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OBBBA (One Big Beautiful Bill Act)

  • Writer: KACPA
    KACPA
  • 2 hours ago
  • 3 min read
Sally Kim, CPA
Sally Kim, CPA

On July 4, 2025 President Donald Trump signed the One Big Beautiful Bill Act making sweeping permanent and temporary changes to tax law. 



Individual Tax Changes


Rates & Brackets:

  • Seven tax brackets (10%/12%/22%/24%/32%/35%/37%) from the 2017 Tax Cuts and Jobs Act were made permanent with enhanced inflation adjustment for 10%/12%/22% brackets. Without this provision, five out of seven marginal (individual) income tax rates will rise at the end of the year. Nine out of 10 small businesses are organized as pass-through businesses and pay regular income tax rates rather than the C-corporation rate.


Standard Deduction:

  • The standard deductions for 2025 have increased to $15,750 (single), head of household $23,625, and married filing jointly to $31,500 permanently, then inflation adjusted.


New Senior Deduction:

  • A temporary $6,000 deduction per taxpayer for ages 65+ will be available from 2025-2028. This deduction will phase out when modified gross income exceeds $75K (single) or $150K (married filing jointly).


Child Tax Credit:

  • The expiring child tax credit is now permanent and increases to a $2,200 maximum in 2026. The credit will be adjusted for inflation thereafter.

  • The addition of "Trump Accounts" will give parents a $1,000 tax-free credit for each child born between 2025-2028.


SALT Cap:

  • The SALT cap for itemized deductions is being raised from $10,000 to $40,000 in 2025. This new cap will be adjusted for by 1% inflation each year through 2029, ending at the beginning of 2030.

  • The phaseout for the increase in itemized deductions starts at $500K MAGI.


Workforce Deductions (2025-2028):

  • No tax on Tips: From 2025-2028, qualifying individuals will be able to deduct $25,000 annually from the federal taxable income. Qualifying individuals will typically work in occupations which rely on tips including, waiters, bartenders, and more. This deduction phases out at $150K (single) and $300K (filing jointly).

  • Overtime: Qualified overtime compensation can be deducted up to $12,500 (single) and $25,000 (filing jointly).


Deduct car loan interest:

  • Car buyers could deduct up to $10,000 annually in car loan interest payments if they buy a vehicle assembled in the U.S. This deduction will phase out between $100K and $150K (single) or $200K~ $250K (filing jointly).



Business Tax Changes


R&D Expensing:

  • Permanent immediate expensing has been made available for domestic research and development expenses.

  • Small businesses can amend their 2022-2024 returns of up to $31 million in gross receipts.


Bonus Depreciation:

  • The 100% depreciation is now permanent. This replaces the phase-down of 40% for property after January 19, 2025.

  • Increases Section 179, Small Business Expensing Cap from $1.25 million to $2.5 million. This will allow small businesses to fully expense business equipment purchases in the first year.

  • A temporary 100% expensing for qualifying structures that start construction in 2025-2028 will be granted.


Pass-Through Deduction:

  • The 20% deduction rate for qualified business income (QBI) is now permanent. The phase-out threshold on deductions for business entities like SSTBs have been increased from $50K to $75K (single) and $100K to $175K (filing jointly).

  • A new $400 minimum deduction for active participants that is adjusted for inflation is in effect.


Green Energy:

  • Most Inflations Reduction Act (IRA) credits will terminate 2025-2027. This includes, but is not limited to tax credits for renewable energy production, such as solar and wind, as well as clean energy project will phase out by the end of 2025.

  • Exceptions for nuclear/hydro/geothermal are being made for construction projects that begin within 12 month of the signing of the OBBBA.



Estate & International


Estate Tax Exemption:

  • The lifetime gift tax exemption has been increased to $15 million (single) and $30M (married filing jointly) permanently, while being adjusted for inflation.

  • Increases and makes permanent the Small Business Estate Tax Exemption. The new exemption thresholds will be set at $15 million for individual filers and $30 million for joint filers.”


International:

  • GILTI (Global Intangible Low-Taxed Income) is renamed to Net CFC Tested Income (NCTI) with a new tax rate structure of 12.6% to 14% applied after foreign tax credits

  • The BEAT rate increases to 10.5% while maintaining current rules that allow US tax credits to offset BEAT liability.



Sally Kim, CPA

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