At Peters Bandura, LLC, we’re committed to keeping you informed about major legislative changes that impact your finances. The One Big Beautiful Bill Act (OBBBA), signed into law by President Donald Trump on July 4, 2025, is a sweeping tax and spending bill that brings significant updates to the tax code. Passed by the House on July 3 with a narrow 218-214 vote, this legislation builds on the 2017 Tax Cuts and Jobs Act (TCJA) and introduces new provisions that could affect both individuals and businesses. Here’s a breakdown of key changes and how they might impact you, along with planning opportunities to discuss with our team.
Key Changes for Individuals
- Permanent Income Tax Rates: The OBBBA makes the TCJA’s reduced income tax rates permanent, maintaining the seven brackets of 10%, 12%, 22%, 24%, 32%, 35%, and 37%. This provides long-term certainty for your tax planning.
- Standard Deduction Made Permanent: The doubled standard deduction from the TCJA—$15,000 for individuals, $30,000 for married couples filing jointly, and $22,500 for heads of household in 2025—is now permanent, simplifying tax filing for many.
- New Deduction for Seniors: If you’re over 65 or blind, a temporary $6,000 additional standard deduction is available from 2025 to 2028, subject to income-based phase-outs. This could lower your taxable income significantly.
- SALT Deduction Cap Increase: The state and local tax (SALT) deduction cap rises from $10,000 to $40,000 through 2029, benefiting homeowners in high-tax states like California and New York. However, it phases out for incomes above $500,000 and reverts to $10,000 in 2030.
- Child Tax Credit Boost: The child tax credit increases to $2,200 per qualifying child, offering a dollar-for-dollar tax reduction. Note that phase-out rules apply for higher earners, and the refundable portion remains limited.
- No Tax on Tips and Overtime: A temporary deduction of up to $25,000 for tip income (for specific occupations) and $160,000 for overtime pay is available from 2025 to 2028, benefiting service and hourly workers.
- Trump Accounts for Kids: Children born between December 31, 2024, and January 1, 2029 receive a $1,000 savings account with tax-advantaged growth if used for education, a first home, or starting a business.
- Car Loan Interest Deduction: A temporary deduction of up to $10,000 for interest on U.S.-assembled car loans is available from 2025 to 2028, with phase-outs for incomes above $100,000 (single) or $200,000 (joint).
- Estate Tax Exemption: The TCJA’s doubled estate tax exemption ($13.99 million per person in 2025) is permanent, with a $15 million exemption starting in 2026, adjusted for inflation.
- Elimination of Miscellaneous Deductions: Miscellaneous itemized deductions (e.g., unreimbursed employee expenses, home office, tax preparation fees) are permanently eliminated, simplifying but potentially limiting deductions.
Key Changes for Businesses
- Pass-Through Deduction Enhanced: The Section 199A deduction for pass-through entities (LLCs, S corporations) increases from 20% to 23% and is made permanent, benefiting small business owners and sole proprietors.
- Corporate Tax Rate Stays Low: The 21% corporate tax rate from the TCJA remains permanent, supporting business growth.
- R&D and Bonus Depreciation: Businesses can fully expense research and development costs retroactively from December 31, 2021, and 100% bonus depreciation for qualifying property is extended through 2029.
- Opportunity Zones Extended: Tax incentives for investments in underserved communities are extended through 2033, with a 30% exclusion of deferred gains and a focus on rural areas.
- Manufacturing Deductions: Businesses can immediately deduct costs for new manufacturing facilities started before January 1, 2029, boosting U.S. production.
Plan with Peters Bandura, LLC
The OBBBA introduces both opportunities and complexities. Whether you’re an individual looking to maximize deductions or a business owner planning investments, our team at Peters Bandura is here to help. The redesigned Form W-2 to account for overtime and the Treasury’s upcoming list of “traditionally tipped industries” will require careful navigation. Contact us to discuss tailored strategies, from leveraging the SALT deduction to optimizing pass-through benefits.