The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, enacts significant and wide-ranging changes to U.S. tax policy, affecting individuals and businesses alike. Below you will find a summary of its key provisions regarding tax rates, deductions, credits, and exemptions. Over the coming months and beyond, we will be evaluating how these provisions will impact your planning and investment portfolio so that we can continue to help you make and execute great financial decisions.

Tax Rates:

• Individual Income Tax Rates: The Act permanently extends the individual income tax rates established by the 2017 Tax Cuts and Jobs Act (TCJA), including the top marginal rate of 37%. These rates had been scheduled to revert to their higher, pre-2017 rates beginning in 2026.

Tax Deductions:

• Standard Deduction: The Act permanently extends the increased standard deduction amounts from the TCJA. For 2025, this is $31,500 for married filing jointly and $15,750 for most other filers, with annual inflation adjustments.
• State and Local Tax (SALT) Deduction: The cap on the SALT deduction is temporarily raised from $10,000 to $40,000 for tax years 2025-2029, with inflation adjustments. This cap will revert to $10,000 in 2030. There is a phaseout for taxpayers with modified adjusted gross income (MAGI) above certain thresholds ($500,000 in 2025), but it won’t drop below $10,000.
• Tax Deductions for Tips and Overtime: A temporary provision (from 2025-2028) allows for deductions on qualified tips (up to $25,000 annually) and qualified overtime pay (up to $12,500 annually for individuals, $25,000 for joint filers). These are “above-the-line” deductions, meaning they apply regardless of whether an individual itemizes. However, they begin to phase out for higher-income earners with MAGI above $300,000 for joint returns and $150,000 for single returns.
• Deduction for Older Adults: A temporary $6,000 annual deduction (through 2028) is provided for taxpayers aged 65 and up with less than $150,000 per year of Modified Adjusted Gross Income (MAGI) for joint filers or $75,000 a year for single filers. This deduction partially addresses the President’s campaign promise to eliminate taxes on Social Security.
• Qualified Business Income (QBI) Deduction (Section 199A): The 20% QBI deduction for pass-through entities (e.g., LLCs, partnerships, S corporations) is made permanent, preventing its scheduled expiration at the end of 2025. The deduction limit phase-ins are expanded from $50,000 to $75,000 for single filers and from $100,000 to $150,000 for joint filers.
• Bonus Depreciation: The Act makes permanent the 100% bonus depreciation deduction for most tangible personal property with a recovery period of 20 years or less, acquired and placed in service on or after January 19, 2025. It also introduces temporary 100% expensing for certain newly constructed nonresidential real property used in “qualified production activities.”
• Mortgage Insurance Deduction: The bill restores a deduction for mortgage insurance.
• Charitable Contributions: Taxpayers who do not itemize their deductions can deduct up to $1,000 (single) and $2,000 (joint) for charitable contributions. Taxpayers who itemize may only itemize charitable contributions that exceed .5% of AGI. The 60% AGI limit for cash gifts to public charities is retained.
• Auto Loan Interest: A temporary deduction through 2028 for interest on car payments for new cars with final assembly done in the United States. The maximum deduction is $10,000, and it phases out between $200,000 and $250,000 of MAGI for married couples and between $100,000 and $150,000 for single filers. 

Tax Credits:

• Child Tax Credit: The Child Tax Credit is permanently increased to $2,200
• Scholarship Tax Credit: A new tax credit is established for donations to scholarship-granting organizations, with a permanent credit of $1,700. To qualify for the credit, the scholarship-granting organization must be operating in a state that has officially opted into the program.
• Energy Tax Credits: The bill significantly changes and curtails various clean energy tax credits, including repealing credits for electric vehicles and residential energy products, and accelerating phase-outs for others. 

Tax Exemptions:

• Estate, Gift, and Generation-Skipping Transfer (GST) Taxes: The Act permanently raises the exemption amounts for estate, gift, and generation-skipping transfer taxes to $15 million per individual with annual inflation adjustments. The exemption had previously been scheduled to revert to $7 million in 2026.
• Trump Accounts: A new savings vehicle called “Trump Accounts” is established. Features of these accounts include:
  • A $1,000 government-provided bonus for children born between 2025 and 2028 
  • A $5,000 annual contribution limit (including up to $2,500 tax-free from the parent’s employer) until the beneficiary turns 18
  • Funds become available when the beneficiary turns 18
  • Growth is deferred until the money is withdrawn or age 31
    • Qualified withdrawals will be taxed at capital gains rates
    • Non-qualified withdrawals will be taxed at ordinary income rates

Other Provisions:

• Expanded 529 Qualified Expenses: Additional expenses are now eligible as qualified expenses for 529 distributions. These include certain K-12 education expenses, vocational certifications, and professional credentials. Not all states will conform to Federal rules in terms of state treatment of distributions.
• Qualified Educational Assistance: This provision, which allows employers to pay for up to $5,250 of student loans on a tax-free basis, has been made permanent and indexed for inflation beginning in 2026. It was previously set to expire at the end of 2025.
• Qualified Opportunity Zones: The bill makes permanent tax benefits for Qualified Opportunity Zones (that were set to end on December 31, 2026) and modifies the deductions, holding periods, and Opportunity Zone designations beginning January 1, 2027

In essence, the One Big Beautiful Bill Act aims to make many of the individual and business tax cuts from the TCJA permanent, introduce new targeted tax relief for workers and seniors, and significantly alter provisions related to energy and international taxation. It is projected to result in substantial tax cuts, primarily benefiting higher-income individuals, and adds significantly to the federal debt.