Array Blog

Andrew Redden, CPA – October 1, 2025


Breaking Down the One Big  Beautiful Bill Act (OBBBA): Key Tax  Changes That May Affect You


The One Big Beautiful Bill Act (OBBBA) was officially passed by Congress on July 1, 2025, and signed into law on July 4, 2025. While the contents of this bill include significant law changes beyond tax, the tax provisions included in this bill are some of the most sweeping changes to federal tax law in recent history. The legislation extends several popular provisions from the 2017 Tax Cuts and Jobs Act (TCJA), introduces new deductions aimed at wage earners, seniors, and business owners, and rolls back several green energy tax incentives.

Here’s what you need to know about how OBBBA may impact your finances, and which provisions might warrant action before year-end:

Major TCJA Provisions Extended

Several popular TCJA policies are extended, including:

• Lower marginal tax rates for individuals – Including top marginal tax rates of 37% for high-net-worth individuals.
• Enhanced standard deduction – Tax year 2025 deduction of $15,750 for single filers and $31,500 for couples filing a joint tax return. Indexed for inflation in following tax years.
• Elimination of personal exemptions – Were worth $4,050 per exemption prior to being repealed in 2018.
• Expanded estate tax exemption – Extended permanentlyand increased to $15M.
• Increased AMT exemption
• 20% Qualified Business Income (QBI) deduction
• 100% bonus depreciation (available for property pl
aced in service after January 19, 2025)

These extensions provide continued tax relief for many individual taxpayers and business owners, especially pass-through entities and estates.

New: No Tax on Tips and Overtime (With Limits)

Two headline provisions included in the bill that target hourly and service workers:

1. Tip Income Deduction

• Deduction limit: Up to $25,000 per year
• Eligibility: Occupations that “customarily and regularly” received tips prior to 2025
• Phase-out: Begins at $150,000 Modified Adjusted Gross Income (MAGI) for single filers; $300,000 for married filing jointly (MFJ)
• Not allowed if filing Married Filing Separately (MFS)
 

2. Overtime Pay Deduction

• Deduction limit: Up to $12,500 ($25,000 for MFJ)
• Only the OT premium qualifies (example: if OT is $30/hrvs. regular $20/hr, only $10/hr is deductible)
• Phase-out: Same MAGI thresholds as the tips deduction

Both provisions expire after tax year 2028.

Note: States may not conform to this federal change. Tips and overtime may still be taxable at the state level.

New: Temporary Senior Deduction

Designed to provide relief to older taxpayers:

• Deduction: $6,000 per qualifying senior
• Eligibility: Age 65 or older by year-end
• Both spouses can qualify
• Phase-out: Begins at $75,000 MAGI (or $150,000 MFJ)
• Expires after 2028
 

This is in addition to the standard deduction and could provide significant tax savings for fixed-income seniors.

Charitable Contributions for Non-Itemizers (Permanent Starting in 2026)

For taxpayers who claim the standard deduction:

• Deduction cap: $1,000 (or $2,000 if MFJ)
• Cash donations only (non-cash contributions excluded)
• No income phase-out

This brings back a popular 2021 pandemic-era provision: this time permanently, beginning in 2026.

SALT (State and Local Tax) Cap Increase

The deduction cap for individuals that itemize their deductions is modified as follows:

• New cap: $40,000 (adjusted annually)
• Phase-down: Reduced by MAGI over $500,000 ($250,000 for married couples filing separately) (example: if a taxpayer has MAGI of $550,000, the cap is reduced by 30% of the excess $50,000, so the new cap is $25,000).
• Cannot be phased down below $10,000, regardless of income level
• Expires after 2030

This revision benefits high-income earners in high-tax states, although still subject to phase-down limits.

Personal Car Loan Interest Becomes Deductible

A surprising new Schedule A deduction:

• Deduction cap: $10,000 per year
• Must be for a vehicle used for personal purposes, with a first lien and final assembly in the U.S.
• Applies to new and refinanced loans incurred after December 31, 2024
• Phased out starting at $100,000 MAGI ($200,000 MFJ)
• Expires after 2028

This creates a new angle for buyers considering a vehicle purchase in 2025 or beyond.

Green Energy Credits Repealed 

The OBBBA repeals several existing credits meant to incentivize clean energy purchases:

• EV tax credits – Repealed effective September 30, 2025
• Energy Efficient Home Improvement Credit – Ends December 31, 2025
• Residential Clean Energy Credit – Ends December 31, 2025

Planning Note: If you’re considering any purchases that qualify, it may be beneficial to expedite your purchase prior to the expiration date to cash in on these credits.

Final Thoughts

The One Big Beautiful Bill Act makes bold changes that could reduce tax burdens for workers, seniors, and middle-class families. But with numerous phase-outs, sunsets, and income thresholds, careful planning will be essential.

 If you’re unsure how the changes may affect you or your clients, now is a great time to sit down with one of the tax advisors at Array Tax Services.