07/07/2025
One Big Beautiful Bill (OBBB) tax changes" refers to tax changes enacted through the One Big Beautiful Bill. This legislation includes significant tax provisions, affecting both individuals and businesses.
Individual Tax Changes:
• Extension of TCJA Provisions: The bill permanently extends key aspects of the 2017 Tax Cuts and Jobs Act (TCJA), including lower income tax rates and the doubled standard deduction.
• Increased Standard Deduction for Seniors: Taxpayers aged 65 and older receive an additional standard deduction of $6,000 from 2025 to 2028, with an income phaseout.
• SALT Deduction Cap Increase: The State and Local Tax (SALT) deduction cap is temporarily raised to $40,000 for 2025, with an annual inflation increase through 2029. The cap reverts to $10,000 in 2030.
• Child Tax Credit: The Child Tax Credit increases to $2,200 per child in 2025 and is indexed for inflation thereafter.
• Estate and Gift Tax Exemption: The estate and lifetime gift tax exemption is permanently increased to $15 million per individual ($30 million for married couples) in 2026 and indexed for inflation.
• Deductions for Tips and Overtime Pay: Temporary above-the-line deductions are available for certain tip income and overtime pay from 2025 through 2028. These deductions are subject to income limits.
• Auto Loan Interest Deduction: A temporary, above-the-line deduction for qualified auto loan interest is available for vehicles assembled in the U.S. from 2025 to 2028, up to $10,000. This deduction is subject to income phaseouts.
Business Tax Changes:
• Research and Development (R&D) Expensing: Businesses can immediately deduct domestic R&D expenses in the year incurred, reversing the prior law's amortization requirement.
• Bonus Depreciation: The bill permanently reinstates 100% bonus depreciation for qualifying property acquired and placed in service after January 19, 2025.
• Section 179 Expensing: The Section 179 deduction limit is increased to $2.5 million, with a phaseout threshold of $4 million, for property placed in service after 2024.
• Qualified Business Income (QBI) Deduction: The Section 199A QBI deduction is made permanent at 20%. Income thresholds for specified service businesses are raised, and a minimum deduction of $400 is introduced for qualifying taxpayers.
Impact on the Affordable Care Act (ACA):
• Expiration of Enhanced Premium Tax Credits: The OBBB does not extend the enhanced ACA subsidies which are set to expire at the end of 2025. This is expected to increase premiums for many individuals and could lead to coverage losses.
• Eligibility Verification: The OBBB includes new ACA requirements for eligibility verification for premium tax credits.
• Elimination of Recapture Limit: The limit on the recapture of excess advance premium tax credits is removed for tax years beginning after December 31, 2025.
Important Notes:
• The OBBB passed both the House and Senate and awaits the President's signature.
• Some provisions, like the temporary deductions for tips, overtime, and auto loan interest, are scheduled to expire after 2028.
• The OBBB is expected to have a significant impact on health care, including potential coverage losses due to the expiration of enhanced subsidies and changes to Medicaid funding.
• While the OBBB makes some permanent changes, other provisions are temporary, requiring taxpayers to stay informed about future legislation.
