More on the OBBB – One Big Beautiful Bill
Hello Valued Clients!
The One Big Beautiful Bill Act (OBBB) was signed into law in July 2025. As CPAs and tax professionals have had time to review this extensive legislation, we would like to highlight some of the most important provisions from an individual taxpayer’s perspective.
Please note that several provisions include income phase-outs based on Adjusted Gross Income (AGI).
Tax Brackets
The OBBB Act makes permanent the tax brackets that have been in place since 2017, which were scheduled to expire at the end of 2025.
Permanent tax brackets: 10%, 12%, 22%, 32%, 35%, and 37%.
Without this legislation, rates would have reverted to: 10%, 15%, 25%, 28%, 33%, 35%, and 39.6%.
Standard Deduction
The increased standard deduction is now permanent.
- Married Filing Jointly: $31,500
- Single: $16,750
- Head of Household: $23,625
These amounts will be indexed for inflation each year. The personal exemption that existed prior to 2017 is now permanently eliminated.
Senior Deduction
An additional Senior Deduction is available for taxpayers age 65 and older.
- $6,000 per qualifying taxpayer
- Both spouses may claim the deduction if both are 65+
Phase-out begins at:
- $75,000 AGI (Single)
- $150,000 AGI (Married Filing Jointly)
Charitable Deduction for Non-Itemizers
Beginning in 2026, non-itemizers may deduct charitable contributions in addition to the standard deduction.
- $1,000 (Single)
- $2,000 (Married Filing Jointly)
Child Tax Credit
- $2,200 per child under age 17
- Refundable portion remains $1,700
- Other Dependent Credit remains $500
SALT (State and Local Tax) Deduction
The SALT deduction cap has been temporarily increased.
- $40,000 cap for tax years 2025–2029
- Reverts to $10,000 in 2030
Phase-out begins at $500,000 AGI.
Car Loan Interest Deduction (2025–2028)
Taxpayers may deduct up to $10,000 per year in qualified car loan interest.
AGI phase-out begins at:
- $100,000 (Single)
- $200,000 (Married Filing Jointly)
Vehicle requirements include:
- New personal-use vehicle
- Loan incurred after December 31, 2024
- Final assembly in the United States
- Under 14,000 lbs GVWR
- VIN reported on the tax return
No Tax on Tips (2025–2028)
Up to $25,000 per year of qualified tip income may be deducted.
- Tips must be reported on W-2, 1099, or 1099-K
- IRS will publish qualifying tip-based occupations
Phase-out begins at:
- $150,000 AGI (Single)
- $300,000 AGI (Married Filing Jointly)
No Tax on Overtime (2025–2028)
Taxpayers may deduct up to $12,500 per year of qualified overtime wages.
Overtime must be reported on W-2 or 1099 forms. For 2025, the IRS allows reasonable estimation methods during the transition period.
Child and Dependent Care Credit
The maximum credit rate has increased from 35% to 50%.
Phase-out begins when AGI reaches:
- $105,000 (Single)
- $210,000 (Married Filing Jointly)
Trump Accounts
A new tax-deferred investment account for children.
- Maximum contribution: $5,000 per child per year
- Funds generally cannot be withdrawn before age 18
- 2025–2028 pilot program includes a
Estate and Gift Tax Exclusion
The estate and gift tax exclusion has been increased to
$15,000,000 per person beginning in 2026 and will be
indexed for inflation thereafter.
Business Deductions
- The Qualified Business Income (QBI) deduction of 20%
is now permanent. - 100% Bonus Depreciation is optional again and has been
made permanent. - The Section 179 deduction has been increased to
$2,500,000. - 1099-K reporting requirements for Third Party Networks
now apply only when both of the following are met:- More than $20,000 in aggregate transactions, and
- At least 200 transactions during the year
Please keep in mind this is a high-level summary of the OBBB Act and does
not include every detail or limitation. If you would like additional
information, please contact your tax professional, who would be happy to
answer any questions. We are continuing to stay informed through training
seminars and educational resources so we can provide the best service
possible to our clients.
Wishing you a joyful Thanksgiving season filled with family, friends, and
all the blessings this time of year brings!
Thank you for your continued trust. We truly appreciate the opportunity to work with you and support you through both current year filings and future planning. We look forward to continuing to support you and your financial goals.
Sincerely,
Busek Olson & Associates | Taxman | West Fargo Tax & Accounting
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