personal-finance

Individual Income Tax Changes & Opportunities in the One Big Beautiful Bill Act (OBBBA)

Nick Eusanio, Esq., LL.M. Leave a comment

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) became law, making key 2017 tax rules from the Tax Cuts and Jobs Act (“TCJA”) permanent and adding several new tax breaks targeted at working households and seniors. Below is your quick-reference guide to what changed for individuals and what to do now. 

Executive Summary

  • Permanent (or improved with a 5-year lock)
    • The 2017 lower individual rate schedule from TCJA stays in place permanently. The 20% pass-through (section 199A) deduction and higher AMT exemption stick around, too. 
    • Improvements to the child tax credit and adoption credit.
    • State and Local Tax (“SALT”) cap relief is expanded but only through 2029—good news for high-tax states, but still not “unlimited SALT forever.” Thereafter the $10,000 annual SALT deduction cap applies again.
  • New temporary deductions (2025 – 2028): “no tax on tips,” “no tax on overtime,” car-loan interest, and a brand-new $6,000 per-person senior deduction—available even if you don’t itemize. 
  • Charitable giving rules change: a small “floor” before itemized gifts count, plus a revived above-the-line charitable deduction for non-itemizers (temporary). Bunching strategies matter again. 

What’s now permanent (or improved with a 5-year lock)

1) Individual rate cuts & AMT relief locked in

The OBBBA keeps the lower post-2017 brackets in place, along with the increased AMT exemption/phase-out thresholds. On balance, expect fewer folks to hit AMT and the rate chart you’ve grown accustomed to is here to stay. Owners of pass-throughs also keep the section 199A 20% deduction, with some expanding modifications [see my article on Business Tax Changes in the OBBBA for more detail]. 

2) Child Tax Credit slightly increased & indexed

The OBBBA bumps the Child Tax Credit to $2,200 per qualifying child and adds inflation indexing (starting after 2026). The refundable portion of the credit remains at a maximum of $1,700 per qualifying child for 2025 (also indexed to inflation in future years).

3) Adoption Credit improvement to add some refundability

Prior law permitted a nonrefundable credit for total qualified adoption expenses incurred (up to a $17,280 limit). The OBBBA preserves the prior law provisions and now allows a portion of the credit to be refundable up to $5,000 (with annual increases indexed to inflation) of qualifying adoption expenses.

4) SALT cap improved with 5-year lock before reverting

SALT deduction relief is broadened to a max deduction of $40,000 annually (indexed for inflation after 2025) through 2029. If you’re in a high-tax state or do state-and-local tax workaround planning, this is a window—plan around the re-tightening after 2029 (i.e., the maximum deduction then returns to $10,000 annually). 

Key new temporary deductions (2025 – 2028)

These are structured as above-the-line deductions—meaning you can claim them even if you don’t itemize (subject to income caps and reporting rules).

1) “No tax on tips”

Deduct up to $25,000 of qualified tips (limited to net income from the trade or business producing the tips, for self-employed individuals) for eligible workers (phases out starting at Modified Adjusted Gross Income (“MAGI”) of $150k for single filers or $300k for married filing jointly filers). The taxpayer must be in a “customarily and regularly” tipped occupation to be listed by the IRS, and the amounts must be properly reported (Form W-2, Form 1099, or Form 4137). If married, a taxpayer must file jointly with the taxpayer’s spouse to claim this deduction. Expect transitional relief and new employer reporting. 

2) “No tax on overtime”

Deduct the overtime premium (for example, the “half” in time-and-a-half) up to $12,500 for single filers ($25,000 married filing jointly), with the same $150k/$300k MAGI phase-out noted above. Applies to FLSA-required OT that’s reported on a Form W-2 or Form 1099 wage statement. If married, a taxpayer must file jointly with the taxpayer’s spouse to claim this deduction.

3) Car-loan interest deduction

Deduct up to $10,000 of interest on a loan for purchase (leases don’t qualify) of a qualified (generally, having a gross weight rating less than 14,000 lbs.) new (used doesn’t qualify) vehicle, assembled in the U.S., for personal use, and secured by a lien on the vehicle (loan originated after 12/31/24). Taxpayers will include the VIN on their returns; lenders will have new Form 1098-style reporting. 

4) $6,000 “Senior Deduction”

Qualifying individuals age 65+ can claim an extra $6,000 deduction ($12,000 for joint filers if both spouses are age 65+), on top of the normal additional standard deduction for seniors. To qualify, a taxpayer must attain age 65 on or before the last day of the taxable year. If married, a taxpayer must file jointly with the taxpayer’s spouse to claim this deduction. The deduction phases out at MAGI of $75k for single filers ($150k for married filing jointly). 

