What Is the One Big Beautiful Bill Act? Key Tax Law Changes Every Family Should Know

On July 4, 2025, President Trump signed a sweeping tax reform bill into law. Officially titled the “One Big Beautiful Bill Act” (OBBB), this legislation permanently extends and modifies several key provisions of the 2017 Tax Cuts and Jobs Act (TCJA) and introduces new tax rules that will impact nearly every American household.

The law went through multiple rounds of revision between the House and Senate before passage, and the final version contains important planning implications for individuals, families, and business owners. Below are the most significant changes and their potential implications for your wealth strategy.

Permanent Extension of Lower Individual Tax Rates

The OBBB permanently extends the lower income tax brackets introduced under the TCJA, preventing them from sunsetting in 2025. Modest inflation adjustments will apply to the 10% and 12% brackets going forward.

Standard Deduction Increased and Made Permanent

The standard deduction—doubled under the TCJA—is now permanently extended and increased. Starting in 2026:

• $31,500 for joint filers
• $23,625 for heads of household
• $15,750 for single filers

These amounts will adjust annually for inflation.

Temporary Additional Deduction for Seniors

The OBBA introduces a new, temporary deduction for certain taxpayers aged 65 and above.  This deduction is designed to replace the suspended personal exemptions and deliver on a campaign promise to reduce or eliminate taxation of Social Security benefits. 

For tax years 2025 through 2028, taxpayers may claim a $6,000 deduction per qualified individual, someone who is 65 or older by the end of the tax year. For joint filers, each filer must be 65 or older by the end of the tax year to claim the tax deduction. The deduction phases out for individuals earning over $75,000 (or $150,000 for joint filers) at a rate of 6% of excess income.

Child Tax Credit Increased and Made Permanent

The Child Tax Credit increases from $2,000 to $2,200 per child, starting in 2025, and is now permanently indexed for inflation.

Permanent Extension of the Section 199A/QBI Deduction for Pass-Through Entities

Business owners can continue to benefit from the 20% Qualified Business Income (QBI) deduction (Section 199A deduction), now with increased income thresholds and a new minimum deduction of $400 for those with at least $1,000 in qualified income.

The phase-in income threshold amounts have been increased from $50,000 to $75,000 for single filers and from $100,000 to $150,000 for joint filers.

Permanent Extension and Increase of the Estate & Gift Tax Exemption

For 2025, the estate and gift tax exemption amount is $13.99 million per person. Starting in 2026, this exemption rises to $15 million per person, indexed for inflation. This may result in significantly fewer complex estate plans to lock in the expanded credit exemption. With this expanded exemption, cost basis and income tax management will be critical. Non-grantor trusts may become a more common tool to maximize additional state and local tax (SALT) deductions for taxpayers in states with higher local property taxes.

Alternative Minimum Tax Exemption Adjustments

Alternative Minimum Tax exemption amounts are now permanent and will be indexed for inflation moving forward. The phaseout threshold ($1,000,000) becomes more aggressive, rising from 25% to 50% of excess income.

Temporary Deduction for Qualified Tip Income

The OBBA temporarily introduces a new deduction for up to $25,000 of qualified tip income each year for tax years 2025 through 2028. This deduction does not require itemization, so all qualified taxpayers can take advantage of this new deduction.

There is an income phase-out that reduces the deduction by $100 for every $1,000 of modified adjusted gross income above $150,000 for single filers and $300,000 for joint filers, but the deduction cannot be reduced to $0.

This deduction only applies to individuals in occupations that customarily receive tips as of December 31, 2024. The Secretary of the Treasury must publish a list of qualifying occupations within 90 days of the law’s enactment, which is Thursday, October 2, 2025.

Temporary Deduction for Overtime Pay

Similar to the new deduction for Qualified Tip Income, the OBBA temporarily introduces a new deduction for Qualified Overtime Pay up to $12,500 for single filers and $25,000 for joint filers. This deduction does not require itemization, so all qualified taxpayers can take advantage of this new deduction.

