The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, represents the most comprehensive federal tax reform since the Tax Cuts and Jobs Act (TCJA). This sweeping legislation impacts nearly every category of taxpayer, from individuals and small businesses to large corporations and multinational entities.
With dozens of new provisions, extensions, sunsets, and modifications, understanding how OBBBA may affect your tax position is essential. This FAQ is designed to break down the most significant changes, organized by topic to help you quickly find answers that matter to you or your business. From individual tax brackets and deductions to international tax reform and clean energy credits, we’ve covered the top questions we’re hearing from clients and advisors alike.
Individual Provisions
Q: What happens to the individual tax brackets under OBBBA?
A: OBBBA makes the Tax Cuts and Jobs Act (TCJA) individual rate brackets permanent. The 7 brackets (10%, 12%, 22%, 24%, 32%, 35%, and 37%) remain in place, with inflation adjustments for brackets under 24%, beginning in 2026.
Q: What’s the new deduction for overtime pay?
A: For tax years 2025 through 2028, individuals can claim an above-the-line deduction of qualified overtime pay up to $12,500 ($25,000 for joint filers). This deduction phases out at $150,000 ($300,000 MFJ).
Q: Is there a deduction for tipped income?
A: Yes. From 2025–2028, a temporary above-the-line deduction of up to $25,000 is available for qualified tip income. The deduction is limited by the net income from the tip-earning business and phases out at $150,000 ($300,000 MFJ).
For more details, see the IRS’s full list of tipped occupations here.
Q: What do employers need to do in response to the new deduction for tips and overtime pay?
A: Not much. While employees may benefit from the new above-the-line deductions for qualified tips and overtime pay (available 2025–2028), employers do not need to make changes to payroll withholding at this time. The IRS has confirmed that the Forms W-2 and 1099 will not be revised for tax year 2025, but recently released Drafts for 2026 indicate Forms will be adjusted then. The key action is to work with your payroll provider to ensure accurate tracking and reporting of eligible wages and tips for employee tax reporting purposes.
For more details, see the IRS’s full list of tipped occupations here.
Q: What changes were made to the standard deduction and personal exemptions?
A: The increased standard deduction under TCJA is made permanent. For 2025, it will be $31,500 MFJ ($15,750 single), adjusted annually for inflation. Personal exemptions remain eliminated, but a temporary $6,000 deduction for individuals aged 65+ applies from 2025–2028.
Q: Is the new Senior Deduction permanent?
A: No. The deduction for individuals aged 65 and older—$6,000 per eligible taxpayer—is temporary and only available for tax years 2025 through 2028. It is also subject to income phaseouts and adjusted for inflation beginning in 2026.
Q: How does OBBBA impact AMT and itemized deductions?
A: The higher AMT exemption levels from TCJA are made permanent, but phaseouts accelerate (50% reduction over the threshold). A new Pease-like limitation reduces itemized deductions by ~5.4% for taxpayers in the 37% bracket.
Q: Are any miscellaneous deductions revived?
A: The TCJA’s suspension of miscellaneous itemized deductions is made permanent. However, unreimbursed educator expenses now qualify as itemized deductions beyond the $300 above-the-line limit.
Q: What about mortgage interest and SALT deductions?
A: OBBBA makes the $750,000 mortgage limit permanent. SALT deduction caps increase to $40,000 in 2025 and 2026, and with inflation adjustments through 2029, but phase down for high-income taxpayers ($500,000 AGI threshold). The SALT deduction is set to revert back to $10,000 in 2030
Q: Will the $500K income threshold for the SALT deduction count dividend income, or only wages/other income?
A: It’s based on adjusted gross income (AGI), so it includes dividend income.
Q: Is the $500K SALT phase-out threshold dependent on filing status?
A: Yes. For married filing separately, the threshold is halved.
Q: Can taxpayers deduct up to $40K in state and local taxes and also take the standard deduction?
A: No. You must choose either itemizing (to deduct SALT up to $40K) or taking the standard deduction — you cannot do both.
Q: Are there changes to charitable contributions?
A: Yes, beginning in 2026. Non-itemizers can deduct up to $1,000 ($2,000 MFJ) of cash contributions above the line. Itemizers now face a 0.5% AGI floor. Contributions above the floor carry forward for 5 years.
Q: What else is new for individuals?
- 90% limit on gambling loss deductions
- Deductibility of interest on qualified auto loans (2025–2028)
- Expanded 529 and ABLE account uses and limits
- Creation of “Trump Accounts” for children’s long-term savings
- Casualty losses extended to include state-declared disasters
Q: What else is new for individuals?
- 90% limit on gambling loss deductions
- Deductibility of interest on qualified auto loans (2025–2028)
- Expanded 529 and ABLE account uses and limits
- Creation of “Trump Accounts” for children’s long-term savings
- Casualty losses extended to include state-declared disasters
Business Provisions
Q: What’s the update on bonus depreciation?
A: 100% first-year bonus depreciation is permanently restored for property acquired and placed in service after Jan. 19, 2025. Property acquired before this date follows TCJA phase-down rules.
