The One Big Beautiful Bill Act (OBBBA), passed in 2025, is a major new law that changes a lot about taxes, health care, and more. Here’s a simple breakdown of what it means for individuals, families, and businesses.
1. Tax Changes for Individuals and Families
· Lower Tax Rates Stay: The lower tax rates from the 2017 tax law are now permanent. The standard deduction is even higher—$31,500 for married filing joint, $23,625 for heads of household and $15,750 for singles.
· No More Personal Exemptions, But a New Deduction for Seniors: Personal exemptions are gone for good, but seniors (65+) get a special $6,000 deduction through 2028 (phased out for higher incomes).
· Bigger Child Tax Credit: The child tax credit is now $2,200 per child and will go up with inflation. Both the taxpayer and child need valid Social Security Numbers.
· Business Owners: The 20% deduction for qualified business income (Section 199A) is easier to get, with higher income limits and a $400 minimum deduction.
· Estate Tax: The amount you can pass on tax-free is now $15 million, adjusted for inflation.
· AMT Relief: The alternative minimum tax (AMT) is less likely to hit middle-income taxpayers, thanks to higher exemption amounts.
· SALT Deduction: You can now deduct up to $40,000 in state and local taxes (SALT) through 2029, but this drops back to $10,000 after that.
2. New Deductions and Credits
· No Tax on Tips and Overtime: For 2025–2028, you can deduct up to $25,000 in tips and $12,500 ($25,000 for joint filers) in overtime pay from your taxable income, with some limits for higher earners.
· Car Loan Interest: Deduct up to $10,000 per year in interest on loans for new U.S.-made cars (2025–2028), subject to income limits.
· Trump Accounts for Kids: New tax-advantaged accounts for children under 18, with a $1,000 government contribution for kids born 2025–2028 and a $5,000 annual contribution limit.
3. Business and International Tax Changes
· Full Expensing: Businesses can immediately write off the full cost of new equipment and certain real estate used in manufacturing.
· R&D Write-Offs: Companies can immediately deduct domestic research expenses.
· Interest Deductions: Businesses can deduct more interest on loans.
· International Tax: Higher taxes on certain foreign income, new rules to prevent tax avoidance, and changes to how foreign tax credits work.
4. Energy and Environmental Changes
· End of Clean Energy Credits: Most clean energy tax credits for vehicles and home improvements end after September 2025.
· New Restrictions: Foreign-influenced companies can’t claim many energy credits, and there are new rules about where materials must come from.
· Some Credits Stay: Nuclear and clean fuel credits remain, but with new restrictions.
5. Community, Family, and Education
· Child and Dependent Care: Bigger tax credits for child and dependent care, with higher income limits.
· 529 Plans: You can use 529 education savings accounts for more types of education expenses.
· Charitable Giving: You can deduct more for charitable donations, but there are new minimums you must give to claim the deduction.
· Affordable Housing: More incentives for investing in low-income housing and opportunity zones.
6. Health and Social Policy
· Medicaid and Medicare: Stricter eligibility checks, new work requirements for some Medicaid recipients, and limits for non-citizens.
· Health Insurance Credits: Tighter rules for who can get premium tax credits for health insurance.
· Telehealth and HSAs: Telehealth coverage is now permanent for high-deductible health plans, and you can pair HSAs with more types of insurance plans.
7. Other Notable Changes
· Debt Limit: The federal debt limit is increased by $5 trillion.
· Unemployment: No federal unemployment benefits for people who earned $1 million or more in the base period.
· Remittance Tax: A new 1% tax on certain money transfers sent outside the U.S.
8. International Business Impact
· Global Minimum Tax: Some of these changes could mean higher taxes for U.S. companies with foreign parents, due to new global tax rules.
Bottom Line
The OBBBA is a sweeping law that affects almost everyone—individuals, families, and businesses. It keeps many tax breaks from the 2017 law, adds new deductions and credits, changes business and international tax rules, and rolls back many clean energy incentives. There are also big changes to health care and social programs.
If you have questions about how these changes affect you or your business, reach out to Senter, CPA, P.C. for personalized advice.
