What the One Big Beautiful Bill Act Means for Individuals and Businesses
The One Big Beautiful Bill Act (OBBBA), now just over one month fresh into law, is full of tax code changes that could have major implications for individuals and business owners. With over 90 provisions packed in, it touches everything from personal income tax rates and charitable deductions to depreciation, research credits, and employer incentives.
KEY PROVISIONS FOR INDIVIDUALS:
Tax Rates Made permanent
The bill makes permanent the reduced individual tax rates introduced by the 2017 Tax Cuts and Jobs Act (TCJA).
Standard Deduction Made Permanent
The increased standard deduction from TCJA remains in place, set at $31,500 for joint filers and $15,750 for single filers for 2025, adjusting for inflation thereafter.
Personal Exemptions Terminated
Personal exemptions were suspended under TCJA for 2018 through 2025. The new law permanently terminates the deduction for personal exemptions.
Enhanced Deduction for Seniors Added
A new $6,000 deduction is allowed per senior (age 65 or older). The deduction is temporary, ending in 2028. The deduction is subject to income limitations and phases out when a Modified Gross Income (MAGI) exceeds $75,000 ($150,000 for joint filers) and is fully phased out when MAGI reaches $175,000 for single filers ($250,000 for joint filers). This deduction is in addition to the existing standard deduction for seniors.
Child Tax Credit Increased and Other Dependent Credit Remains
The child tax credit amount was set to revert to $1,000 after 2025. The bill permanently increases the amount to $2,200 for 2025 with the refundable portion set to $1,700, with both amounts adjusted for inflation. The $500 nonrefundable credit for a dependent other than a qualifying child, which was set to expire after 2025, is also made permanent.
Alternative Minimum Tax Exemption Permanently Increased
The higher AMT exemption and phaseout thresholds were set to expire after 2025. The bill permanently extends the increased AMT exemption amounts ($88,100 for single filers and $137,000 for joint filers), but reverts the phaseout thresholds to 2018 levels of $500,000 ($1m for joint filers) and increases the phaseout amount from 25% to 50% of the amount that AMT income exceeds the threshold amount.
Mortgage Interest Deduction Threshold Made Permanent
The bill permanently sets the allowable deduction for mortgage interest to the first $750,000 acquisition indebtedness incurred after 12/15/17. The bill also expands the deduction to include mortgage insurance premiums starting in 2026, but subject to phaseouts when AGI exceeds $100,000. The disallowance for interest on home equity debt not incurred to buy, build or improve a taxpayer’s home was made permanent.
Car Loan Interest Deduction Added
A new temporary deduction is allowed for up to $10,000 of interest on new car loans for 2025 through 2028. The deduction is subject to phase out for taxpayers with MAGI in excess of $100,000 ($200,000 for joint filers). Qualifying interest is for loans incurred after 12/31/24 for the purchase of a US assembled passenger vehicle for personal use and for which the vehicle is secured as a first lien for the loan.
Charitable Contribution Deduction Revised
For non-itemizers an above-the-line deduction up to $1,000 ($2,000 for joint filers) is allowed for cash donations (other than donations to Donor Advised Funds). For itemizers, the deduction is reduced by .5% of your AGI (calculated before any NOL carrybacks and above the line charitable deduction). These changes both take effect in 2026. The bill also makes permanent the 60% of AGI contribution limit for cash donations.
Casualty Loss Deduction Limited to Disasters
The limitations on casualty loss deductions for only federally declared disasters is made permanent. The deduction is expanded to also include certain state-declared disasters for tax years beginning in 2026.
Miscellaneous Itemized Deductions Disallowed Permanently
The bill permanently eliminates the deduction for miscellaneous itemized deductions. But beginning in 2026 unreimbursed expenses for eligible educators are removed from the list of disallowed miscellaneous itemized deductions.
Itemized Deductions Subject to New Limitation
The bill permanently repeals the overall “Pease” limitation for itemized deductions but replaces it with a new overall limitation starting in 2026. The new limitation applies to taxpayers in the highest tax bracket (currently 37%) and effectively limits the overall tax benefit to 35%.
Student Loan Forgiveness Changes
Under the prior TCJA act, the temporary provision for income exclusion for student loan forgiveness due to death or disability was set to expire at the end of 2025. The bill now makes that income exclusion permanent. The bill does not extend the exclusion to any other reason for student loan forgiveness.
Temporary Deduction for Tips and Overtime
From 2025 through 2028, there are two new above-the-line deductions for qualified tips and overtime compensation. The deduction for tips is limited to $25,000 per tax return, and the deduction for overtime is limited to $12,500 for single filers and $25,000 for joint filers. These deductions begin to phase out when MAGI exceeds $150,000 ($300,000 for joint filers), and married filers must file a joint return to claim these deductions.
Many Clean Energy Credits Phased Out or Eliminated
The bill eliminates or phases out a wide range of clean energy tax incentives introduced in recent years. Several credits for renewable energy production, energy-efficient commercial buildings, and clean vehicle purchases are either discontinued entirely or significantly scaled back.
Lifetime Estate and Gift Tax Exemption Increased and Made Permanent
Beginning in 2026, the estate tax exemption increases to $15 million per person. The exemption is made permanent and will be indexed for inflation.
KEY PROVISIONS FOR BUSINESSES
Qualified Small Business Stock Exclusion Increased
This bill modifies the exclusion of gain on qualified small business stock under Section 1202. Going forward, for stock issued after 7/4/2025, the exclusion percentage will be based on the holding period of the stock with a 50% exclusion if held for three years, a 75% exclusion if held for four years and a 100% exclusion if held for five years.
SALT Cap Temporarily Increased
The SALT deduction cap temporarily increases to $40,000 for 2025 through 2029, adjusted for inflation. However, a phasedown applies to households with MAGI above $500,000, reducing the deduction by 30% of the excess income, but not below $10,000.
QBI Deduction Made Permanent with Expanded Thresholds
The 20% qualified business income (QBI) deduction under Section 199A is now permanent. The income thresholds for specified service trades or businesses (SSTBs) have also been expanded, phasing in at $75,000 for single filers and $150,000 for joint returns.
Bonus Depreciation Returns to 100%
Bonus depreciation is reinstated to 100%. Businesses can fully expense qualifying property placed in service after January 19, 2025.
Section 179 Expensing Limit Increased
The maximum expensing amount increases to $2.5 million, with the phase-out starting at $4 million of purchases. Both amounts are indexed for inflation.
Domestic R&D Costs Immediately Deductible
The bill restores immediate expensing for domestic based research and experimental costs. For businesses with gross receipts under $31 million, this provision applies retroactively to 2022 and businesses can elect to either amend prior returns or write off the remaining capitalized expenses over a 1 or 2 year period.
Business Interest Deduction Reverts to EBITDA
Interest expense deductibility now returns to an EBITDA basis. Depreciation and amortization are now added back to Adjusted Taxable Income when calculating the amount of deductible interest.
Excess Business Loss Limitation Made Permanent
The cap on excess business losses under Section 461(l), which was scheduled to expire after 2028, is now permanent.
1099 Reporting Threshold Increased
Starting in 2026, the reporting threshold for Form 1099-MISC and 1099-NEC increases from $600 to $2,000. The threshold will be adjusted annually for inflation.
Final Thoughts
The OBBBA brings changes along with opportunities. The combination of permanent deductions, revived credits, and simplified compliance opens new doors for planning, investment, and growth.
The changes are broad, and in some cases retroactive. Your ShindelRock team is ready to guide you through strategy, compliance, and planning to ensure you get the most out of these changes.