One Big Beautiful Bill Act
On July 4, 2025 the One Big, Beautiful Bill Act was signed into law. This brought about several significant tax changes. These provisions are designed to provide meaningful tax relief to both individuals and businesses, effective for tax years 2025 through 2028.
This is not a comprehensive list of changes but some of the few that we know will have the most impact on many people.
For Individuals:
The OBBBA introduces several new deductions, including:
| Before OBBBA | After OBBBA | |
|---|---|---|
| Tips and Overtime | Tips and overtime pay were taxable income. | For 2025–2028, above-the-line deductions are created for qualified tips (in certain occupations) and for overtime premium pay, subject to income and occupation limitations. |
| New Car Loan Interest Deduction | Car loans and interest were not deductible. | Interest on loans for new, personal-use vehicles may be deductible up to $10,000 annually. |
| Senior Deduction | For the ages of 65 and over, standard deduction. | Individuals aged 65 and older may claim an additional $6,000 deduction ($12,000 for qualifying couples). |
| State and Local Tax (SALT) Deduction Cap | Cap of $10,000. | SALT deduction cap is increased to $40,000 per household and would be phased out for taxpayers with modified adjusted gross income (MAGI) over $500,000. In 2030, the deduction will revert to $10,000. |
For Businesses:
Key provisions include:
| Before OBBBA | After OBBBA | |
|---|---|---|
| Tip and Overtime Reporting | No separate reporting from standard payroll. | Employers must report qualified overtime and cash tips for eligible employees with new W-2 codes. |
| Form 1099 Reporting Threshold | The threshold for Form 1099 reporting remained at $600 since its inception in 1916. | The information reporting threshold for payments for services increases to $2,000 in a calendar year (up from $600) in 2026, and the threshold amount will be indexed annually for inflation starting in 2027. |
| QBI Deduction | The deduction of 20% for pass-through income was scheduled to expire after 2025. | The qualified business income (QBI) deduction is made permanent and the deductible amount for each qualified business would remain at 20%. |
| Sec. 179 Expensing | Sec. 179 allowed up to $1,160,000 of expenses of qualifying property for business. The phase-out threshold began at $2,890,000. | The maximum amount a business may expense for qualifying expenses is increased to $2.5 million, with the phaseout threshold raised to $4 million, both indexed for inflation after 2025. |
Resources:
For further information on these tax updates, please see the following PDFs:
Overview of OBBBA Tax Changes Affecting Individuals
Overview of OBBBA Tax Changes Affecting Businesses
Deduction for Car Loan Interest