The recent signing of the “One Big Beautiful Bill Act” (OBBB Act) by President Trump on July 4 represents a monumental shift in the American fiscal landscape.
Here is a summary of 12 permanent provisions:
- Permanent extension of individual tax rates: The OBBB Act permanently extends the individual income tax rates established by the 2017 Tax Cuts and Jobs Act (TCJA). These rates, including the current brackets (10%, 12%, 22%, 24%, 32%, 35%, and 37%) and their associated thresholds, were originally slated to expire at the end of 2025 but will now remain in effect indefinitely.
- Expanded standard deduction: The OBBB Act includes a permanent substantial expansion of the standard deduction beginning in tax year 2025. For example, starting in 2025 the standard deduction increases to $31,500 for joint filers, $23,625 for head of household, and $15,750 for all other filers, inflation adjusted thereafter.
- Permanent Qualified Business Income (QBI) deduction: The Section 199A deduction for qualified business income is made permanent. This deduction allows owners of pass-through businesses (such as sole proprietorships, partnerships, and S corporations) to deduct a portion of their qualified business income. The deduction rate is staying at 20%. The
act modifies the phase-in range for wage and investment limitations for certain businesses by increasing the amount from $50,000-$75,000 for non-joint tax returns and from $100,000-$175,000 for joint returns. It also proposes an inflation-adjusted minimum deduction of $400 for taxpayers with at least $1,000 of QBI from active trades or businesses. This provides significant, long-term tax relief for small and medium-sized businesses, directly influencing business structuring and investment decisions. - Permanent incentives for business owners: Three incentives for business owners will be permanent: deductions for research and development expenses, a 100% bonus depreciation rate for property assets like machinery and factories, and an allowance to apply depreciation and amortization costs to the basis of interest expenses.
- Clean vehicle credits (Section 30D, 25E): The credits for new electric vehicles (Section 30D, up to $7,500) and previously-owned clean vehicles (Section 25E, up to $4,000) are largely repealed for vehicles acquired after September 30, 2025. Alternative Fuel Vehicle Refueling Property Credit (Section 30C): This credit, which incentivized the installation of home charging stations for EVs and other alternative fuel vehicles, is repealed for property placed in service after June 30, 2026. Residential Energy Credits (Section 25C, 25D): The Energy Efficient Home Improvement Credit (Section 25C) is terminated for property placed in service after December 31, 2025. The Residential
Clean Energy Credit (Section 25D, commonly known as the consumer solar tax credit for installing solar panels on homes) is terminated for expenditures made after December 31, 2025. This means homeowners will no longer receive federal tax credits for installing solar panels, energy-efficient windows, or other qualifying home improvements after
these dates. - Increased Child Tax Credit: The maximum amount of the Child Tax Credit (CTC) is increased from $2,000 to $2,200 per child, with the credit amount indexed for inflation in future years. The refundable portion of the credit is also adjusted for inflation, ensuring its value keeps pace with rising costs.
- Permanent charitable deduction (including non-itemizers): There is a permanent above-the-line charitable deduction for non-itemizers, starting in tax year 2026. Taxpayers who do not itemize can deduct up to $1,000 (single filers) or $2,000 (married filing jointly) in qualified charitable contributions annually. For those who do itemize, the Act introduces a new 0.5% AGI floor, meaning only charitable gifts that exceed 0.5% of adjusted gross income will be deductible.
- Permanent lifetime gift and estate tax exclusion: The Act permanently increases the estate and lifetime gift tax exemption to an inflation-indexed $15 million for single filers and $30 million for joint filers beginning in 2026. This is a significant increase from the previously scheduled drop in 2026 (to roughly $7 million under pre-OBBB law).
- Tax on remittances: A new 1% tax is imposed on remittances, which are cross-border money transfers. The tax applies to both U.S. and non-U.S. citizens sending transfers. This excise tax is effective for transfers sent after December 31, 2025.
- Medicaid spending cuts: The act implements significant cuts to federal spending on Medicaid and the Children’s Health Insurance Program (CHIP), projected at $1.02 trillion over the next decade. This includes new eligibility verification requirements and expanded work requirements for some expansion populations.