Charitable giving updates

  1. Taxpayers who Itemize Deductions: A new 0.5% of income “floor” before cash gifts to public charities are deductible (i.e., your first 0.5% of Adjusted Gross Income (“AGI”) doesn’t count). That makes bunching (or stacking into Donor-Advised Funds) more attractive again. Also, for tax year 2026 and continuing, there’s a new above the line charitable deduction for cash donations, equal to $1,000 (single filers) / $2,000 (married filing jointly) available to both itemizers and non-itemizers.
  2. Taxpayers who don’t Itemize Deductions: As noted, for tax year 2026 and continuing the OBBBA provides a new above the line charitable deduction for cash donations, equal to $1,000 for single filers or $2,000 for married filing jointly.

Action checklist (what to do now)

  1. Update your Form W-4 / estimates for 2025. If you’ll use the tips/overtime/senior or car-interest deductions, your 2025 tax might drop—consider adjusting withholding so you’re not overpaying. The IRS says no changes to 2025 information returns or withholding tables right away, so it’s on you to tweak. 
  2. Tipped/OT workers: start tracking. Keep clean records (pay stubs, Form 4137 for cash tips, employer statements). Employers will face new reporting—expect updated Form W-2 / Form 1099 boxes or separate statements. 
  3. Considering a car purchase? If you were already planning to buy, run the numbers on a new, U.S.-assembled, qualifying vehicle financed in 2025 – 2028—the deductible interest (up to $10k) could swing the math. Verify U.S. final assembly (window sticker/VIN or NHTSA VIN Decoder) and other “qualifying vehicle” factors (e.g., gross vehicle weight rating of less than 14,000 lbs).
  4. Seniors: Coordinate the $6,000 senior deduction with the standard deduction vs. itemizing—and with charitable bunching—so you don’t leave dollars on the table. 
  5. Charitable giving plan: With the 0.5% floor for itemizers, and the new above-the-line deduction for both itemizers and non-itemizers (for tax year 2026 forward), consider bunching gifts into alternating years or front-loading into a DAF in a high-income year. 
  6. SALT window (through 2029): If you’re in a high-tax state, re-evaluate state and local tax timing and your use of SALT cap workarounds (e.g., PTE taxes). The expanded relief won’t last forever. 
  7. Adoption benefits: If you’re mid-process, confirm the new adoption credit amounts/phase-outs against your qualifying expenses and expected income.
  8. State conformity caveat (don’t skip this): Your state may not automatically follow these federal changes (especially the tips/overtime and car-interest deductions). Expect a patchwork in the 2025 filing season; check your state’s conformity rules or talk with your advisor. 

Questions or want a tailored OBBBA impact review?

Contact Nick Eusanio, Partner, Tax Planning & Compliance — DBL Law

OBBBA, Explained: What the “One Big Beautiful Bill Act” Means for Businesses,Funds, and Founders

Nick Eusanio, Esq., LL.M. Leave a comment

On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) became law, reshaping several core business tax rules, including those in the incentives and international tax landscapes. Below is a concise guide to the provisions most likely to affect closely held businesses, sponsors, and growth companies—and where to focus next.

