for kiddos born in 2025 through 2028, the trump account comes prefunded with a $1,000. So, free money for a part of Generation Beta.
A charitable deduction for nonitemizers of $1,000 or $2,000 for joint filers. This does not expire, but it also doesn’t start until 2026.
Business related provisions
There are many of these, too many to summarize here, but a couple of the more interesting are:
Bonus depreciation is back to 100% for property acquired on or after January 19, 2025, and this deduction is now permanent.
Changes to 1099 filing requirements include increasing the filing requirement on forms 1099-MISC and 1099-NEC from $600 to $2,000 for reporting services by independent contractors, and the 1099-K filing requirement by third party settlement organizations has increased so no reporting is necessary unless payees have earned more than $20,000 on more than 200 separate transactions in a period (This was $600 previously).
Is that all?
No, not by a long shot. The Bill was Big, as you may have heard. However, I believe that these are the provisions that most people may care about. Now we wait until 2028 to see what provisions Congress will let expire, or if we’ll see another bill, big, beautiful, or otherwise, to extend them.
