The One Big Beautiful Bill Act & What it Means for Americans

1. Permanent Extension of 2017 Tax Cuts  

• The OBBBA makes the TCJA’s tax brackets permanent, preserving the top income tax rate of 37%. 

• The standard deduction is permanently increased to $15,750 for individuals, $23,625 for heads of household, and $31,500 for married couples filing jointly in 2025, with ongoing inflation adjustments.  

• Additionally, a one-time boost of $750 for individuals and $1,500 for couples applies for 2025. 

What This Means for You: These changes provide tax stability, reducing the risk of a significant tax hike that was set to occur if the TCJA expired. 

• Middle-income families may see modest tax savings, averaging $500–$1,000 annually, while higher earners could save more, with those earning $1 million or more potentially seeing a 3% boost in after-tax income (approximately $75,000 in 2026). 

2. Spending Cuts  

To offset the tax benefits, the law includes spending cuts to the following programs. 

Medicaid 

• Cuts $700 billion in Medicaid funding over 10 years.

• Implements new requirements, including 80 hours per month of work, education or service for able-bodied adults with no dependents (starting in 2026).

• Eliminates benefits for an estimated 1.4 million undocumented immigrants.

Supplemental Nutrition Assistance Program (SNAP) 

• Reduces spending by $267 billion over a 10-year period.

• Expands work requirements for parents with children over age 7.

• Increases the work requirements age to 64.

• Shifts 5% of benefit costs and 75% of administrative costs to states beginning in 2028.

Affordable Care Act (ACA)  

• Ends automatic ACA re-enrollment.

• Requires annual income and immigration status verification (starting in 2028).

• Allows certain premium subsidies to expire.

• Shortens open enrollment window by moving up the deadline to December 15.

Loan Forgiveness

• Repeals the Biden-era student loan forgiveness program.

3. Increased State and Local Taxes (SALT) Deduction

• The SALT deduction cap rises from $10,000 to $40,000 for taxpayers earning up to $500,000 from 2025 to 2029, with a 1% annual increase. After 2029, it reverts to $10,000. 

• Higher earners will still benefit from a deduction of at least $10,000, depending on income.

What This Means for You: If you live in a high-tax state like California or New York, this temporary increase offers significant tax relief, especially for households earning $200,000–$500,000 with high property or state income taxes. Real estate investors and homeowners benefit most, as the higher cap reduces taxable income.

4. Added Senior Tax Deduction

Individuals aged 65 and older will receive an additional $6,000 deduction, which begins to phase out at incomes of $75,000 for single filers and $150,000 for joint filers. 

Note: The enhanced deduction would be in addition to the $2,000 single filers and $3,200 married filers are currently able to deduct if they are 65 or older.

5. Enhanced Child Tax Credit

The Child Tax Credit (CTC) increases from $2,000 to $2,200 per child under 17 (with a valid Social Security number) starting in 2025, with inflation adjustments from 2026. The refundable portion (Additional Child Tax Credit) rises to $1,700 in 2025.

6. Trump Accounts for Newborns

• The OBBBA introduces “Trump Accounts,” tax-advantaged savings accounts for children born between January 1, 2025, and December 31, 2028. 

• Each account starts with a $1,000 federal contribution, and parents can contribute up to $5,000 annually (tax-deferred growth, taxed as capital gains on qualified withdrawals). 

7. Temporary Deductions for Overtime, Tips & Auto Loan Interest 

• Overtime and Tips: Through 2028, overtime pay (up to $12,500 for individuals, $25,000 for couples) and tips (up to $25,000) are deductible for workers earning under $150,000 (individuals) or $300,000 (couples). 

• Auto Loan Interest: A deduction of up to $10,000 for interest on loans for U.S.-made vehicles is available from 2025 to 2028, phasing out for incomes above $100,000 (individuals) or $200,000 (couples).

What This Means for You: Service industry workers, hourly employees, and those purchasing U.S.-built vehicles can reduce taxable income significantly. However, the income phase-outs can limit benefits for higher earners.

8. Increased Estate Tax Exemption 

• The estate and gift tax exemption rises from $13.99 million to $15 million per individual ($30 million for couples) starting in 2026, with inflation adjustments. The step-up in basis at death is preserved. 

What This Means for You: High-net-worth families benefit from increased flexibility to transfer wealth tax-free. The higher exemption provides a window for strategic gifting or trust planning, especially if you’ve delayed due to uncertainty.

Action Steps: If your estate approaches or exceeds $15 million, act before 2026 to lock in the current exemption using strategies like Spousal Lifetime Access Trusts (SLATs) or Intentionally Defective Grantor Trusts (IDGTs). 

9. Business & Investment Incentives

• Bonus Depreciation: 100% bonus depreciation is restored for qualifying property (e.g., equipment, software) placed in service after January 19, 2025, through 2030.

• Section 199A Deduction: The 20% deduction for pass-through businesses (e.g., freelancers, contractors) is made permanent.

• Qualified Small Business Stock (QSBS): The capital gains exclusion for QSBS increases to $15 million, and the small business threshold rises to $75 million, encouraging investment in small companies. 

What This Means for You: Business owners and investors can accelerate deductions and reduce taxable income through strategic purchases or sales. The QSBS changes are particularly attractive for entrepreneurs and investors in startups.

9. Expanded 529 Plan Uses 

The OBBBA broadens 529 plan uses to include K-12 expenses like tutoring, textbooks, test prep, online learning, homeschool materials, and special education expenses (e.g., speech therapy). It also allows nonprofit scholarships for private or charter schools.  

What This Means for You: Families using 529 plans gain flexibility to cover a wider range of educational expenses, making these accounts more versatile for private, homeschool, or special-needs education. 

10. Border Security & Immigration

The OBBBA includes the following border security and immigration provisions:

• Border Wall Funding – There’s an allocation of $46.5 billion for border wall construction, including 701 miles of primary wall and 900 miles of river barriers.  

• Increased Personnel – There’s funding for 10,000 new ICE agents, 5,000 customs officers and 3,000 border patrol agents, providing $4.1 billion for hiring expenses and $2 billion for bonuses.  

• Deportation Funding – The legislation provides $45 billion for ICE detention facilities and $14 billion for deportation expenses. 

• Remittance Tax – The legislation imposes tax on cash payments sent by non-citizens to their home countries.

11. Other Provisions

Additional provisions of the bill include: 

• Air Traffic Control Modernization – Funds are provided to improve aviation safety and efficiency.

• Coast Guard Funding – Funding is increased to support the U.S. Coast Guard in protecting Arctic sovereignty and combatting illegal drugs and migration.

• Energy Policy – Biden-era methane taxes are repealed, the permitting process for fossil fuel projects is streamlined, and federal lands are opened for oil and gas development.

• Logging Expansion – A 25% increase in national forest logging is allowed.

• Department of Education – Plans are in place to close the U.S. Department of Education and transfer its responsibilities to other departments.

• School Vouchers – $20 billion in tax credits is provided for donations to voucher schools, and capital gains tax exemptions are allowed for stock donations that support private education.

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