  1. Interest expense limits (163(j)): back to EBITDA, with a new twist
    • For tax years beginning after December 31, 2024, the section 163(j) cap reverts to an EBITDA measure (generally allowing more interest than the current EBIT approach). But, effective for tax years beginning after December 31, 2025, OBBBA also brings capitalized business interest under 163(j) (unless it is required to be capitalized under sections 263(g) or 263A(f))—closing a common workaround that capitalized interest could avoid the limitation. Review 2026+ models and debt documents now; consider how the new ordering rule (generally calculating the section 163(j) limitation before application of interest capitalization provisions) affects cash tax and timing.
  2. 100% bonus depreciation: permanent—plus a real-property expansion
    • OBBBA permanently restores 100% expensing for qualifying property acquired and placed in service on or after Jan. 19, 2025. It also creates temporary 100% expensing for certain “qualified production property”—specified U.S. nonresidential real property used in defined production activities—if construction begins after Jan. 19, 2025 and before Jan. 1, 2029, and the property is placed in service before Jan. 1, 2031. Capital-intensive manufacturers (including ag processing, chemicals, autos, and semiconductors) should map capex projects to these windows. 
  3. R&E (section 174): current expensing is back (domestic), with limited retro relief
    • For tax years beginning after Dec. 31, 2024, domestic R&E may again be expensed currently (or capitalized by election). Foreign R&E remains 15-year amortization. Under one special transition rule, certain small businesses can retroactively expense domestic R&E for tax years beginning after Dec. 31, 2021—a refund opportunity worth exploring but which requires amending tax returns or a change in accounting method. For all taxpayers that paid or incurred domestic R&E expenses after Dec. 31, 2021 and before Jan. 1, 2025, a second special transition rule effective for tax years after Dec. 31, 2024 permits an election to deduct the remaining unamortized balance of domestic R&E expenses over a period of  one or two tax year(s),
  4. QSBS (section 1202): faster tiers, bigger caps, broader access
    • For stock acquired after July 4, 2025, OBBBA replaces the five-year wait with a 3/4/5-year framework: 50% exclusion at 3 years, 75% at 4, 100% at 5. It also raises the issuer’s gross-assets cap to $75M (from $50M) and lifts the gain cap to the greater of $15M or 10× basis (except for taxpayers that fully utilized the exclusion amount in a prior year), indexed for inflation from 2027. Growth-stage companies and early-stage investors should tighten cap-table/QSBS tracking now, especially across follow-on rounds.
  5. 199A: pass-through deduction expanded and made permanent
    • Owners of qualifying pass-throughs get long-term certainty: the 20% 199A deduction is extended and made permanent (not increased to 23% as earlier drafts floated). The OBBBA also increased the taxable income limitation phase-in amounts to $100,000 to $150,000 for joint returns ($50,000 to $75,000 for separate filers). Finally, the OBBBA changes include a $400 minimum deduction amount for active QBI of at least $1,000 (amounts to be increased for inflation in following years). Re-test blocker structures and owner-level models.
  6. International tweaks: steadier rules, fewer cliffs
    • GILTI / NCTI:
      • Effective for tax years beginning after Dec. 31. 2025:
        1. The GILTI regime is reshaped by removing the qualified business asset investment (QBAI) reduction to GILTI, and renaming the inclusion as a taxpayer’s net CFC tested income (NCTI). 
        2. The statutory deduction under section 250 for a taxpayer’ total NCTI and associated section 78 gross-up amount is reduced to 40% (versus prior 50%) for tax years beginning after Dec. 31, 2025. 
        3. The OBBBA further trims the deemed paid foreign income tax haircut to 10% (instead of the prior 20%) with respect to NCTI. 
        4. Deductions allocated and apportioned to a taxpayer’s NCTI inclusion for foreign tax credit limitation purposes are confined to: (a) the section 250 deduction associated with the NCTI inclusion; and (b) any additional deductions directly allocable to the NCTI inclusion. Specifically, no interest expense or R&E expense amounts are allocated or apportioned to NCTI for foreign tax credit  limitation purposes.
      • Finally, the OBBA adds a new 10% disallowance for taxes paid or deemed paid on any previously taxed earnings and profits (PTEP) distributions of NCTI after June 28, 2025. 
    • FDII / FDDEI:
      1. Effective for tax years beginning after December 31, 2025:
        1. The OBBA also strikes the QBAI adjustment from the FDII framework.
        2. The OBBA permits deduction of 33.34% of the corporation’s total foreign-derived deduction eligible income (FDDEI) – dispensing with the prior FDII measure.
        3. Interest expense and R&E expense are no longer allocated or apportioned for purposes of calculating DEI and FDDEI.
      2. Effective for transactions after June 16, 2025, certain categories of income are not treated as deduction eligible income (DEI) or FDDEI – for instance gain from sale or disposition (or deemed) of intangible property (see section 367(d)(4)) or any other property subject to seller depreciation, amortization or depletion.
    • BEAT: Effective for tax years beginning after Dec. 31, 2025, the BEAT rate is increased to 10.5% for most taxpayers (11.5% for specific banks and securities dealers). 

      Cross-border groups should re-test ETRs and foreign tax credit positions under the revised definitions and mechanics.
  7. What didn’t make the cut
    • Some headline items that weren’t included in the final law: (i) the headline U.S. corporate income tax rate of 21% is retained and made permanent (versus previously considered reductions); (ii) carried interest stays the same (the Tax Cuts and Jobs Act (TCJA) three-year holding period rule for long-term capital gains tax treatment still applies), and (iii) the proposed “revenge tax” (section 899) on residents of “unfair foreign tax” jurisdictions was dropped.

Quick action list (Q3–Q4 2025)

  • Debt & LBO models: Re-run section 163(j) under EBITDA for 2026+; factor in the elective capitalized-interest inclusion and the new ordering rule. 
  • Capex timing: Align construction and placed-in-service dates to capture qualified production property expensing; adjust procurement/contractor timelines now.
  • R&E cleanup: Separate domestic vs. foreign R&E; evaluate retro expensing/refund opportunities for small businesses and accelerated relief for others.
  • QSBS hygiene: Confirm issuer status, asset levels, and issuance dates; build tracking for the new 3/4/5-year tiers and higher gain caps.
  • Re-evaluate global structures with fresh ETR calculations based on the latest GILTI / NCTI, FDII / FDDEI, and FTC limitation changes. 

Bottom line: OBBBA offers meaningful cash-tax savings opportunities (bonus depreciation / section 168(k), R&E expense deduction / section 174, QBI deduction / section 199A, QSBS exclusion / section 1202) while limiting others (prior section 163(j) capitalization workaround). Savvy business taxpayers will time projects and transactions to the statute’s effective dates, conduct appropriate diligence, and prepare documentation accordingly.

This post provides general information and does not constitute legal or tax advice.

Questions or want a tailored OBBBA impact review?

Contact Nick Eusanio, Partner, Tax Planning & Compliance — DBL Law