The Tax Cuts and Jobs Act (TCJA) of 2017 introduced sweeping changes to the tax code by lowering taxes for many-but not all-individual investors. However, many of the provisions are temporary and are set to expire at the end of 2025. This looming sunset creates significant uncertainty about what tax rates will be after 2025.
On July 4, 2025, President Trump signed into law the One Big Beautiful Bill (OBBB) Act. This bill will bring many significant changes to Americans in a wide range of situations. Many taxpayers may not experience a large tax cut with the passage of the OBBB. Instead, the passing of this bill may help investors to avoid the significant tax hike that would have occurred if the current provisions of the Tax Cuts and Jobs Act had been allowed to sunset at the end of 2025. Until the passing of the OBBB, it was unknown whether Congress would allow some of the provisions to sunset.
This blog is intended to give you an overview of the important tax law changes in this bill. We will not comment on the pros and cons of the changes. We will leave that for you to decide. The information presented here comes from reputable sources such as the Congressional Budget Office (CBO) and other reliable sources listed as references at the end of this article.
This information is not intended to be tax advice. There are so many changes to the tax code and if you have detailed questions about how they apply to your situation, we recommend you contact a tax professional.
In this blog, we will discuss:
- Permanent Provisions of the OBBB for Individuals
- Permanent Provisions of the OBBB for Businesses
- Temporary Provisions of the OBBB
- Effects on the Deficit and National Debt
- Key Takeaways
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Permanent Provisions of the One Big Beautiful Bill for Individuals
Here are key provisions made permanent by the OBBB for individuals.
1. Permanent extension of individual tax rates: The OBBB Act permanently extends the individual income tax rates in place since the 2017 Tax Cuts and Jobs Act (TCJA). These rates of 10%, 12%, 22%, 24%, 32%, 35%, and 37% were originally set to expire at the end of 2025. The bill continues these tax rates indefinitely.
2. Expanded standard deduction: The OBBB Act continues the standard deduction at this high level. For example, beginning in 2025 the standard deduction increased to $31,500 for joint filers, $23,625 for head of household, and $15,750 for all other filers, inflation adjusted thereafter.
3. Phase-out of clean energy tax credits: The OBBB Act has a significant impact on clean energy credits. It eliminates them very quickly. This change indicates a shift in policy towards promoting fossil fuels rather than renewable energy sources. It also impacts individual taxpayers who may have been considering specific energy-efficient upgrades for their homes or EV vehicle purchases. Here are some key details:
- Clean vehicle credits: The credits of up to $7,500 for new electric vehicles and up to $4,000 for previously owned clean vehicles are largely repealed for vehicles acquired after September 30, 2025. This change ends the incentives that have been driving EV adoption, with their expiration just a couple of months away.
- Alternative fuel vehicle refueling property credit:This credit that was meant to incentivize the installation of home charging stations for EVs and other alternative fuel vehicles, is repealed for property placed in service afterJune 30, 2026.
- Residential energy credits: The Energy Efficient Home Improvement Credit will end for properties placed in service after December 31, 2025. The Residential Clean Energy Credit, known as the consumer solar tax credit for installing solar panels on homes, will end 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. If you've been considering any of these types of purchases, it would be wise to make them before the deadline if possible.
4. Increased child tax credit:The maximum amount of the Child Tax Credit (CTC) has been 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. However, critics note that this version will be available to fewer households. See your tax professional for details.
The OBBB Act maintains the income phase-out thresholds for the Child Tax Credit. The credit begins to phase out for single filers with a modified Adjusted Gross Income (AGI) exceeding $200,000 and for married couples filing jointly with an AGI exceeding $400,000. For every $1,000 (or fraction thereof) that a taxpayer's AGI exceeds these thresholds, the credit is reduced by $50. This means that higher-income earners will see their Child Tax Credit reduced or eliminated entirely once their income is higher than these specified limits.
5. Permanent charitable deduction (including non-itemizers): Starting in 2026, there will be a permanent above-the-line charitable deduction for those who do not itemize. Taxpayers who do not itemize will be able to deduct up to $1,000 as a single filer or $2,000 if married and filing jointly for qualified charitable contributions each year. For those who do itemize, the Act introduces a new 0.5% AGI floor. This means only charitable gifts that exceed 0.5% of adjusted gross income will be deductible. This change expands charitable giving incentives for a broader base of taxpayers.
6. 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. The estate and lifetime gift exemption were scheduled to fall to roughly $7 million so this is a significant increase. High-net-worth individuals will benefit from this part of the bill.
