The OBBA: An Overview of Major Provisions

The One Big Beautiful Bill Act, or OBBA, was signed into law on July 4, bringing with it sweeping changes to the U.S. tax code for both individuals and businesses. Widely viewed as pro-business, the legislation makes permanent several provisions of the 2017 Tax Cuts and Jobs Act and introduces new deductions, credits and caps.

Watch the video below for a quick overview of key changes and what they could mean for you.

As with all major legislation, the details matter. Taxpayers are encouraged to consult with a qualified professional before making any decisions based on the new law. Below are highlights from the OBBA:

Key Provisions for Individuals

Tax Brackets and Deductions: The law adds one year of inflation adjustment for tax brackets. The standard deduction is now permanent and increased to $15,750 or single filers and $31,500 for joint filers. These will be indexed for inflation after 2025.

Pease Limitation Repealed: The deduction cap on high-income earners has been removed.

State and Local Tax (SALT) Deduction: The SALT deduction is raised to $40,000 in 2025 and will increase slightly through 2029. It will revert to $10,000 in 2030 unless Congress intervenes.

Charitable Contributions: Non-itemizing taxpayers can now deduct up to $1,000 (single) or $2,000 (joint). Itemizers will see deductions reduced by 0.5% of their contribution base, capped at 10% of taxable income.

Alternative Minimum Tax (AMT): The law raises the exemption and phase-out thresholds for AMT.

Educator Expenses: Certain unreimbursed expenses are now deductible for eligible teachers.

Moving Expense Deduction: Permanently eliminated, except for military personnel and members of the intelligence community.

Disaster Loss Deductions: Casualty loss deductions are now available for certain state-declared disasters.

Auto Loan Deduction: Taxpayers who purchase an American-made vehicle between 2025 and 2028 may deduct up to $10,000 in interest. This benefit phases out for those earning more than $100,000 ($200,00 for joint filers).

Electric Vehicle Credits: The $7,500 EV credit ends after September 2025. Credits for EV-charging equipment and bike commuting reimbursements also face cuts.

Mortgage Interest: The $750,000 cap on mortgage interest is made permanent, and interest on home-equity loans is no longer deductible. Mortgage insurance premiums on acquisition debt remain deductible.

Gambling Winnings: Loss deductions are now limited to 90%.

New Temporary Deductions:
- Tip Income: Up to $25,000 can be deducted through 2028 for workers tipped in occupations. Begins to phase out at $150,000 income ($300,000 joint).
- Overtime Pay: Deductions of $12,500 (single) or $25,000 (joint) are available for qualified overtime. Phases out at same income thresholds as tip deduction.

Student Loan Debt: Forgiven student loan debt due to death or disability is now permanently excluded from taxable income.

Social Security Income: Seniors earning up to $75,000 (or $150,000 joint) can deduct $6,000 (or $12,000 joint) from their income. This expires after 2028 unless extended.

Business Provisions

Qualified Business Income Deduction: The 20% deduction under IRC Section 199A is now permanent. The phase-in threshold rises to $75,000 for single filers and $150,000 for joint filers.

Capital Expenditures: Businesses can permanently expense 100% of qualified assets placed in service starting January 20, 2025.

Form 1099 Reporting: Reporting thresholds increase to $2,000 and will be indexed for inflation after 2026.

New Markets Tax Credit: Now permanent.

R&D Costs: Domestic research costs can be expensed immediately. Foreign R&D must be amortized over 15 years.

Foreign Tax Credits and International Taxation:
- Deemed paid credits under Section 960 increase to 90%.
- Global intangible low-tax income is renamed and deduction lowered to 40%.
- Foreign-derived income is renamed and deduction lowerd to 33.34%.

Base Erosion and Anti-Abuse Tax (BEAT): Permanently set at 10.5%.

Clean Energy Incentives Rolled Back

The OBBA accelerates the phaseout of clean energy tax incentives created under the Inflation Reduction Act.

It ends credits for energy-efficient homes and commercial buildings for projects beginning after June 30, 2026.

Estate and Gift Taxes

Starting in 2026, the estate and gift tax exemption is increased to $15 million (single) or $30 million (joint), indexed for inflation.

The generation-skipping transfer tax exemption is aligned with these figures.

TCJA tax brackets for trusts and estates are retained.

This summary covers only some of the major provisions of the One Big Beautiful Bill Act. The law is extensive and contains additional rules affecting narrower taxpayer groups. Final regulations and interpretations are still evolving.

Stay tuned for more detailed guidance and video updates from your team at Payroll Systems and JRBT.