- Expanded SNAP work requirements: The OBBB Act expands work requirements for recipients of Supplemental Nutrition Assistance Program (SNAP) benefits. This extends requirements to a broader range of individuals, including some parents with children over age 6 and adults aged 55-64. These individuals must demonstrate compliance with a 20-hour-perweek work requirement or qualify for an exemption to receive benefits for more than three months in a three-year period. It also reverses bipartisan SNAP paperwork-requirement exemptions for vulnerable groups, including
veterans, people experiencing homelessness, and youth aging out of foster care. Additionally, the act shifts some program costs and responsibilities to states. - Increased college endowment taxes: The OBBB Act significantly reforms and raises taxes on investment income from college endowments. It imposes a multi-tiered rate structure based on a school’s “student-adjusted endowment.” The tax rate starts at 1.4% for endowments between $500,000 and $750,000 per student, escalating up to 8% for the wealthiest colleges (those with endowments over $2,000,000 per student). This applies to colleges with more than 3,000 tuition-paying students.
There are also some temporary provisions in the OBBB.
- Increased SALT deduction cap: The cap on the state and local tax (SALT) deduction is temporarily raised from its current $10,000 to $40,000 for single filers and married couples with adjusted gross incomes (AGI) below $500,000 (for married filing separately, the increased deduction and phaseout income threshold are halved to $20,000 and $250,000
respectively). The increased cap and income thresholds would increase slightly each year. - Enhanced additional standard deduction for seniors: The Act now allows each qualifying individual aged 65 or older to deduct an additional $6,000 on top of their standard deduction through 2028. The deduction phases out at a 6% rate for individual filers whose income is more than $75,000 or joint filers whose income exceeds $150,000, fully phasing
out at $175,000 for individual filers and $250,000 for joint filers. Therefore, for tax year 2025, a married couple who are both age 65+ and under the $150,000 income limit could take a maximum total standard deduction of $46,700 ($31,500 base standard deduction + senior extra deduction of $3,200 + $12,000 ($6,000 each) new bonus deduction). The deduction is available whether a taxpayer takes the standard deduction or itemizes their deductions. This will eliminate the taxes on Social Security benefits for the vast majority of seniors during these years. - Temporary tax deduction for tips: The act introduces a new, temporary federal income tax deduction for tips. This deduction is available for workers making less than $150,000 annually (phasing out for incomes above this threshold, or $300,000 for married couples filing jointly), with a cap of $25,000 per year on the deductible amount. This provision is set to expire at the end of 2028. It provides a direct financial benefit to individuals in service industries, though it does not exempt tips from state, local, or payroll taxes.
- Temporary tax deduction for overtime pay: A new temporary tax deduction is established for overtime pay. This deduction applies to workers earning less than $150,000 per year (with a phase-out above this), capped at $12,500 for single filers and $25,000 for joint filers. Similar to the tip deduction, this provision is temporary and is set to expire in 2028.
- Trump Accounts: The act establishes “Trump Accounts,” a new type of tax-deferred savings account designed for children. These accounts aim to encourage saving for a child’s future by allowing parents and others to contribute funds that grow tax-deferred. Children born in 2025 through 2028 (as U.S. citizens with Social Security numbers for both parents and the child) will be automatically enrolled and receive a one-time deposit of $1,000 from the federal government into their account. These accounts have a $5,000 per year (indexed) contribution limit and contributions must cease when the child reaches age 18. Employers can make up to $2,500 in nontaxable contributions per employee. Distributions from the account are generally prohibited until the child turns 18. Once age 18, the full account
balance can be withdrawn. Trump Accounts will operate similarly to IRAs with investments growing on a tax-deferred basis. - Temporary auto loan interest deduction: Car buyers can now deduct up to $10,000 per year in auto loan interest. This deduction applies exclusively to vehicles with their final assembly in the United States and explicitly excludes fleet sales or commercial vehicles. It is subject to income phase-outs, beginning for taxpayers with adjusted gross incomes exceeding$100,000 ($200,000 for joint filers), and phasing out entirely for higher earners. This provision is in effect for vehicles purchased between 2025 and 2028.
With all these changes, now may be a good time to review how the new law might impact your tax situation, retirement contributions, or investment planning. If you’d like to discuss this further, please reach out and we’ll arrange a time to talk.
As always, feel free to reach out with any questions.