7. Tax on non-commercial transfers of money outside the U.S.:A new 1% tax is imposed on remittances, which are money transfers sent from the US to recipients abroad. The tax applies to both U.S. and non-U.S. citizens sending money transfers out of the US. The person sending the money has to pay the 1% excise tax. There are some exceptions so be sure to talk with your tax professional for more details. This excise tax applies to transfers sent after December 31, 2025.
8. Medicaid changes: The act makes significant cuts to federal spending on Medicaid and the Children’s Health Insurance Program (CHIP). The Congressional Budget Office (CBO) projects this bill will cut federal Medicaid spending by approximately $1 trillion over the next decade. This includes new eligibility verification requirements and work requirements. The CBO estimates that these changes could lead to at least 11 million people losing health insurance coverage by 2034. It also includes a provision that might defund Planned Parenthood clinics for one year by prohibiting any health clinic that provides abortion care from accepting Medicaid funds for any other service. It allows states to charge Medicaid enrollees with family incomes between 100% and 138% of the federal poverty level up to $35 per health care service. This is capped at 5% of family income. It also allows providers to turn away patients who cannot afford these costs.
9. Expanded SNAP work requirements: The OBBB Act expands work requirements for recipients of Supplemental Nutrition Assistance Program (SNAP) benefits. Prior to this, those who did not have dependents did not need to work after the age of 54. Under the new bill, those between the ages of 55 to 64 will need to meet the work requirements. All individuals will now be required to prove compliance with a 20-hour per-week work requirement or qualify for an exemption to receive benefits for more than three months in a three-year period. It also reverses exemptions for vulnerable groups, including veterans, people experiencing homelessness, and youth aging out of foster care. In addition, the Act also shifts a greater portion of the costs to the states.
10. Increased college endowment taxes: The OBBB Act significantly reforms and raises taxes on investment income from wealthy 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 up to 8% for the wealthiest colleges. This applies to colleges with more than 3,000 tuition-paying students.
Permanent Provisions of the One Big Beautiful Bill for Businesses
Key provisions made permanent by the OBBB for businesses are outlined below.
These provisions are very detailed and technical. If you are not a business owner, you may wish to skip this section.
1. 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%. This provides significant, long-term tax relief for small and medium-sized businesses.
2. Permanent incentives for businessowners: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.
- Deduction for research and development (R&D) expenses: The immediate deductibility of research and development expenses for businesses has been restored, reversing the amortization requirement introduced in 2022. Beginning in tax year 2026, businesses can once again fully deduct R&D costs in the year they are incurred, rather than spreading them over five years (or 15 years for foreign research). This change provides a significant cash flow benefit for innovative businesses, particularly in technology, biotech and manufacturing. And it encourages continued domestic investment in research and innovation.
- 100% bonus depreciation reinstatement: The 100% bonus depreciation has been restored for qualifying property purchased after January 19, 2025, and placed in service before January 1, 2030. This allows businesses to immediately deduct the full cost of eligible assets in the year they are placed in service, rather than depreciating them over several years. This incentive for business investment aims to improve cash flow and increase capital expenditure.
- Expanded interest expense deduction for businesses: Businesses are permanently allowed to include depreciation and amortization when calculating their interest expense limitation. By adding depreciation and amortization back into the calculation, capital-intensive businesses-such as those in manufacturing, real estate and energy-will be able to deduct more interest. It's an incentive for new investments.
Temporary Provisions of the One Big Beautiful Bill
The OBBB includes the following temporary provisions.
1. 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 respectively. But it is limited to those 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 cap and income thresholds would increase slightly each year. This will revert to the original $10,000 limit after five years (in 2030).
The new $40,000 SALT deduction cap is subject to income phase-outs to ensure that the primary benefits are directed to middle and upper-middle-income taxpayers, rather than the highest earners. This higher cap applies equally to single and married filers and begins phasing out once adjusted gross income exceeds $500,000, fully phasing out at $600,000—regardless of filing status. For example, a married couple or single filer earning $500,000 can claim the full $40,000 SALT deduction, but one earning $600,000 faces the $10,000 cap. Pass-through business owners can still use state-level workarounds to bypass the cap. This change benefits many taxpayers in high-tax states, especially business owners. Many of our clients living in California are likely to see a tax benefit from this change.
2. Additional standard deductions for seniors: This is a major change 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. For tax year 2025, a married couple 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. 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. It fully phases out at $175,000 for individual filers and $250,000 for joint filers. This will eliminate the taxes on Social Security benefits for many seniors below these income levels during these years.
3. Temporary tax deductions for tips: The act introduces a new, temporary federal income tax deduction for tips. This deduction is available to workers making less than $150,000 annually. It phases out for incomes above $150,000 as a single and $300,000 for married couples filing jointly. There is a cap of $25,000 per year on the deductible amount. This provision is set to expire at the end of 2028. It provides federal tax relief to individuals in service industries. Note that it does not exempt tips from state, local, or payroll taxes.
