Year End Look at The One Big Beautiful Bill Act

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Year End Recap of OBBBA

Let’s Review the New Tax Changes and Financial Notes from the OBBBA

On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was signed into law by President Trump, capping off the final step of the budget reconciliation process for the 2025 fiscal year. Here is a partial list of goals and benefits that should be considered in your planning in the current environment by category:

Seniors

  • Eligible taxpayers age 65 and older can claim an additional deduction of up to $6,000 (per person), regardless of whether they take the standard deduction or itemize. This amount is in addition to the existing standard deduction and the pre-existing extra standard deduction for seniors. For 2025, an eligible single filer can have a total standard deduction of up to $23,750, and a married couple (both age 65+) can have up to $46,700.
  • Older adults who are paying off cars or are liable for local property taxes may also get some short-term tax relief. The new legislation allows car owners to deduct up to $10,000 in interest payments on loans for certain vehicles and increases the maximum SALT (state and local tax) deduction from $10,000 to $40,000.

Parents

  • The expanded child tax credit from the Tax Cuts and Jobs Act (TCJA) is renewed and rises to a maximum of $2,200 per child from $2,000 per child last year.
  • $1,000 Investment Accounts for Newborns: The bill creates a new type of investment plan called a “Trump Account” for children born between 2025 and 2028 and seeds the account with $1,000 for free, as a start to their savings.
  • Private School Scholarship Deduction Tax Credit $1,700
  • 529 Enhancements: Extended use of 529 plans for enrollment in elementary or secondary schools.
  • Changes to ABLE accounts: The annual contribution limit will increase to $19,000 for 2025, with an additional $15,060 allowed for employed beneficiaries who do not participate in a workplace retirement plan. The ABLE-to-Work provision and 529 rollovers will be made permanent
  • New Restrictions on Student Loans: Graduate students are limited to borrowing a maximum of $100,000 in federal student loans—or $200,000 if they are attending medical school, law school, or pursuing another professional degree.
  • Fewer Student Loan Repayment Options: Future student loan borrowers who take out loans after July 1, 2026. will be able to choose from two plans instead of the numerous previously available.

Income Taxes

  • Extends And Expands Tax Cuts From 2017: For household finances, one of the bill’s most significant impacts is to extend the tax cuts implemented in the 2017 TCJA. The bill makes permanent the current marginal income tax rates, which had been scheduled to revert to higher levels.
  • OBBBA makes permanent the TCJA’s expansion of the standard deduction and raises it further to $15,750 for an individual filer ($31,500 for married couples filing jointly), and will rise along with inflation in future tax years. Before the TCJA, the standard deduction was $6,500.
  • Expanded SALT Deduction: The maximum deduction for state and local taxes has been raised to $40,000 from $10,000. The deduction benefits taxpayers who live in states with high income taxes and remains available only for those who itemize their taxes instead of taking the standard deduction.
  • Section 199A: 20% deduction made permanent for small business income including real estate.
  • Home Mortgage Interest Deduction: OBBBA permanently extends the limitation on deducting qualified residence interest to the first $750,000 in home mortgage acquisition debt.
  • Eliminates moving expenses deduction except for members of the armed forces.

New Tax Breaks

  • The bill creates new tax breaks including eliminating taxes on tips up to $25,000 per year for individuals making under $150,000. The tax break expires in 2029.
  • OBBBA also eliminates taxes on certain overtime pay up to $12,500 for an individual making under $150,000, also sunsetting in 2029.
  • Taxpayers can also deduct interest on loans to buy American-made cars, up to $10,000 per year. Unlike many tax breaks, the new deduction can be taken in addition to the standard deduction.
  • New .5% Charitable Deduction floor- Charitable contribution deduction up to $1,000 for singles and $2,000 for married filing jointly. For those that itemize the bill has charitable contributions reduced by 0.5% of the taxpayer’s contribution base.
  • Alternative Minimum Tax (AMT) applied to high-income taxpayers. The 2017 Tax Act modified the AMT increasing the exemption and the level at which the exemption is phased out. This bill makes it permanent. For 2025, the maximum 28% AMT rate kicks in when your taxable income, calculated under the AMT rules, exceeds an inflation-adjusted threshold of $239,100 for married joint-filing couples or $119,550 for other taxpayers.

Business Tax Provisions

  • Bonus Depreciations: Makes permanent first-year or bonus depreciation deduction at 100% for property acquired and placed in service on or before Jan 19, 2025.
  • Sec. 179 Expensing: Increases the amount a taxpayer can expense under $2.5 million per year. This immediate deduction is reduced by the amount by which the qualifying property exceeds $4 Million
  • Research and Development Expenses: Permits taxpayers to deduct domestic research or experimental expenditures paid or incurred. If conducted outside the US, they must be deducted over 15 years.
  • Qualified Opportunity Zones: A tax incentive created in 2017 to stimulate investments in economically distressed communities. These are in census tracts certified by the US treasury as low income.
  • Qualified Small Business Stock (QSBS): This is a tax benefit to stimulate investment in new startup companies. The OBBBA increases the gross assets of the company to $75 Million or less.

There is a lot here to digest as the OBBBA is a very large bill. While we attempted to put the highlights into categories, there is quite a lot more that can contribute to your financial planning and estate planning. For more information or to discuss your specific question, reach out to us for a consultation at info@madonia.com or (312) 578-9300.