The One Big Beautiful Bill Act (OBBBA): What Taxpayers Need to Know
- Stacey Payne
- Dec 4, 2025
- 3 min read
The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, brings significant tax changes that impact individuals, families, employees, and small business owners. While some provisions from the 2017 Tax Cuts and Jobs Act (TCJA) were made permanent, plenty of new rules arrive in 2025 and beyond.
Below is a breakdown of what stays the same, what's new, and how these changes may impact you.
What Stays the Same
The OBBBA locks in several TCJA benefits that taxpayers have become accustomed to. These provisions are now permanent:
* Lower individual tax rates
* Higher standard deduction
* Higher child tax credit
* Increased estate and gift tax exemption
* Qualified Business Income (QBI) deduction for pass-through businesses
If you’ve relied on these tax breaks over the last several years, you can rest easy—none of them sunset under the new bill.
What’s New Under the OBBBA
The Act introduces multiple taxpayer-friendly deductions and credits, along with some expanded definitions and updated reporting rules. Here’s a closer look at the most notable changes.
No Tax on Tips (2025–2028)
Employees and self-employed individuals working in occupations that are “customarily and regularly tipped” may deduct qualified tips they receive.
Key points:
* Applies to voluntarily given cash or charged tips
* Maximum deduction: $25,000 per year
* Self-employed individuals are limited to net business income
* Phase-out begins at $150,000 of income ($300,000 MFJ)
* Must file jointly if married
* The IRS will release the official list of qualifying occupations
No Tax on Overtime (2025–2028)
Highlights:
* Maximum deduction: $12,500 annually ($25,000 MFJ)
* Deduction equals the “extra” portion of overtime paay (e.g., the half-rate of time-and-a-half)
* Phase-out begins at $150,000 of income ($300,000 MFJ)
* Joint filing is required for married couples
Senior Deduction (2025–2028)
Individuals age 65 and older can claim:
* An additional $6,000 deduction per eligible person
* Married couples where both spouses are 65+ may claim $12,000
* Phase-out begins at $75,000 income ($150,000 MFJ)
* Must file jointly if married
This is in addition to the standard deduction and other available tax breaks for seniors.
New Car Loan Interest Deduction (2025–2028)
Taxpayers may deduct interest on qualifying new vehicle loans up to $10,000 per year.
Requirements:
* Loan must be taken out in 2025 or later
* Vehicle must be new (used cars do not qualify)
* Vehicle must be for personal use (business use does not qualify)
* Gross vehicle weight must be under 14,000 lbs
* Final assembly must occur in the United States
* VIN must be included on your tax return
Information returns related to these loans will begin in 2026.
Bonus Depreciation Returns
Beginning January 19, 2025, 100% bonus depreciation is restored for eligible business purchases. This is a win for business owners looking to invest in equipment, technology, and other depreciable assets.
FICA Tip Credit Expanded
Previously available to restaurants, the employer FICA tip credit now extends to several beauty service industries, including:
* Barber and hair care
* Nail care
* Aesthetics
* Body and spa treatments
This credit applies to the employer’s share of FICA taxes on tips employees receive.
529 Plan Expense Expansion
Families can now use 529 plan funds for a broader range of educational expenses, including:
Additional K-12 expenses
Homeschool-related costs
Certain post-secondary credentialing programs
Energy Credits Limited
Some existing energy incentives will phase out sooner than expected:
* Clean energy credits end early
* Home energy efficient credits end December 31, 2025
Homeowners planning improvements should consider acting before the end of 2025 to use the credits before they expire.
Charitable Contribution Deduction (starting in 2026)
Taxpayers who take the standard deduction will be able to deduct charitable contributions—up to:
$1,000 for single filer
$2,000 for married filing jointly
This gives non-itemizers an opportunity to benefit from their giving.
New Form 1099 Thresholds (Starting 2026)
Reporting thresholds for Form 1099-MISC and Form 1099-NEC will increase from $600 to $2,000, easing the reporting burden on small businesses.
This applies to payments for services and for space provided (like contract labor and rent).
Final Thoughts
The OBBBA introduces a number of taxpayer-friendly provisions while making some of the most popular TCJA benefits permanent. From new deductions for seniors, tip earners, and overtime workers to expanded education benefits and updated 1099 rules, there’s a lot to unpack.
As always, tax situations are personal and nuanced. If you have questions about how these changes affect you or your business, reach out to your tax professional.
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