What Does The One Big Beautiful Bill Act Mean for My 2025 Taxes?

The One Big Beautiful Bill Act (OBBB) marks one of the most comprehensive federal tax reforms since the Tax Cuts and Jobs Act (TCJA) of 2017. It makes several TCJA provisions permanent while introducing new deductions and rules aimed at helping working families, businesses, and retirees. Whether you're a business owner, employee, investor, or retiree, the provisions in this law could affect your tax planning starting as early as 2025.

Below, we break down each major category of the bill to help you understand the key facts and how they may apply to your personal or business finances.

Individual Tax Provisions

Tax Brackets and Rates

The OBBB makes permanent the current seven-tier tax structure (10%, 12%, 22%, 24%, 32%, 35%, 37%) introduced under TCJA. It also enhances inflation indexing for the lower three brackets (10%, 12%, and 22%) starting in 2026.

Standard Deduction and Personal Exemptions

• The standard deduction increases permanently starting in 2025 to $15,750 for individuals, $23,625 for heads of household, and $31,500 for married couples filing jointly.
• Personal exemptions remain eliminated permanently.
• A new senior deduction allows taxpayers age 65 and older to claim an additional $6,000, phased out for incomes above $75,000 (individual) or $150,000 (joint), available from 2025 through 2028.

Child Tax Credit

Beginning in 2026, the child tax credit rises to $2,200 per qualifying child, with ongoing inflation adjustments. The refundable portion and phaseouts remain similar to current law.

Itemized Deductions

• The mortgage interest deduction cap of $750,000 for new loans is made permanent.
• The SALT deduction cap is temporarily increased to $40,000 in 2025, then phases down until it resets to $10,000 after 2029.
• A new charitable deduction offers an above-the-line amount of $1,000 for individuals and $2,000 for married couples.
• For high earners, a 35-cent-per-dollar cap is imposed on total itemized deductions.

New Temporary Deductions (2025–2028)

• Tip Income: Workers in tipped industries can deduct up to $25,000, phased out above $150,000 AGI.
• Overtime Premium Pay: Deduct up to $12,500 for individuals or $25,000 for couples.
• Auto Loan Interest: Deduct up to $10,000 on U.S.-assembled vehicles, phased out at $100,000 AGI ($200,000 joint).

Business Tax Provisions

Bonus Depreciation and Expensing

• 100% bonus depreciation for short-lived assets is restored permanently, reversing the TCJA’s phaseout that had begun in 2023.
• R&D expenditures may now be fully expensed immediately, with retroactive relief for small businesses.

Pass-Through Deduction (Section 199A)

The 20% pass-through deduction is made permanent, with increased phase-in thresholds and a guaranteed $400 minimum deduction for qualifying filers.

Interest Expense Limitations

Section 163(j)'s cap on net business interest expense remains in place, permanently based on EBITDA (earnings before interest, taxes, depreciation, and amortization).

Charitable Giving Rules for Businesses

A 1% floor is introduced on corporate charitable deductions, requiring companies to give beyond this threshold before deducting donations.

Estate and Gift Tax Provisions

• The estate and lifetime gift tax exemption will increase to $15 million per individual (or $30 million per couple) beginning in 2026, indexed for inflation.
• The step-up in basis at death remains in place, shielding heirs from capital gains on appreciated inherited assets.

Timeline: When the Changes Take Effect

FAQs About the One Big Beautiful Bill Act

What is the One Big Beautiful Bill Act?
OBBB is a 2025 tax reform bill that extends and enhances many elements of the 2017 TCJA, while adding new benefits and simplifying certain areas of the tax code.

When do the changes take effect?
Most provisions begin in 2025. Some temporary individual benefits expire in 2028. Business and estate changes are permanent.

How does the bill affect small businesses?
Pass-through businesses benefit from a permanent 20% deduction on qualified income, with higher thresholds and a guaranteed minimum deduction.

What happens to the SALT deduction?
The SALT cap increases to $40,000 in 2025, then phases down to $10,000 by 2030.

Are entertainment expenses deductible for businesses?
The OBBB does not reinstate entertainment deductions. They remain nondeductible under prior law.

What about the estate tax?
The exemption doubles to $15 million for individuals in 2026. The step-up in basis is preserved.

Let Wei, Wei & Co., LLP Help You Navigate the Changes

The One Big Beautiful Bill Act reshapes tax planning across the board. Whether you're a business owner, investor, or family planner, our experienced professionals are ready to help you adapt and optimize your strategy.

Contact us today to schedule a consultation tailored to your needs.