Summary of the One Big Beautiful Bill Act (OBBBA)

This legal package was signed into law by President Trump on July 4, 2025, merging tax cuts, spending measures, and budget reconciliation into a single policy.

Key provisions:

• Permanent extension of Trump's 2017 individual tax cuts

  • (originally set to expire at the end of 2025). This means that our current tax brackets will stay the same as they were set to increase at the end of 2025, back to their previous levels.

• Expanded SALT (state and local tax) deductions

  • Up to $40,000 cap (for households with an income under $250k single * HOH and $500K married filing jointly), reverting to $10K after 5 years.

  • However, once this expires in 2029, most business owners may still have the option to pay their property taxes through their business to receive the full deduction above the $10k limit

• Temporary benefits (expire in 2028)

  • 0% tax on tips, overtime, auto‑loan interest; “Trump Accounts” for child savings; boosted child tax credit; senior deductions.

  • Most people who are paid in tips don't report that income to begin with, so not much change there. The maximum avoidance is $25k/yr and only applies to traditionally tipped industries (waiter, bartender, riverboat tour guide). Also, this full benefit is phased out after income exceeds $150k (Single) or $300k (Married).

  • Tax-free overtime pay only applies to the amount you are paid in excess of your regular pay. So if your normal hourly pay is $10/hr and overtime is $12/hr then only the $2/hr difference is tax-free. There are $150k (single) and $300k (Married) income phaseouts for this benefit.

• Medicaid and SNAP cuts

  • 12% Medicaid reduction, added work requirements, and state cost‑share in food assistance.

• Heightened border and defense spending

  • Around $150B each for ICE/deportations and defense.

• Raised debt ceiling

  • By approximately $4–5 trillion via reconciliation

• Bonus depreciation

  • Is back and permanent. This tool enables businesses to immediately deduct a significant portion of the purchase price of eligible assets.

• Standard deduction

  • Increases from $15k to $15,750 (single) and from $30k to $31,500 (married).

• 1099 reporting

  • Increased from $600 to $2,000 per year. Meaning if you pay someone less than $2,000 as a business owner, you don't need to provide a 1099 tax form to them.

• Car loan interest deduction

  • From now until 2028, you can deduct up to $10k in interest per year on your personal use car loans if you earn less than $100k (single) or $200k (married). Also, the car needs to be assembled in the US.

  • You won't need to itemize to receive this deduction.

  • Car must weigh less than 14,000 lbs.

  • The car must be purchased after 12/31/2024

  • The car must be new; no used vehicles will qualify.

• Cancel EV tax credit

• Senior increased deduction (over the age of 65)

  • Seniors will receive an increase of $6,000 to their standard deduction. However, it is phased out after income grows to $75k (single) or $150k (married).

• $1,000 baby account

  • Children born in 2025 - 2028 will receive $1,000 into an account that can be invested.

  • What is the best thing to do with this money? It's very situational, but I would assume most parents will withdraw these funds almost immediately to help cover hospital bills or baby expenses.

• Gambling losses

  • Deduction is capped at 90% of actual losses instead of 100%. Also, gambling losses can only be deducted against gambling gains.

• Insurance coverage

  • Around 10–12 million more Americans are projected to become uninsured due to Medicaid cuts kiplinger.com.

• Income distribution

  • Top 20% (>$120K): gain roughly $5,700/year.

  • Bottom 20% (<$13,350): lose about $700/year kiplinger.com.

• Charitable Contribution Deductions

  • Charitable deductions are available for non-itemizers. Single: up to $1,000 / Married Filing Joint: up to $2,000.

  • For itemizers: Must exceed 0.5% of AGI before claiming deduction; subject to AGI caps (60% of AGI for cash gifts per year)—carryforward of unused amounts allowed for 5 years.

Summary

This bill is comprehensive and will affect every U.S. citizen. If you have any questions or would like to explore a specific rule shift or strategy in more detail, please don't hesitate to reach out. And remember that in life, there are things we can control and things that truly matter. With tax shifts like this, we will do our best to focus on the space where those overlap.