A tax-focused walk-through of the One Big Beautiful Bill Act 

Article | July 09, 2025

Authored by Weinlander Fitzhugh

President Trump signed the “One Big Beautiful Bill Act” (OBBBA) on July 4, 2025, enacting an overhaul that permanently extends many tax provisions previously set to expire and rewrites large sections of the Internal Revenue Code. Because the measure is so broad, the Treasury Department, IRS, and other agencies will spend the next year or more issuing regulations, forms, and notices that fill in the operational details.

What follows is a high-level summary, not an exhaustive catalog; the Act contains scores of narrow or industry-specific items that lie beyond this brief. To keep the discussion practical, we have grouped the tax changes into two categories: brand new rules and extensions or enhancements of existing provisions. 

Additional nuances will surface as agency guidance appears, but this framework should help you identify the provisions most relevant to your planning for 2025 and beyond. 

Brand new rules created by the Act

New deductions for tips and overtime pay

OBBBA introduces two temporary deductions for tips and overtime pay from 2025 to 2028. Both deductions phase out once modified AGI reaches $150,000 ($300,000 for joint filers).

Up to $25,000 of cash tips received in an occupation that already customarily received tips on or before December 31, 2024, may qualify for a deduction. Tips that are mandatory service charges, like automatic gratuities, or those received by certain occupations, don’t qualify. The Treasury must publish a list of qualifying occupations within 90 days, and employers will be required to report both total cash tips and the worker’s occupation on the 2025 Form W-2. 

For taxpayers who receive overtime pay, up to $12,500 ($25,000 for joint returns) may be deductible. The deduction applies only to the overtime premium required by the FLSA, not the entire overtime payment. For example, if an employee’s base wage is $30 per hour and the FLSA-mandated rate for overtime is $45, only the $15 premium portion is deductible. Contractual “double-time” or state-only overtime rules do not qualify. Employers must report the qualified premium separately on Forms W-2 starting with 2025 wages, which will require payroll systems to track regular pay and FLSA-required premiums as distinct items. The Treasury is expected to allow a “reasonable approximation” method for 2025 while programming catches up.

Vehicle loan interest deduction

Up to $10,000 of interest paid each year on a qualified passenger-vehicle loan may be deductible. A vehicle generally qualifies if its final assembly occurred in the United States and was purchased after 2024; however, the deduction does not apply to leases or fleet financing. The deduction is available for 2025-2028 tax years and begins to phase out once modified AGI exceeds $100,000 for single filers or $200,000 for joint filers.

The Treasury has 12 months to prescribe reporting rules for this deduction.

Above-the-line charitable deductions

Beginning in 2025, anyone may deduct up to $1,000 of cash gifts ($2,000 on a joint return) above the line. You cannot claim both this deduction and an itemized charitable deduction for the same dollars, and contributions must be in cash to a §501(c)(3) organization. The rule is permanent.

Trump Accounts

Starting with children born or adopted between January 1, 2025, and December 31, 2028, the Treasury will open a federally administered savings account and seed it with $1,000. Once the program goes live in 2026, parents and others may contribute up to $5,000 per year (aggregated per child). Earnings grow tax-deferred and may be withdrawn without federal penalty for qualified education expenses, up to $15,000 of first-home costs, or up to $25,000 to start or buy a business. 

Think of the accounts as something between a 529 plan and an UTMA/UGMA. It has broader permitted uses than a 529, but less favorable tax treatment. When compared to an UTMA/UGMA, the contributions and earnings in these accounts may avoid kiddie-tax rules while they stay in the account, but funds are locked to the three qualified categories until age 30, so there’s a little less flexibility. 

Scholarship donation credit

Starting in 2027, individuals can claim a dollar-for-dollar credit (up to the greater of $5,000 or 10% of AGI) for gifts to certified K-12 scholarship funds. Gifts to a college or university scholarship fund do not generate the credit. 

Extensions or enhancements of existing provisions

Business and capital boosts

Qualified Business Income Deduction Permanently Extended: The Act permanently extends the Qualified Business Income (QBI) deduction under IRC §199A. This deduction allows eligible taxpayers, including owners of sole proprietorships, partnerships, LLCs, and S corporations, to deduct up to 20% of their qualified business income. The permanent extension includes additional modifications that expand eligibility and clarify qualification rules to benefit a broader range of small business owners.

Full first-year depreciation (bonus depreciation): Any machinery, computers, furniture, or other qualified property your business places in service on or after January 19, 2025, may now be written off 100% in the first year – permanently. That immediate deduction had been scheduled to phase out.

Higher ceiling for §179 expensing: §179 lets businesses deduct the cost of most tangible equipment (and certain building improvements) instead of depreciating it over time. OBBBA raises the annual dollar cap to $2.5 million and begins phasing the benefit out when total qualifying purchases top $4 million in a year. Both thresholds will adjust for inflation going forward.

Instant R&D deductions restored: U.S. research expenditures, previously required to be amortized over five years, can now be deducted in the year paid. Companies averaging $31 million or less in gross receipts may elect a catch-up deduction for 2022-2024; larger firms may accelerate the remaining amortization over one or two years.

Business interest deductions: Since 2022, many companies could deduct net interest only up to 30% of EBIT (earnings before interest and taxes). Starting with the 2025 tax years, the cap reverts to 30% of EBITDA, adding back depreciation and amortization, which typically allows a larger deduction. The Act also tweaks the rules so that interest on financing for certain trailers and campers now qualifies for deduction under the limitation. 

