Overview of the One Big Beautiful Bill (OBBBA)

The One Big Beautiful Bill (OBBA) signed into law July 4, 2025, made significant changes to current tax laws. 

IMPORTANT DETAILS 

Permanent Extensions of TCJA Rules 

-Larger standard deduction remains in place. 

-No personal or dependent exemptions. 

-Current income tax rates and brackets are locked in permanently. 

“No Tax On” Exemptions 

-Tips and overtime pay are exempt from federal income tax beginning in 2025

-Designed to increase take-home pay for service and hourly workers. 

-Additional $6,000 deduction for seniors, intended to reduce tax on Social Security 

-Certain limitations apply. Please contact us for consultations 

Business Incentives 

-100% bonus depreciation made permanent, encouraging capital investment. 

-Immediate expensing of research and development (R&D) costs made permanent, supporting innovation. 

-Qualified Business Income (QBI) Deduction: Permanently extended, allowing most pass-through businesses to deduct 20% of qualified income. 

Estate & Gift Tax Changes 

-Estate/Gift Tax Exemption permanently increased to $15 million, creating significant planning opportunities. 

-Qualified Small Business Stock (QSBS) gain exclusion expanded to allow 100% exclusion on gains from C corporation stock sales. 

IMPACTS

Client Type	Impact of OBBBA
Individuals	Higher standard deduction, no tax on tips/overtime, new senior deduction. Expanded indexing of tax thresholds to inflation, reducing bracket creep.
Families	Continued TCJA benefits, expanded estate/gift exemptions.
Small Businesses	Permanent QBI deduction, bonus depreciation, and R&D expensing improve cash flow.
Corporations	Long-term certainty in tax planning, but stricter international tax rules.
High-Net-Worth Clients	Estate/gift exemption at $15M creates major planning opportunities.

CONSIDERATIONS FOR CLIENTS 

Payroll Adjustments: Employers must update systems to reflect “no tax on” provisions for tips and overtime. 

Estate Planning: Historic gifting opportunities should be considered while exemptions are historically high. 

Business Structuring: Evaluate whether S corporation or C corporation status provides greater tax efficiency under new Qualified Small Business Stock (QSBS) rules. 

International

GOING FORWARD 

Review 2025 Compensation & Payroll for compliance with new exemptions. 

Update Capital Investment & R&D Plans to maximize permanent expensing provisions. 

Consider Estate & Gift Strategies while exemptions are historically high. 

Consult Your CPA for tailored planning under OBBBA’s complex rules. 

2026 Forms 1099-MISC and 1099-NEC filing thresholds change from the prior $600 to $2,000.  After 2026, this amount will be adjusted for inflation. 

In summary: OBBBA delivers long-term tax certainty and new opportunities for individuals and businesses but also introduces compliance challenges and planning considerations. Our firm is here to help you navigate these changes and optimize your financial strategies. 

FAQ’s 

1. Will Social Security be taxed?    

We recognize that the current administration states “no tax on Social Security”. Social security tax benefits will continue to be taxed. 

The established standard that “up to 85% of Social Security benefits MAY BE taxable” remains in place. 

The new senior deduction enables certain Single taxpayers 65 and older with an additional $6,000 deduction, beginning in 2025.  Married Filing Jointly (MFJ) can deduct up to $12,000.  This deduction is intended to reduce the total tax burden on seniors by reducing total income recognized on the tax return, rather than a direct reduction in tax on Social Security benefits.  

This deduction is PHASED OUT for single filers with modified adjusted gross income over $75,000 ($150,000 MFJ).  Deduction is FULLY PHASED OUT at $175,000 for single filers (or $250,000 MFJ). 

2. No Tax on overtime employees – exempt vs non-exempt employees 

Exempt employees are NOT eligible for the overtime deduction (Salaried, executive, professional roles) 

Non-Exempt employees ARE eligible for the overtime deduction (hourly, manual, technical roles) 

The new law applies to qualified non-exempt employees and employees who earn tips.  The portion exceeding regular hourly pay is exempt from taxes.  This deduction phases out with increasing modified adjusted gross income above $150,000 single filers ($300,000  MFJ). 

3. Trump Accounts – contributions do NOT start until AFTER July 4, 2026 

Parents must open accounts on behalf of eligible children. A pilot program is in place for the government to make a one-time $1,000 contribution to each eligible child’s account (born January 1, 2025 – December 31, 2028).  Parents, guardians, etc. may contribute up to $5,000/year.  Account  will be available to children once they turn 18.