4. Temporary tax deduction for overtime pay: A new temporary tax deduction has been established for overtime pay. This deduction applies to workers earning less than $150,000 per year. It phases out and is capped at $12,500 for single filers and $25,000 for joint filers. This provision is temporary and is set to expire in 2028.
5. Trump accounts: The act introduces the “Trump Account”. It allows parents and others to contribute after tax dollars of up to $5,000 per year in a child’s name. The contributions are indexed with inflation. It allows the money to grow tax-deferred until the child reaches 18. It also gives children born between 2025 and 2028 a one-time deposit of $1,000 in each account. The goal is to help more people save for their child’s future. Those qualified need to be a U.S. citizen with Social Security numbers for both parents and the child. 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 the child turns 18, the full account balance can be withdrawn. However, these are like non-deductible IRA accounts. The earnings will be taxed at the ordinary income rate. The penalty can be waived if used for higher education, first-time home purchase and other reasons just like the current IRA rules.
6. Temporary auto loan interest deduction: New car buyers can now deduct up to $10,000 per year in auto loan interest for personal use. This deduction applies to vehicles assembled in the United States. It explicitly excludes leased cars, fleet sales or commercial vehicles. It is subject to income limitations. The phase-out for individuals with modified adjusted gross income above $100,000 and $200,000 for joint filers, and phases out entirely for higher earners. This deduction is available for tax years 2025 through 2028.
Effects on the Deficit and National Debt
The OBBB Act introduced many changes to the tax codes.
According to the Congressional Budget Office’s (CBO) analysis, it is expected to increase the nation’s budget deficits (not including interest payments) by $3.25 trillion over the fiscal years of 2025-2034 budget periods. This significant increase is primarily driven by the permanent extension of the tax cuts from the TCJA and the introduction of new temporary tax deductions. The bill includes nearly $1.5 trillion in gross spending cuts (mostly from Medicaid and SNAP), these offsets are insufficient to fully make up for the losses in revenue.
The OBBB Act includes an increase in the national debt ceiling of $5 trillion. As a direct consequence of these projected deficits, the national debt held by the public is forecast to climb by about $4 trillion through 2034. The CBO also projects that the OBBB Act may increase the national debt to 124% of Gross Domestic Product (GDP) by the end of fiscal year 2034, compared to an estimated 117% of GDP before this bill passed.
Key Takeaways
The One Big Beautiful Bill introduces many new tax changes to the U.S. tax code.
We want our clients to be aware of these changes as you complete your taxes for 2025. Here are some key takeaways that may affect our clients.
- If you are on Social Security, you may see your taxes reduced
- If you don't itemize, the standard deduction is higher
- If you live in states with high state taxes, such as California, you may see your taxes reduced with the increased SALT deduction up to $40,000 if you qualify
- If you want to take advantage of the tax credits for clean vehicles, you may do so until September 30, 2025. After that date, the clean vehicle tax credits will be eliminated
- If you want to take advantage of the tax credits for Energy Efficient Home Improvement Credit for installing solar panels on your home, you have until December 31, 2025
- If you wish to donate $1,000 to $2,000 to charity, you'll be able to deduct it if you qualify
- If you have children or grandchildren born between 2025 and 2028, look into the Trump Account for their benefit
As we go through the year, we will do our best to look for areas where this bill may affect our clients. If you are not using a tax professional to complete your taxes, it may be time to use a tax professional next spring for your 2025 tax return. If you want to discuss this further, contact your Wealth Manager at Financial Journey Partners.
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At Financial Journey Partners, our office is located in San Jose, California. We have clients that live in many states across the country. If you have questionsabout your investments or financial situation, call us to schedule time to talk about your specific situation.
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Financial Journey Partners - Partners in Your Financial Journey®
Our Financial Journey Partners office is based in San Jose, California. We have clients that live in many states across the country. If you have questions about your investments or financial situation, call us to schedule time to talk about your specific situation.
Sign up for our email newsletter to stay up to date on our views of the economy, stock market, and top news stories.
References:
- Horsesmouth. “Overview of the OBBB Act: What You Need to Now.”
- Horsesmouth. “Overview of the OBBB Act: 6 More Provisions You Need to Understand.”
- Kiplinger. "Parents Prepare: Trump's Megabill Brings Three Crucial Tax Changes"
Disclaimer. This is general advice and information that may vary based on the state in which the probate is occurring. Talk to an estate administration professional for specific guidance to determine what is accurate and relevant for your situation.