Legislative Summary: The “One Big Beautiful Bill” (OBBB) or The Bill– Tax Reform Overview
On July 4, 2025, President Donald J. Trump enacted H.R. 1 of the 119th Congress, formally titled the One Big Beautiful Bill (OBBB). This expansive legislative package builds upon the Tax Cuts and Jobs Act (TCJA) of 2017 and introduces numerous permanent and temporarychanges affecting individual taxpayers, business entities, and international transactions. At 870 pages in length, the OBBB represents a comprehensive and transformative revision of the Internal Revenue Code.
This memorandum provides an executive-level summary of important tax provisions and their potential implications for U.S. taxpayers. It is intended to assist in evaluating planning strategies in light of this significant legislative development but in no way is it a complete analysis.
I. Individual Tax Provisions
Permanent Extensions and Modifications to TCJA Provisions:
Individual Income Tax Rates: The Bill makes permanent the TCJA’s marginal income tax brackets, maintaining rates between 10% and 37%. Long-term capital gains remain taxed between 10% and 20%, with the 3.8% Net Investment Income Tax continuing to apply.
Standard Deduction: Codifies increased deduction levels: $15,750 for single filers,$31,500 for joint filers, and $23,625 for heads of household. Indexed annually for inflation.
Charitable Contributions (Standard Deduction Filers): Allows an additional
deduction of $1,000 (single) or $2,000 (joint) for qualified charitable contributions.
Personal Exemptions: Permanently repealed.
Itemized Deductions Adjustments:
State and Local Tax (SALT) Deduction: Increased to $40,000 with a phased reduction commencing at $500,000 AGI. The original $10,000 cap is reinstated in2030.
Mortgage Interest Deduction: The $750,000 loan cap under TCJA is retained permanently.
Charitable Contributions: Deductibility limited to amounts exceeding 0.5% of AGI.
Miscellaneous Deductions and Casualty Losses: Permanently disallowed except for federally declared disaster losses.
Child-Related Tax Credits:
Child Tax Credit: Increased to $2,200 per qualifying child, with $1,700 refundable.Requires a valid SSN for each child.
Child and Dependent Care Credit: Enhanced to 50% of eligible expenses, subject to income-based phaseouts.
Estate and Gift Tax:
Increases the exemption amount to $15 million per individual as of 2026, indexed for inflation thereafter.
Alternative Minimum Tax (AMT):
Permanently increases the exemption to $500,000 (single) and $1,000,000 (joint), indexed for inflation. Prior issues related to “bracket creep” have been largely resolved.
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II. Temporary Provisions Applicable to Individuals (2025–2028)
Overtime Pay Deduction: Deductible up to $12,500 (single) or $25,000 (joint) above standard wages; phased out above $150,000/$300,000 AGI.
Tip Income Deduction: Deductible up to $25,000 for workers in customary tipping industries; subject to the same phaseout thresholds.
Auto Loan Interest Deduction: Up to $10,000 for interest on new, U.S.-assembled passenger vehicles. Phaseouts begin at $100,000/$200,000 AGI.
Senior Deduction: Additional $6,000 deduction for taxpayers aged 65 and over; phased out at $75,000/$150,000 AGI.
III. Investment and Savings Incentives
Qualified Small Business Stock (QSBS): Enhances capital gain exclusions under §1202. Depending on the holding period (3 to 5 years), exclusions range from 50% to100%.
Opportunity Zones: Program is made permanent. However, current designations expire in 2026. New zones to be designated thereafter.
Trump Accounts for Minors: Tax-advantaged savings vehicle for minors, with up to $5,000 in annual contributions and a $1,000 credit for eligible accounts opened between 2025–2028.
Clean Energy Tax Incentives: Many credits (e.g., EVs, energy-efficient buildings) are phased out by mid-2026.
IV. Business Tax Provisions
Qualified Business Income Deduction: The 20% pass-through income deduction under §199A is made permanent.
Business Interest Expense Deduction: EBITDA-based formula restored for determining deductibility of interest, effective for tax years beginning after 2024.
Bonus Depreciation: 100% bonus depreciation reinstated for property placed in service post-January 19, 2025.
Qualified Production Property (QPP): Additional elective 100% depreciation through 2030 for eligible U.S. manufacturing and refining property.
R&D Expenses: Immediate deduction of domestic R&D expenditures allowed beginning in 2025. Small businesses may apply changes retroactively to 2022.
V. Conclusion and Action Items
The Bill represents a substantial revision to federal tax policy with both simplifying and complexifying effects. Many provisions require immediate attention for planning purposes, particularly those with short-term applicability or income-based limitations.
Contact Information
For further discussion regarding how the OBBB may impact your individual or business tax posture, please contact:
Royce A. Belcher, CPA, CEPA Royce@rabcpa.com
Danny Kasic Danny@rabcpa.com
Doris Jessie Doris@rabcpa.com
This memorandum is provided for informational purposes only and does not constitute legal or tax advice. Clients should consult with qualified advisors prior to taking any action based on the contents herein as each situation is unique and requires detailed analysis.