Q: If I acquired property before January 19, 2025, can it still qualify for 100% bonus depreciation under OBBBA?
A: No. Property acquired before January 19, 2025, follows the TCJA phase-down schedule for bonus depreciation. To qualify for immediate 100% expensing, property must be acquired and placed in service after January 19, 2025.
Q: Are there new depreciation rules for production property?
A: No. Property acquired before January 19, 2025, follows the TCJA phase-down schedule for bonus depreciation. To qualify for immediate 100% expensing, property must be acquired and placed in service after January 19, 2025.
Q: Are there new depreciation rules for production property?
A: Yes. Qualified Production Property (QPP) placed in service after Jan. 19, 2025, and before Jan. 1, 2031, qualifies for 100% bonus depreciation if used for manufacturing, agriculture, or chemical production.
Q: Did OBBBA remove the special 5-year MACRS recovery period for renewable energy property (section 168(e)(3)(B)(iv))?
A: Yes. OBBBA eliminates that special 5-year cost recovery treatment for energy property described in section 48(a)(3).
Q: How has Section 179 expensing changed?
A: The limit increases to $2.5 million, with a phase-out beginning at $4 million (fully phased out at $6.5 million). These amounts are indexed for inflation starting in 2026.
Q: How does the business interest expense limitation (163(j)) change?
A: EBITDA-based limitation is permanently restored, allowing more interest to be deducted. Starting in 2026, capitalized interest is included in the 30% limitation calculation.
Q: What’s new for Section 174 research expenses?
A: Domestic R&E costs can be fully expensed starting in 2025. Small businesses may apply this change retroactively to 2022–2024. Foreign R&E costs still require 15-year amortization.
Q: How does this affect the R&D tax credit under Section 41?
A: Domestic R&E costs can be fully expensed starting in 2025. Small businesses may apply this change retroactively to 2022–2024. Foreign R&E costs still require 15-year amortization.
International Tax
Q: How does OBBBA change GILTI?
A: GILTI is renamed Net CFC Tested Income (NCTI). The 10% QBAI exclusion is eliminated, Sec. 250 deduction set at 40%, and FTC haircut reduced to 10%.
Q: What’s the new FDII regime?
A: FDII becomes FDDEI (Foreign-Derived Deduction Eligible Income), with a new 33.34% deduction rate and streamlined expense allocations. Certain intangibles are excluded.
Q: Any changes to BEAT?
A: Yes. The BEAT rate is increased slightly to 10.5%, and the current methodology continues. Credits remain usable against BEAT liability.
Q: What’s the new international excise tax?
A: A 1% excise tax is imposed on outbound remittance transfers not made via banks or U.S.-issued debit/credit cards. Applies after December 31, 2025.
Credits & Incentives Provisions
Q: What happens to clean energy credits?
A: Many IRA credits now phase out sooner:
- Wind, solar, clean vehicles, and hydrogen credits have earlier sunset dates
- 45L and 179D expire June 30, 2026
- Prohibitions apply to projects tied to foreign entities of concern
Q: When does the residential solar and geothermal tax credit now expire?
A: The residential clean energy credit, which includes solar and geothermal systems, is now set to expire on December 31, 2025, under the accelerated termination schedule in the OBBBA. Homeowners and contractors should plan accordingly to complete qualifying projects before this deadline.
Q: What about tax incentives for dependents?
- Child Tax Credit: $2,200 made permanent with $1,700 refundable portion
- Dependent Care FSA: Up to $7,500 exclusion made permanent
- Child & Dependent Care Credit: Updated AGI-based phaseout schedule
Q: What are the changes to Qualified Opportunity Zones?
A: QOZs are now permanent. Key updates include:
- New 10-year designation cycles
- Enhanced benefits for Rural QOZs (30% step-up basis)
- Stricter reporting and penalties
Estate & Gift Tax Exemption
Q: When does the new gift and estate tax exemption take effect?
A: Starting in 2026, and it will be indexed for inflation thereafter.
Q: What is the exemption amount for estate and generation-skipping taxes?
A: OBBBA makes the $15 million exemption permanent, and indexes it for inflation. This applies for both estate and gift taxes, and also generation-skipping transfers.
Miscellaneous
Q: Are there changes for educational institutions and compensation?
- Investment income tax increased for private colleges based on endowment size
- 21% excise tax on tax-exempt organizations paying employees over $1 million
What’s Next?
Q: What should taxpayers and advisors be doing now?
- Await IRS guidance, forms, and instructions
- Model tax scenarios based on effective dates
- Monitor potential second reconciliation or technical corrections
- Assess state conformity and legislative responses
Stay Informed on the OBBBA
We’re continuing to share timely insights to help you navigate the One Big Beautiful Bill Act. Find all our updates on the OBBBA Resource Hub, and follow us on LinkedIn and via email to stay connected.
If you need further guidance or have any questions, we are here to help. Please do not hesitate to reach out to discuss your specific situation.
This material has been prepared for general, informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Should you require any such advice, please contact us directly. The information contained herein does not create, and your review or use of the information does not constitute, an accountant-client relationship.
