BREAKING DOWN THE ONE BIG BEAUTIFUL BILL ACT (OBBBA)
All of the tax changes that took place in the 2018 tax bill have been made permanent or completely removed, including:
The lower tax rate brackets
The standard deduction increased annually for inflation
The current child tax credit income limitations ($200K AGI for single and $400K AGI
for married couples)
The increased child tax credit amount (now $2,200)
Qualified Business Income Deduction and associated requirements
Removal of Miscellaneous Itemized Deductions except for teachers
Moving expenses only deductible by military personnel
Termination of pretty much ALL clean energy and vehicle tax credits beginning in
2026
Repayment of advance premium tax credits on health insurance premiums
extended permanently
Changes that OBBBA has put into place:
PERSONAL TAXES:
Increase of $6,000 ($12,000 for married couples) for individuals on social security
Social security will still be taxed, but the amount of taxable social security will be lower due to the increased deduction from income for those taxpayers
(This is only applicable for the tax years 2025 – 2028)
Increases the estate and gift tax exemption from $5 million to $15 million
The state and local tax (SALT) limitation is increased from $10K to $40K (for married couples) increased annually for inflation
Subject to income limitations and is reduced by 30% of the amount
over the income limitation ($500K in 2025 increased annually for inflation)
This increase reverts back to $10K after 2028
No Tax on the first $25K of qualified tips
New above the line deduction (off of income)
Subject to income limitations ($150K for single, $300K for married)
Tips will be taxed on paychecks, and then taxpayers can put the tips
on their returns and it will reduce how much tax they have to pay by reducing their AGI
No Tax on the first $12.5K of overtime ($25K for married couples) New above the line deduction (off of income) subject to income limitations ($150K for single, $300K for married) Overtime will be taxed on paychecks, and then taxpayers can put the overtime amount on their returns and it will reduce how much tax they have to pay by reducing their AGI. Not available for people filing as married filing separately
New deduction of $10K for interest paid on indebtedness (loan)
off of income for purchasing a new vehicle
Does not have to be a clean energy vehicle
Subject to income limitations ($100K for single, $200K for married)
New retirement account option for children (Trump Account)
Not tax deductible
Individuals younger than 18
Capped at $5K per year
$1,000 government contribution for children born after 12/31/2024
and before 1/1/2029
Charitable Contribution deductions
Permanent extension of allowed deduction even if not itemizing
$1K for single, $2K for married couples
BUSINESS TAXES:
Permanent extension of 100% bonus depreciation for the 1st year property is
acquired and placed into service
Current bonus depreciation has decreased by 20% for each year and for 2024 it was only 60%
Domestic research and experimental expenses can be fully deducted in the year incurred
Prior law only $5K was expensed and the rest had to be amortized over 15 years
Does not apply to foreign research and experimental expenses
Can be retroactive for small businesses making under $31M per year to tax years beginning after 12/31/2021
Permanent exclusion of up to $5,250 (increased annually for inflation beginning in 2026) for education assistance to employees
Can be used if employer helps employee pay for student loans
Can be used if employer offers education assistance programs
Corporate charitable contribution deductions must exceed 1% and no more than
10% of a corporation’s taxable income to be deductible
Only for C Corporation’s – not applicable for S Corporation pass throughs
1099-K requirements increased to $20K and at least 200 transactions
Beginning 1/1/2026
Individuals on Medicaid
Aren’t losing their Medicaid benefits, but they do have new requirements put
in place to keep their Medicaid benefits
On a monthly basis, individuals on Medicaid must either work 80 hours, participate in 80 hours community service, participate in a work program for 80 hours, or be enrolled in at least a half time education program (or a combination of 80 hours of any of these things)
STUDENTS:
Expands tax free eligible withdrawals from 529 plans to be allowed use for
attendance at an eligible elementary or secondary school (not just for college)
Also increases the limit on distributions per year from $10K to $20K
Graduate or professional students may not receive Direct PLUS loans beginning
7/1/2026
Limit to graduate and professional Direct Unsubsidized Loans
($100K for graduate, $200K for professional)
Changes to Parent Plus Loans
Limited to $20K per dependent per year
Lifetime limit of $65K per dependent
Aggregate lifetime limit (except for parent plus loans) to $257,500 per single
borrower
Loan Repayment Option Changes for borrowers with NEW loans after 7/1/2026
Standard repayment plan based on amount borrowed
An income based repayment plan known as Repayment Assistance Plan (RAP)
Beginning on 7/1/2028 borrowers who are on a CURRENT income based repayment
plan must begin repaying under 1 of 3 new plans and if they don’t choose one of these plans, they will be subject to the standard repayment plan
The Saving on Valuable Education (SAVE) plan
The Pay as you earn (PAYE) plan
The Income-Contingent Repayment (ICR) plan
Economic hardship and Unemployment deferments for student loans completely
eliminated for students receiving a loan after 7/1/2027
FOR MORE INFORMATION ON OTHER CHANGES NOT RELATED TO TAXES/FINANCES, PLEASE VISIT: