The One Big Beautiful Bill Act — also known as the Big Beautiful Bill, or One Big Beautiful Bill (OBBB) — is back in the spotlight. The House of Representatives voted to approve the Senate’s version of the bill, and President Trump signed it into law on July 4, 2025, making the tax changes official.
Here’s what you need to know about what’s in the Big Beautiful Tax Bill, what it could mean for taxpayers (individuals and businesses), and where it goes from here.
What is the One Big Beautiful Bill?
The One Big Beautiful Bill is a broad tax reform proposal from House Republicans connected to President Trump’s push for continued tax cuts. It’s designed as an update to the 2017 Tax Cuts and Jobs Act (TCJA) and includes a variety of new tax provisions that would affect individuals, families, and small business owners.
Did the Big Beautiful Bill pass?
Update July 4, 2025:
Both chambers of Congress have now agreed on the final version of the One Big Beautiful Bill, and the president has signed it into law. This means the new tax rules are official and will kick in starting with your 2025 taxes.
TaxAct has your back during tax reform.
But don’t worry about figuring out all these changes alone! TaxAct® will keep our software up to date and guide you through filing your taxes every step of the way. No matter what changes, we will be right here to help you navigate it all. Our tax software is built to guide you through the tax filing process step by step, ask the right questions about your tax situation, and fill out the tax forms you need to claim the tax credits and deductions you deserve.
Tax reform 2025: Key tax changes in the One Big Beautiful Bill
Let’s review some of the biggest changes in the final tax bill, starting with individual taxpayers and then moving on to business owners.
Tax changes for individuals: How will the One Big Beautiful Bill affect individual income taxes?
Extension of the TCJA
The One Big Beautiful Bill extends several key parts of the 2017 Tax Cuts and Jobs Act (TCJA) that were set to expire after 2025. This means the standard deduction, which was nearly doubled under the TCJA, will remain at those higher levels, instead of reverting to pre-2017 amounts.
The bill also maintains other important provisions from the TCJA, such as the updated tax brackets, the repeal of the personal exemption, and various changes to tax credits and deductions, which we will discuss further below.
SALT deduction cap increase
Under current law, the SALT deduction (which allows you to deduct state and local taxes) is capped at $10,000. This mainly impacts taxpayers in states with higher tax rates, such as New York, California, or New Jersey.
The One Big Beautiful Bill raises the SALT cap to $40,000 for married couples earning up to $500,000, with the cap phasing down for higher earners. For those with a modified adjusted gross income (AGI) above $500,000, the deduction gradually decreases until it reaches $10,000. If your income is above the threshold, you can still deduct up to $10,000, just like under current law.
The expanded $40,000 SALT cap will also increase annually for inflation through 2029, giving taxpayers a little extra room if local taxes rise over time. Beginning in 2030, the cap will revert to $10,000, unless new legislation is passed.
If you itemize deductions and live in a high-tax state, this change means you could deduct more of your local taxes for the next several years if you fall under the income threshold.
Extra deduction for seniors
If you’re age 65 or older, the One Big Beautiful Bill gives you a temporary boost to your standard deduction. Starting in 2025, seniors can claim an extra $6,000 standard deduction (up from the typical $2,000 in previous tax years). This additional deduction phases out for higher earners — specifically, if your AGI is over $75,000 as a single filer or $150,000 if you’re married and filing jointly.
This larger deduction is available for tax years 2025 through 2028, offering a little extra help to retirees and older taxpayers during those years.
No tax on tips
If you work in a job where tipping is customary, you could see a tax break on your tip income thanks to the Big Beautiful Bill. For tax years 2025 through 2028, tips you earn may qualify for an above-the-line deduction (meaning you don’t need to itemize deductions to claim it).
Here’s how it works:
- You must have a valid Social Security number (SSN), and so must your spouse, if you’re married.
- The deduction is capped at $25,000 per year.
- The deduction starts to phase out once your modified adjusted gross income (MAGI) hits $150,000.
- The Treasury secretary will publish a list of qualifying occupations within 90 days of the bill becoming law, so you’ll know if your job makes the cut.
- Your employer will need to indicate your total cash tips and qualifying occupation on your Form W-2.
Note: Even though you could get a break from federal income tax on your tips, Social Security and Medicare taxes, and any applicable state and local taxes will still apply. You’ll still need to report your tips to your employer and on your tax return. TaxAct can guide you through how to do so when you file with us.
No tax on overtime pay
If you earn overtime as an hourly worker, the One Big Beautiful Bill offers another new tax break for 2025 through 2028. You may qualify for an above-the-line deduction on your overtime wages.
Here’s what you need to know:
- You’ll need a valid SSN (and so will your spouse, if you’re married).
- The deduction is capped at $12,500 each year if you file as single, or $25,000 per year if you’re married filing jointly.
- The deduction starts to phase out once your MAGI hits $150,000 for single filers or $300,000 for joint filers.
- Your employer will need to include your total qualified overtime compensation separately on Form W-2.
Remember, this tax break only applies to your overtime pay — your regular wages are still taxed as usual. But don’t worry, TaxAct will walk you through reporting your income and claiming any tax deductions you qualify for.
Note: The bill also clarifies that tips cannot be claimed as overtime pay to avoid “double dipping” with the overtime tax deduction and no tax on tips deduction.
Bigger Child Tax Credit
Here’s what’s changing with the Child Tax Credit (CTC) and the Additional Child Tax Credit (ACTC):
- For the 2025 tax year, the Child Tax Credit will rise to $2,200 per qualifying child (up from $2,000).
- Starting in 2026, the CTC will increase yearly to keep up with inflation, so it’s designed to help your credit keep pace with rising costs.
