A Tax-Focused Walk-Through of the One Big Beautiful Bill Act 

14 Jul 2025 A Tax-Focused Walk-Through of the One Big Beautiful Bill Act 

On July 4, 2025, the President signed the One Big Beautiful Bill Act (OBBBA), enacting legislation that adjusts large sections of the Internal Revenue Code and extends many tax provisions previously set to expire.

The legislation moved quickly with multiple revisions, and to date, the final enrolled statute hasn’t been released. Many regulatory agencies, including the IRS, will propose and issue guidance over the upcoming months and years to adapt to the specifics of the Act.

What follows is a high-level summary, not an exhaustive catalog; the Act contains scores of niche or industry-specific items that lie beyond the scope of 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). Further, you must have an SSN, and, if married, must file a joint return to qualify for either deduction.

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. To be considered a qualified tip, the tip amount must be determined by the payor and paid voluntarily.

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, but the deduction does not cover 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.

Above-the-line charitable deductions

Beginning in 2026, anyone may deduct up to $1,000 of cash gifts ($2,000 on a joint return) for certain charitable contributions even if they don’t elect to itemize. The rule is permanent.

Itemized charitable deductions

Starting in 2026, taxpayers who itemize may deduct qualified charitable gifts only to the extent that their qualified contributions exceed 0.5% of their AGI.

Trump savings accounts

US citizens born this year through 2028 are eligible to receive a $1,000 seed deposit in a new “Trump account.”

Earlier drafts of the legislation would have made the accounts function much like 529 plans or other custodial arrangements. During the final days of negotiations, however, lawmakers rewrote the mechanics. Although the final statutory language still isn’t public, several reports say the accounts will now be administered more like IRAs. Analysts note that many questions remain, and operational specifics will remain unknown until the Treasury releases guidance.

Current summaries suggest parents and other relatives may contribute up to $5,000 in after-tax dollars annually, and the money must be invested in stock funds.

Details are still fluid, so it’s worth tracking as new details emerge.

Scholarship donation credit

Starting in 2027, individuals can claim a nonrefundable credit up to $1,700 for gifts to qualified K-12 Scholarship Granting Organizations (SGOs) operating in states that have elected to participate. A qualified contribution cannot also be claimed as a charitable deduction.

Extensions or enhancements of existing provisions

Business and capital boosts

QBI deduction: The Act permanently extends the Qualified Business Income (QBI) deduction. This deduction allows eligible taxpayers to deduct up to 20% of their qualified business income. The permanent extension includes additional modifications that expand the phase-in range of the wage and investment limitation and introduce a minimum deduction for businesses in which the taxpayer materially participates.

Full first-year depreciation (bonus depreciation): Any 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&E 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.

The election for catch-up deductions must be made by July 4, 2026, and requires the filing of amended returns for those tax 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 amends the rules so that interest on financing for certain trailers and campers now qualifies for deduction under the limitation.

Excess business loss cap: A non-corporate taxpayer may not deduct excess business losses over an inflation-adjusted aggregate gross income for a tax year.  Any excess losses carried forward and treated as a net operating loss carryover to the following year.  This limitation on excess business losses was originally scheduled to expire after 2028.  The OBBBA has made this limitation permanent.

Meals for the convenience of employers: Under the prior law, employers could deduct expenses for meals they provided, for the employer’s convenience, to employees without including the value of the meals in the employee’s gross income.  The meals were subject to the 50% limitation for food and beverages.  The new law disallows the deduction for employer-provided meals that are excludable from an employee’s income.  There is an exception if the meals are sold or provided to employees on certain vessels, oil or gas platforms, or drilling rigs and their support camps.  The exception to the 50% deduction limit is also expanded to crew members of commercial fishing vessels.

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.

For tax years beginning after July 4, 2025, the new law requires informational reporting from QOFs with an extensive number of informational disclosures, including taxpayer personal identifiable information regarding disposals of investments in the QOF. Penalties for non-compliance can be severe.

Qualified Small Business Stock: For QSBS acquired after enactment, the percentage of gain excluded from gross income will rise from 50% to 75% if the stock is held for four years. 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 family and medical leave 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% and the GILTI deduction rate is lowered to 40%. 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 ($20,000 for those married filing separately). The deduction is subject to a phaseout and is reduced by 30% of the excess of the taxpayer’s modified AGI over a threshold amount. The initial threshold amount is $500,000 ($250,000 married filing separately). The OBBA preserves taxpayers’ ability to avoid the SALT deduction limit through pass-through entity tax rules.

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.

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, higher education, and postsecondary credentialing expenses. 529 plans are also now available for private, public, or religious elementary or secondary schools.

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.

Contact The Haynie & Company CPA Firm For Tax Advisor Services