The One Big Beautiful Bill Act, June 2025.

In May 2025, the U.S. House of Representatives narrowly passed a budget resolution, “The One, Big, Beautiful Bill Act” (OBBB), with vote of the House (216–214) and Senate (51–48), advancing resolution to extend the Tax Cuts and Jobs Act. With the budget passed, Congress will now focus on tax legislation.

Key Tax Provisions for Individuals

The bill aims to make permanent several provisions from the 2017 Tax Cuts and Jobs Act (TCJA), which are set to expire at the end of 2025. These include maintaining lower individual income tax rates and extending the repeal of the Pease limitation on itemized deductions.

The key and most interesting takes aways for upcoming changes:

• Extension of Increased Standard Deduction: Single $15,000, MFJ $30,000, HOH $22,500. For 2025 year.

• Child Tax Credit: Increasing the credit to $2,500 through 2028, then reverting to $2,000 thereafter. The child tax credit (CTC) is indexed for inflation starting in 2029. Taxpayer, spouse (if filing jointly), and qualifying child must have Social Security numbers to claim the child tax credit. The additional CTC of $1,400 ($1,700 in 2025) is made permanent. The credit for other dependents of $500 is made permanent.

• No Tax on Tips: Introducing new deductions for tips and overtime pay. Deduction allowed for qualified tips received by the taxpayer during the year reported on an information statement (e.g., Form W-2). Only applies to cash tips, including cash, check, debit, and credit card. Deduction is allowed in addition to the standard deduction for barbering, hair care, nail care, aesthetics, and body and spa. Available for tax years 2025 through 2028.

• Enhanced Deduction for Seniors: adding $4,000 deduction for taxpayers who have reached age 65. Available for tax years 2025 through 2028.  

• No Tax on Car Loan Interest: Deduction for qualified passenger vehicle loan interest. $10,000 limit. Deduction allowed whether or not the taxpayer itemizes.

• Charitable Contributions of Individuals Who Do Not Elect to Itemize: $300 for joint return ($150 for other taxpayers). Available 2025 through 2028.

• Trump Accounts Contribution Pilot Program: $1,000 credit for children born between 2025 and 2028. $5,000 contribution limit, adjusted for inflation.

• SALT Deduction Cap: Raising the state and local tax (SALT) deduction cap to $40,000 for taxpayers earning less than $500,000.

• Estate and Gift Tax Exemptions: Permanently increasing the lifetime exemption to $15 million per individual (or $30 million per married couple) starting in 2026, with annual inflation adjustments.

However, the bill also introduces a new overall limit on itemized deductions for those in the top 37% tax bracket, effectively reducing the tax benefit of itemized deductions for high-income earners. Income Threshold for the 37% Bracket in 2025:

Single Filers: Taxable income over $626,350.

Married Filing Jointly: Taxable income over $751,600.

Head of Household: Taxable income over $626,350

A Few Business Tax Changes

For business, the legislation proposes:

• Extension of Deduction for Qualified Business Income (QBI) and Permanent Enhancement: The QBI deduction is increased from 20% to 23% and made permanent. Effective for tax years after December 31, 2025.

• Section 199A Deduction: Increasing the deduction for pass-through entities.

• R&D Expenses: Restoring the immediate deductibility of U.S. research and development costs under Section 174 for tax years 2025 through 2029.

• Bonus Depreciation: Reinstating 100% bonus depreciation for new manufacturing facilities from 2025 through 2028.

Impact on Social Programs and Deficit

The Congressional Budget Office (CBO) estimates that the bill would add approximately $2.6 trillion to the national debt over the next decade. Key factors contributing to this increase include:

• Medicaid and SNAP Cuts: Implementing stricter eligibility requirements and work mandates, leading to an estimated 8.6 million individuals losing Medicaid coverage.

• Elimination of Green Energy Tax Credits: Rolling back many clean-energy incentives established under the Inflation Reduction Act.

• Increased Defense and Border Security Spending: Allocating an additional $150 billion for defense and $70 billion for border security measures.

With the House's approval, the "One Big Beautiful Bill Act" now moves to the Senate, where it is expected to undergo further debate and potential revisions. Given the narrow margin of passage in the House and the bill's extensive scope, its future in the Senate remains uncertain.

We will continue to monitor developments and share updates for your reference.

Disclaimer

The information provided in this article is for general informational purposes only and does not constitute legal, tax, or financial advice. While efforts have been made to ensure the accuracy of the content as of the publication date, legislative details and interpretations may change, and individual circumstances vary. Readers are strongly encouraged to consult with a qualified tax advisor, legal professional, or financial consultant before making any decisions based on the information presented herein. The authors and publisher disclaim any liability for actions taken or not taken based on this content.