The One Big Beautiful Bill Act (OBBBA): 2025 Tax Reform Made Simple

The One Big Beautiful Bill Act (OBBBA) is the 2025 tax overhaul designed to modernize the code, secure permanent relief for families and businesses, and introduce new tax credits and planning opportunities. For Balanced Equity LLC’s clients, understanding these changes is essential for smart financial and tax planning.

What’s in the OBBBA?

OBBBA builds on the 2017 Tax Cuts and Jobs Act (TCJA) while adding new incentives for individuals, families, seniors, and businesses. Many TCJA provisions are now permanent, providing long-term stability.

Permanent Individual Tax Relief

• Federal tax brackets: Seven brackets (10%–37%) remain, indexed annually for inflation.

• Standard deduction: Doubled from pre-TCJA levels—$15,750 (Single), $23,625 (HOH), $31,500 (MFJ) in 2025.

• Child Tax Credit: Increased to $2,200 per child under 17; phaseouts start at $200,000 AGI (Single/HOH) and $400,000 (MFJ).

• Repealed deductions: Miscellaneous deductions and personal exemptions remain eliminated.

New Deductions & Credits (2025–2028)

• Senior Deduction: Extra $6,000–$12,000 for those 65+, phased out above $75,000/$150,000 AGI.

• Tip Income Deduction: Up to $25,000 for eligible industries; phased out at $150,000/$300,000 AGI.

• Car Interest Deduction: Up to $10,000 annually for qualifying personal vehicles under 14,000 lbs.

• Overtime Deduction: Deduct up to $12,500 (Single/HOH) or $25,000 (MFJ).

• SALT Cap: Raised to $40,000 (2025–2029), phasing out $500,000–$600,000 AGI; reverts to $10,000 in 2030.

• 529 Plans: Expanded for K–12, SAT/ACT, homeschooling, tutors; K–12 limit doubles to $20,000 in 2026.

Trump Accounts: New Tax-Advantaged Kids’ Savings

For children born 2025–2028 or under 18:

• Seed contribution: $1,000 at birth.

• Annual contributions: $5,000 plus $2,500 employer match.

• Withdrawal rules: Principal available at 18; earnings/government/employer portions taxed/penalized if accessed early.

• Investment: Restricted to U.S. equity index funds; exceptions for first home or education.

Estate, Charity, & Gambling

• Estate tax exemption: $15 million per individual, inflation-adjusted, effective 12/31/2025. $30 million MFJ.

• Above-the-line charitable deduction: $2,000 (MFJ), $1,000 (Single/HOH); phase-in of 0.5% AGI limit starts 2026.

• Gambling losses: Deduction capped at 90% of winnings.

Business Tax Relief & Modernization

• 100% bonus depreciation: Immediate, permanent extension for qualifying assets.

• QBI deduction: 20% deduction for pass-throughs now permanent.

• Manufacturing property: Expense new 39-year assets immediately (construction starting 2025).

• R&D credits: Expensing as opposed to amortizing over a period of time.

Clean Energy Credits

• EV credits end: 9/30/25

• Solar/home credits end: 12/31/25

Plan green investments before these deadlines.

Action Steps for Clients

• Families: Maximize Trump Accounts, 529 contributions, and enhanced Child Tax Credit/SALT benefits.

• Seniors: Claim new below-the-line deductions

• Businesses: Coordinate bonus depreciation and deductions with your CPA.

• Charitable planners: Make 2025 gifts to avoid upcoming AGI limits.

For strategic guidance on leveraging OBBBA for your financial future, contact Balanced Equity Consulting LLC to secure tax-smart planning in 2025 and beyond. CPA in Santa Fe, New Mexico. Offering fast, friendly, and professional CPA services in fully remote and/or local personalized environments. Book your consultation now!

Google CPA Santa Fe, NM Link