The One Big Beautiful Bill Act (OBBBA) was passed and signed into law by President Trump, making several expiring tax cuts permanent and also introducing several new temporary provisions through 2028, impacting both individuals and businesses.

Individuals

The bill primarily focuses on extending individual tax benefits that are set to sunset after 2025. Individual tax benefits made permanent by the OBBBA include:

• Income Tax Rates and Brackets: The current seven-bracket system becomes permanent.
• Standard Deduction: The doubled standard deduction amounts are now permanent.
• Alternative Minimum Tax (AMT): The TCJA increases AMT exemptions, which are made permanent with inflation adjustments.
• Mortgage Interest: The lower mortgage interest deduction cap of $750,000 (down from the previous $1 million) is made permanent.

 The bill also made changes to several key deductions available to taxpayers, including:

• State and Local Tax (SALT) Deductions: The current $10,000 cap on state and local tax deductions is raised temporarily to $40,000 with 1% annual increases through 2029. After that, it reverts to $10,000 in 2030.
• Charitable Deductions: Starting in 2026, taxpayers who don’t itemize can claim an “above-the-line” deduction for charitable contributions up to $1,000 ($2,000 for married filing jointly).
• Child Tax Credit: The credit increases from $2,000 to $2,200 per child, with future inflation adjustments.

Several deductions are permanently eliminated, including personal exemptions (which remain at zero), miscellaneous itemized deductions subject to the 2% floor (unreimbursed employee expenses, tax preparation fees), and casualty and theft loss deductions except for federal disasters.

Finally, for individuals, there are several completely new provisions, including:

• Senior Deduction: Taxpayers over 65 can claim an additional $6,000 deduction, available whether they itemize or take the standard deduction.
• No Tax on Tips: Workers in traditionally tipped industries who don’t itemize can deduct up to $25,000 of reported tips.
• No Tax on Overtime: A deduction for qualified overtime pay up to $12,500 ($25,000 for married filing jointly) is available for non-itemizers.
• Auto Loan Interest: Interest on loans for U.S.-assembled cars becomes deductible up to $10,000, but only for vehicles assembled domestically.

Business Impact

Businesses are also impacted, but to a lesser extent than individuals.  Several key business tax provisions that were set to expire are made permanent, ensuring continued tax relief for various business structures.

• Pass-Through Entities benefit significantly from the permanent extension of the Section 199A deduction, allowing LLCs, S corporations, and sole proprietorships to deduct 20% of business income.
• Depreciation – 100% bonus depreciation provision is now permanent.
• Research and Development expenses can now be fully expensed for domestic R&D activities, replacing the previous requirement to amortize costs.

Conclusion

For businesses and individuals, the OBBBA provides long-term tax planning certainty by making temporary provisions permanent. Many of the provisions highlighted above are subject to phase-outs and other income-based limitations, so make sure to read the complete articles and consult your tax advisor.