Excess business loss cap: The limitation on excess business losses of noncorporate taxpayers is now permanent. It was originally scheduled to expire after 2028. 

Opportunity Zones: The Opportunity Zone program is renewed indefinitely, with zones set to be re-designated every ten years. There’s also a narrower definition of “low-income community,” and a new “Qualified Rural Opportunity Fund” that offers investors more substantial tax benefits. QROFs offer a rolling 30% basis step-up after 5 years (compared to 10% for others) and a reduced “substantial improvement” requirement, which reduces the amount that must be reinvested in property improvements. 

Qualified Small Business Stock: For QSBS acquired after enactment, the percentage of gain excluded from gross income will rise from 50% to 75%. If held for five years or more, the exclusion percentage will increase to 100%.

Employer-provided childcare credit: The credit rate on qualified child-care expenses jumps from 25% to 40%, and the annual dollar cap increases to $500,000 ($600,000 for certain small employers).

Employer credit for FMLA pay: The temporary employer credit for paid family and medical leave is made permanent, preserving a credit of up to 25% of wages paid during qualifying leave. 

Changes to International Tax Provisions: Significant adjustments have been made to international tax provisions. The deduction rates for foreign-derived intangible income (FDII) and global intangible low-taxed income (GILTI) have been updated starting after 2025. The FDII deduction rate is reduced to 33.34% (previously 37.5%), and the GILTI deduction rate is lowered to 40% (previously 50%). Additionally, the Base Erosion and Anti-abuse Tax (BEAT) minimum tax rate will be adjusted to 10.5% (previously scheduled to rise to 12.5% after 2025).

Individual tax framework

Bigger standard deduction: The Act locks in the 2017 individual rate schedule and increases the standard deduction to $15,750 for single filers and $31,500 for joint filers, effective in 2025, with ordinary inflation indexing thereafter. 

Temporary senior bonus deduction: Qualifying taxpayers who are blind and/or at least 65 are already eligible for an add-on to the standard deduction. In 2025, the add-on deduction $1,600 per person ($2,000 if unmarried and not a surviving spouse). 

The OBBBA adds a second layer: a “senior bonus” of up to $6,000 per taxpayer (or $12,000 per joint return). The full amount is available when modified AGI is $75,000 or less for singles and $150,000 or less for joint filers. It phases out and disappears at $175,000 for singles ($250,000 for joint filers). The bonus applies only to returns from 2025 to 2028 and stacks on top of the normal age and blindness add-on.

SALT cap relief: OBBBA temporarily increases the ceiling on the itemized deduction for state and local taxes from $10,000 to $40,000 for joint filers ($20,000 for single filers) beginning with 2025 returns. The cap rises by 1 percent per year through 2029 and then reverts to $10,000 in 2030.

Child Tax Credit: The Act permanently increases the Child Tax Credit (CTC) to $2,200 per qualifying child under the age of 17, effective for tax year 2025. The maximum refundable portion rises to $1,700 the same year. 

Estate and gift exemption made permanent: The doubled lifetime exemption that was due to sunset after 2025 is made permanent and bigger: $15 million per person ($30 million married), indexed for inflation beginning in 2026. 

Alternative Minimum Tax (AMT) exemptions: The larger post-2017 exemption amounts remain in place, but the income levels at which the exemption phases out revert to their pre-TCJA starting points – approximately $ 500,000 (single) and $1 million (joint) in 2025, indexed thereafter. Result: most middle-income filers remain untouched, while very high-income taxpayers may lose more of the exemption than under current rules.

Termination of Consumer-Side Green Energy Credits: Several consumer-focused green energy credits established by the Inflation Reduction Act of 2022 will terminate generally after 2025. Credits ending include the Clean Vehicle Credit, Previously Owned Clean Vehicle Credit, Qualified Commercial Clean Vehicle Credit, Alternative Fuel Refueling Property Credit, Energy-Efficient Home Improvement Credit, Residential Clean Energy Credit, and the New Energy-Efficient Home Credit. These changes significantly reduce incentives for consumer adoption of certain clean energy technologies.

Return of the Pease Limitation: The Act reintroduces the Pease limitation for high-income taxpayers starting after 2025. Under this provision, taxpayers in the highest income tax bracket (37%) will face a phased reduction of certain itemized deductions, limiting deductions as income increases.

Expansion of 529 Plan Uses: The Act expands permitted uses of funds in 529 plans. Previously restricted to higher education expenses, these accounts can now cover expenses related to elementary, secondary, and home schooling, providing families with broader financial flexibility in managing educational costs.

Stay tuned and proactive

The One Big Beautiful Bill Act is still fresh ink. Since its first draft, the text has shifted repeatedly, and many operational details remain open-ended until the Treasury, IRS, and other agencies publish regulations, forms, and notices over the coming months. Because the law is both expansive and evolving, this summary cannot cover every niche rule or later clarification.

Please keep an eye on future guidance, and remember that a seemingly small paragraph in the statute can have an outsized impact once the regulations land. If any of the provisions outlined above could affect your personal or business planning, reach out to our office now so we can evaluate the specifics of your situation and adjust strategies before the new rules take full effect.