The One Big Beautiful Bill Act—referred to as the Big Beautiful Bill or One Big Beautiful Bill (OBBB)—has received renewed attention. The House of Representatives approved the Senate’s version, and President Trump signed it into law on July 4, 2025. These tax changes are now enacted.
Below, we provide a comprehensive overview of the One Big Beautiful Tax Bill, outlining its implications for individual and business taxpayers as well as subsequent steps.
What is the One Big Beautiful Bill?
The One Big Beautiful Bill is an extensive tax reform initiative introduced by House Republicans, aligning with President Trump’s continued efforts on tax reduction. It serves as an update to the 2017 Tax Cuts and Jobs Act (TCJA), introducing multiple new tax provisions affecting individuals, families, and small businesses.
Did the Big Beautiful Bill pass?
Update July 4, 2025: Both chambers of Congress have ratified the final version of the One Big Beautiful Bill, and the president has enacted it into law. Consequently, these new tax regulations will be effective starting with the 2025 tax year.
Tax Reform 2025: Primary Tax Changes in the One Big Beautiful Bill
This summary begins with key changes for individual taxpayers, followed by adjustments relevant to business owners.
Tax Changes for Individuals: Impact of the One Big Beautiful Bill on Income Taxes
Extended and made permanent many provisions from the 2017 TCJA
The legislation extends several core elements of the 2017 TCJA that were set to expire after 2025. The standard deduction—nearly doubled by the TCJA—remains elevated, rather than reverting to prior thresholds. Provisions such as updated brackets, elimination of the personal exemption, and adjustments to various credits and deductions are also retained.
SALT Deduction Cap Increase
Under previous law, the cap on State and Local Tax (SALT) deductions was $10,000, disproportionately impacting residents in high-tax states. The new bill increases this cap to $40,000 for married couples with earnings up to $500,000, phasing down for higher incomes. Taxpayers above this threshold may continue to deduct up to $10,000. The expanded cap adjusts annually for inflation through 2029 and reverts to $10,000 in 2030 unless legislation changes.
This adjustment benefits itemizing taxpayers in high-tax states who fall below the income threshold.
Extra Deduction for Seniors
Effective in 2025, individuals aged 65 and older can claim an additional $6,000 standard deduction, up from the previous $2,000, subject to phase-out if AGI exceeds $75,000 for single filers or $150,000 for joint returns. This provision applies for tax years 2025 through 2028.
No Tax on Tips
For 2025–2028, certain tip income qualifies for an above-the-line deduction, eliminating the need to itemize. Requirements include:
- A valid Social Security number for the taxpayer and spouse, if applicable.
- Deduction capped at $25,000 per year.
- Phase-out starting at $150,000 modified adjusted gross income for single filers or $300,000 for married filing jointly.
- Employers must reflect total cash tips and occupation on Form W-2.
Note: While federal income tax relief applies, Social Security, Medicare, state, and local taxes remain due. All tip income must still be reported.
No Tax on Overtime Pay
From 2025 through 2028, overtime wages qualify for an above-the-line deduction:
- Valid SSN(s) required.
- Deduction limited to $12,500 each year for single filers; $25,000 for joint filers.
- Phase-out starts at $150,000 MAGI for singles; $300,000 for joint filers.
- Employers must report qualified overtime separately on Form W-2.
This benefit is exclusive to overtime income, not regular wages. Double-counting between tip and overtime deductions is prohibited.
Increased Child Tax Credit
Updates to the Child Tax Credit (CTC) and Additional Child Tax Credit (ACTC) include:
- CTC increases to $2,200 per qualifying child for 2025.
- In calendar year 2026 and forward, the CTC will be indexed for inflation.
- ACTC is permanently set at $1,400 and also indexed.
- Income phaseout thresholds fixed at $200,000 (single filers) and $400,000 (joint filings).
Expiration of Certain Green Energy Tax Benefits
Several incentives from the Inflation Reduction Act will conclude:
- Electric Vehicle (EV) tax credit for new/used vehicles ends after September 30, 2025.
- Credits for energy-efficient home improvements and residential clean energy’s end December 31, 2025.
Individuals contemplating green upgrades should observe these deadlines and have installations completed prior to December 31, 2025.
Car Loan Interest Deduction
For 2025–2028, interest on qualifying passenger vehicle loans is deductible above the line, subject to a $10,000 annual limit:
- Deduction phases out above $100,000 MAGI ($200,000 for joint filers).
- Vehicle must be designed for public roads, have at least two wheels, be assembled in the United States, and carry a valid VIN.
- RVs and campers are excluded.
1099 Reporting Threshold Updates
Changes effective 2026:
- Form 1099-NEC and 1099-MISC reporting threshold rises to $2,000, indexed for inflation.
- Form 1099-K threshold returns to $20,000 and at least 200 transactions annually.
These changes reduce the burden for those with minor freelance or gig activities.
Tax Changes for Business Owners: Effects of the One Big Beautiful Bill
Permanent QBI Deduction (Section 199A)
The Qualified Business Income (QBI) deduction remains permanent at 20%. Notably:
- Specified service trades or businesses (SSTBs) have higher phaseout thresholds: $75,000 (single) and $150,000 (joint).
- A minimum deduction of $400 applies if QBI is at least $1,000.
Comprehensive calculation support is available through Complete CPA Solutions.
SALT Workarounds for Pass-Through Businesses
Pass-through entities (partnerships, LLCs, S corporations) benefit from maintained and enhanced state and local tax (SALT) deduction workarounds:
- SALT deduction cap increases to $40,000, adjusted for inflation through 2029.
- Pass-through entity tax (PTET) deductions are preserved.
- SSTB limitations are lifted, expanding access to the workaround.
Business owners retain the ability to utilize these strategies regardless of pass-through entity type.
Restoration of 100% Bonus Depreciation
For property placed in service between January 20, 2025, and January 1, 2030, immediate full-cost deduction is reinstated via 100% bonus depreciation.
Complete CPA Solutions provides guidance for qualification and deduction optimization.