How Does The One Big Beautiful Bill Act Impact You?

The One Big Beautiful Bill Act (OBBBA) was signed into law on July 4, 2025. Given the massive size and comprehensive nature of the OBBBA, many are still trying to understand its nuances. Here, we highlight the provisions impacting financial planning, estate planning, and closely held businesses.

Individual Income Tax

• Permanent extension of the 2017 tax cuts included in the Tax Cuts and Jobs Act (TCJA) – The OBBBA extends the TCJA tax cuts and maintains a current top income tax rate of 37%.

• An increased standard deduction threshold – For 2025, the standard deduction will be $31,500 for joint filers, $23,625 for head of household, and $15,750 for all other filers. There is a temporary $6,000 increase for seniors through 2028 but is phased out above $75,000 in Modified Adjusted Gross Income.

• Car loan interest deduction – This provision, which allows a deduction of up to $10,000 of auto loan interest for U.S.-made vehicles, expires in 2029. The deduction phases out at a rate of 20 percent when income exceeds $100,000 for single filers and $200,000 for joint filers.

• An increase in the child tax credit amount – There’s an increase to $2,200 for 2025 that will be adjusted for inflation in future years. This credit is limited to families with Social Security numbers and is phased out for Modified Adjusted Gross Income (MAGI) of $200,000 for single filers and $400k for married filing jointly.

• An increased state and local tax (SALT) deduction – This deduction was raised from $10,000 to $40,000, with a 1% increase in the cap each year through 2029 before returning to the $10,000 limit for 2030. The deduction is reduced for taxpayers with income over $500,000.

• Home Mortgage Deduction – This provision makes permanent the $750,000 principal limit for the home mortgage interest deduction.

• Savings accounts for newborns – These accounts will be funded with an initial $1,000 government contribution for children born between 2025 – 2028 and are eligible to receive up to $5,000 per year in parental after-tax contributions. The money grows tax-free until it’s withdrawn and must be invested in a broad stock index. Account holders can use the funds once they turn 18 for "qualified purposes" including paying for college, starting a business, or buying a first home, as the accounts essentially convert to traditional IRAs.

• Above the line Charitable Contribution Deduction – This provision creates a permanent $1,000 above-the-line deduction for charitable contributions ($2,000 for joint filers).

Business Tax Provisions

• R&D Expensing – This provision permanently restores immediate expensing for domestic research and development (R&D) expenses; small businesses with gross receipts of $31 million or less can retroactively expense R&D back to after 12/31/21; all other domestic R&D between 12/21/21 and 1/1/25 can accelerate remaining deductions over a one- or two-year period.

• Bonus Depreciation – This provision permanently restores 100 percent bonus depreciation for short-lived investments.

• Pass-through Business income Deduction – This provision makes the Section 199A pass-through deduction permanent;  

• Qualified Opportunity Zones: This provision makes QOZ benefits permanent. These are in census tracts certified by the U.S. Treasury as low-income. If you reinvest capital gains into a QOZ investment, you can defer taxes on those gains. After holding the QOZ investment for five years, the deferred gains will receive a 10% basis step-up that will be excluded from taxation. If held for 10 years, then new gains from a QOZ investment are tax-free upon sale. However, deferred gains in QOZ holdings prior to the enactment of the OBBBA will still require recognition on or before 12/31/26.  

• Qualified Small Business Stock: To qualify, the stock must be acquired directly from a domestic C corporation (not on the secondary market). The corporation must have gross assets of $75 million or less. At least 80% of its assets must be used in an active qualified business. This provision provides for tiered gain exclusion allowing a 50% exclusion for shares held more than three years, a 75% exclusion for shares held more than four years, and a 100% exclusion for shares held more than five years with an exclusion cap of $15 million.

Estate Tax Provisions

• This provision permanently increases the estate and lifetime gift tax exemption to an inflation-indexed $15 million for single filers and $30 million for joint filers beginning in 2026.

Questions? 

Do you have additional questions about the One Big Beautiful Bill Act? Share them below, and we'll address in a future article.

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