Unpacking Tax Implications of the ‘One Big Beautiful Bill’
On Friday, July 4, 2025, President Trump signed the “One Big Beautiful Bill Act” (OBBBA), which contains the largest tax law changes since 2017’s Tax Cuts and Jobs Act (TCJA). Politics aside, the OBBBA provides far greater business and individual tax certainty, as many TCJA provisions were scheduled to expire at the end of 2025. Taxpayers can now rely on a more certain tax outcome, though some key provisions apply only for the next several years. Key individual tax provisions of the OBBBA include:
Permanently extends tax brackets at current levels, with the top bracket at 37%.
Retains the higher standard deduction, set at $15,750 for single filers and $31,500 for joint filers in 2025 (indexed for inflation thereafter).
Adds a new senior citizen deduction for taxpayers aged 65 and older of $6,000 per person. This provision is meant to deliver on Trump’s campaign promise of “no tax on Social Security”. Note that this deduction phases out for income over $90,000 (single) or $180,000 (joint).
Makes the child tax credit permanent at $2,200 per qualifying child in 2025, with inflation adjustments in subsequent years.
Adds new deductions for tip income of up to $25,000, and for overtime pay of up to $12,500 (single) and $25,000 (joint). Note, however, that these are also subject to phaseouts at higher income levels ($150,000 single, $300,000 joint) and lapse after the 2028 tax year.
New deduction of up to $10,000 of auto loan interest for purchases of qualified vehicles manufactured in the U.S. for tax years 2025-2028, with income phaseouts starting at $100,000 (single) and $200,00 (joint).
Increase in the deductibility of state and local taxes to $40,000 per year, with income phaseouts to the previous $10,000 limit after $500,000 of adjusted gross income, for tax years 2025-2029.
Non-itemizers will be able to deduct up to $1,000 (single) or $2,000 (joint) in charitable contributions starting in 2026, but taxpayers who itemize deductions will not be able to deduct the first 0.5% of their adjusted gross income of charitable contributions due to a new floor on such deductions.
Expansion of Section 529 plans allow use of up to $15,000 per year for K-12 tuition and some professional licensing expenses, beginning in 2026.
The OBBBA restricts individuals from claiming deductions for “clean” vehicles and energy-efficient home improvements. Taxpayers now must complete them by September 30, 2025 (vehicles) or December 31, 2025 (home improvements).
The new law also contains very good news on estate taxes. The law sets a permanent base of $15 million per individual starting in 2026, adjusted for inflation thereafter, and retains spousal portability, allowing married couples to shield up to $30 million of wealth from Federal estate taxes. The certainty provided here should allow estate planners to develop more effective and lasting estate plans for wealthy clients.
The OBBBA contains several taxpayer-friendly provisions for businesses and their owners to provide economic certainty and more business-friendly tax treatment of business expenses, including:
“Bonus depreciation” of 100% of the cost of property acquired after January 19, 2025, was made permanent.
Section 179 deductions for purchases of qualified property like manufacturing equipment increases to $2.5 million, indexed for inflation in future years.
Permanent restoration of allowable expensing of qualifying domestic research and development expenses. This provision should make the incurring of technical costs like software research and development much more attractive to U.S. businesses going forward.
Permanent extension of the 20% qualified business income (QBI) deduction for pass-through businesses, which allows businesses that pass through their tax liability to owners, such as S corporations and LLCs, to be on a more equal footing with other corporations.
These provisions are just the highlights of what amounts to an almost 900-page omnibus bill; there are more tax and non-tax parts of this huge new law that affects every citizen in some way. It is important for all taxpayers to engage with their tax advisors as soon as possible to take advantage of potential planning opportunities—the first important deadline for planning appears to be September 30, 2025, for clean vehicles.
Remember, our leaders in Washington, no matter who controls the White House or the gavel of Congress, never fail to do one thing consistently—they always make the tax code more complicated with any change. This fact alone makes it crucial to discuss your tax situation with us at CM Wealth and/or your tax advisor to ensure you are getting the most from your tax planning.