- The refundable Additional Child Tax Credit (ACTC) is permanently set at $1,400 and will adjust for inflation each year. This means if your CTC is bigger than your tax bill, you’ll receive some of the difference back as a tax refund.
- The current CTC income phaseout limits are locked in for good: $200,000 for single filers and $400,000 for married couples filing jointly. This gives families more certainty about their eligibility from year to year.
Not sure how these changes might impact your tax refund? Don’t stress. TaxAct will ask about your family and dependents, crunch the numbers, and make sure you claim every dollar you qualify for — no guesswork required.
Elimination of certain green energy tax breaks
The One Big Beautiful Bill gets rid of many green energy incentives. Several tax breaks created by the Inflation Reduction Act (passed by the Biden administration in 2022) will be eliminated soon, including:
- The electric vehicle (EV) tax credit for new and used cars will expire after Sept. 30, 2025. If you’re thinking about purchasing an EV and want to take advantage of the credit, you’ll need to make your purchase before that deadline.
- The tax credits for energy-efficient home improvements — like upgrading windows, insulation, or HVAC systems — will expire after Dec. 31, 2025.
If you’re planning a green upgrade, be sure to check the timeline. And remember, TaxAct can help you claim any remaining green energy credits you qualify for when you file with us.
Car loan interest deduction
If you’re paying interest on a vehicle loan, the One Big Beautiful Bill introduces a temporary tax break just for you. For tax years 2025 through 2028, you may claim an above-the-line deduction of up to $10,000 each year for interest paid on a qualified passenger vehicle loan.
Here’s what you need to know:
- The deduction starts to phase out if your MAGI is over $100,000 (or $200,000 for joint filers).
- Your vehicle must meet all the following requirements:
- Be manufactured mainly for use on public roads.
- Have at least two wheels.
- Be a car, minivan, SUV, pickup truck, van, motorcycle, or all-terrain vehicle (ATV).
- Have its final assembly take place in the United States.
- Have a valid vehicle identification number (VIN) listed on your loan.
- Loans for campers and RVs do not qualify for this deduction under the final bill.
TaxAct will help you determine if your vehicle and loan meet the requirements, so you can take advantage of this deduction if you’re eligible.
1099 reporting thresholds
How third-party payments and gig work are reported to the IRS is changing. Starting in 2026:
- The reporting threshold for Form 1099-NEC and Form 1099-MISC will rise to $2,000, up from the current $600 minimum. This threshold will increase each year for inflation, so you won’t get as many 1099s for smaller jobs or side gigs.
- For Form 1099-K (which covers payments from third-party apps), the threshold reverts back to $20,000 in payments and at least 200 transactions in a year. That means fewer people will get a 1099-K for occasional sales or small side hustles.
TaxAct will walk you through entering your tax forms and reporting your income, so you’ll always know exactly what you need to file.
Tax changes for business owners: How does the One Big Beautiful Bill impact small business taxes?
QBI deduction (Section 199A deduction) made permanent
Good news for small business owners and the self-employed: The One Big Beautiful Bill makes qualified business income (QBI) deduction permanent, so this valuable tax break isn’t going anywhere.
Here’s what’s included in the final version:
- The QBI deduction remains at 20% of your qualified business income (it won’t rise to 23% as originally proposed).
- If your business is considered a specified service trade or business (SSTB) — think law, healthcare, consulting, or accounting — the phaseout thresholds are now higher:
- $75,000 for single filers (up from $50,000),
- $150,000 for joint filers (up from $100,000).
- There’s a new $400 minimum deduction if you have at least $1,000 in qualified business income and otherwise qualify, even if the standard 20% calculation would give you less.
TaxAct can help you determine if you qualify for the QBI deduction and calculate your deduction automatically.
SALT workarounds for pass-through businesses
Many pass-through entities (like partnerships, LLCs, and S corps) have used pass-through entity taxes (PTETs) available in many states to sidestep the $10,000 SALT cap for individuals. Here’s how it works today:
- The business pays state-level tax.
- That tax is deductible as a business expense at the federal level.
- Business owners typically get a tax credit on their individual state return.
What’s changing:
The One Big Beautiful Bill brings important updates to how pass-through businesses (like partnerships, LLCs, and S corporations) can handle state and local tax (SALT) workarounds.
Under the final version:
- The SALT deduction cap rises to $40,000 and will be adjusted for inflation each year through 2029.
- The pass-through entity tax (PTET) deduction discussed above is preserved for small businesses.
- The bill removes previous limitations for specified service trades or businesses (SSTBs), so all types of pass-through businesses, including SSTBs, can take advantage of the SALT cap workaround.
If you’re a business owner, you can still use state-level SALT workarounds and benefit from the federal deduction, no matter your business type.
100% bonus depreciation returns
If you own a business and invest in new equipment or qualifying property, the One Big Beautiful Bill brings back another big tax break: 100% bonus depreciation. That means you can immediately deduct the full cost of qualifying property placed in service on or after Jan. 20, 2025, and before Jan. 1, 2030, rather than spreading those deductions over several years.
TaxAct will walk you through what qualifies and help you take full advantage of this deduction if you’re eligible.
FAQs
The bottom line
The One Big Beautiful Bill has officially become law, meaning some big changes could be coming to your taxes. But you don’t have to figure out all these new rules on your own. At TaxAct, our job is to keep up with the latest tax law changes, walk you through the tax filing process, and help you claim the tax credits and deductions you’re eligible for.
Remember, these changes won’t affect your 2024 tax return if you haven’t filed it yet. But you can count on TaxAct to have your back for the 2025 tax year and beyond.