This deduction is subject to the same income phaseouts at $150,000 for single filers and $300,000 for joint filers, with the deduction reduced by $100 for every $1,000 of modified adjusted gross income over the threshold. This will require modifications to W-2s, 1099s, and other compensation statements, as non-reported income in these fields will not qualify for the deduction.

Temporary Deduction for Auto Loan Interest

For individuals purchasing a new vehicle between 2025 and 2028, a new deduction is available for qualified passenger vehicle loan interest. The deduction is up to $10,000 of interest per taxpayer per year and reduced by $200 for every $1,000 of modified adjusted gross income over $100,000 for single filers and $200,000 for married filing jointly. 

The vehicle must be used by the taxpayer, assembled in the United States, and have a gross vehicle weight rating of under 14,000 pounds. The VIN must be included on the tax return, and there is a new reporting requirement for lenders who receive more than $600 of interest from an individual. Refinancing a loan can also qualify, but only up to the original loan amount.

Temporary Increase in the State and Local Tax (SALT) Deduction

The State and Local Tax (SALT) deduction cap increases to $40,000 in 2025 and gradually rises through 2029 before reverting to $10,000 in 2030.

There are new income-based phaseouts on this cap. The Deduction Cap is reduced by 30% of the amount by which a taxpayer’s modified adjusted gross income exceeds the annual threshold and will not be reduced below $10,000.  For 2025, the threshold is $500,000 for both single and joint filers, increasing to $505,000 in 2026, and then rising by 1% annually from 2027 to 2029.

Critically, the final version of this bill did not introduce any limitations to a popular tax workaround for pass-through entities (referred to as PTET). 

New Charitable Above-the-Line Charitable Deduction Returns

With the significantly increased standard deduction, many individuals who give to charity may not have been able to use their deduction because they were not itemizing. 

The OBBA has introduced an above-the-line deduction for filers who choose not to itemize.  For single filers, the deduction is up to $1,000, and for joint filers, it is $2,000.  For those who do elect to itemize, the bill has introduced a new floor that they must exceed, beginning in 2026, of 0.5% of their adjusted gross income. Given these changes, those who are charitably inclined should revisit their giving strategies going forward.

Qualified Small Business Stock (QSBS) Improvements and Capital Gain Exclusion

The QSBS capital gain exclusion is a powerful tool for qualifying individuals. The OBBA has enhanced this strategy in several ways.

First, the holding period has been shortened to allow for partial exclusions. After three years, qualifying sales may be 50% exempt, after four years, 75% exempt, and after five years, 100% exempt.

Additionally, the lifetime exclusion has been increased from $10 million to $15 million and will be indexed for inflation going forward.

Finally, the qualifying company asset threshold has been increased from $50 million to $75 million, which will also be indexed for inflation going forward. This means that a qualifying individual who has contributed $74.9 million to a company that sells after 5 years could exclude up to $749 million in capital gains from taxation.

Opportunity Zones Permanently Extended

Finally, the OBBA has permanently extended opportunity zones. Zones must be re-designated every 10 years. For taxpayers who have capital gains invested in a qualified opportunity zone fund, they can defer their gains for five years and increase their basis by 10% of the deferred gains. Additionally, there can be full exclusion of gains after a 10-year holding period, with other special rules for longer-term investments of 30 years or more.

What Should You Do Now?

These tax changes create significant planning opportunities — and risks if not addressed. Consider speaking with your Wealth Advisor about:

• Updating tax projections and revisiting potential tax strategies (e.g. Roth conversions), considering tax changes
• Reviewing charitable giving and SALT deduction strategies
• Revisiting pass-through business structuring
• Reevaluating estate plan structures to ensure the best fits and/or minimize complexity
• Exploring eligibility for opportunity zone and QSBS benefits

Contact your Wealth Advisor today to meet about your next steps.

If you’re interested in learning more about what a wealth management team can do for you, please contact us today to schedule a complimentary portfolio review and consultation.