07/15/2025
One Big Beautiful Bill Act (OBBBA) has been passed and is now law.
Grab your caffeine of choice and settle in. Iâve broken down what's in it and why it matters to you.
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⨠Tax Cuts Made Permanent â¨
Standard Deduction: Under prior law, the standard deduction would have remained around $15,450 (single) and $30,900 (married filing jointly) in 2025 due to TCJA indexing, but then dropped sharply in 2026 to roughly $8,350 and $16,700 when TCJA expired. The new law directly sets the permanent standard deduction at $15,750 (single) and $31,500 (married filing jointly) starting in 2025. These amounts will be indexed for inflation going forward.
This keeps taxes simpler for most people who donât itemize. The standard deduction is the amount of income you donât have to pay income tax on - it's like a free pass on your first $15,750 (or $31,500) of earnings. If this bill hadnât passed, the standard deduction wouldâve been cut nearly in half starting in 2026. That means more people wouldâve had to itemize or pay tax on a much bigger slice of their income.
Child Tax Credit: Bumped up to $2,200 per child starting in 2025.
The credit was previously $2,000 per child, so this is a $200 increase beginning next year.
QBI Deduction (20%): The 20% pass-through deduction (Section 199A) is now permanent.
This deduction was originally set to expire after 2025. Without it, more of your business income would have been taxable. If youâre a sole prop, S corp, or partnership, this helps lower your taxable income simply for running a qualified business.
7 Tax Brackets (10% to 37%): These rates were supposed to sunset in a couple years - now theyâre here to stay.
Bottom line: your tax rate isnât going up⌠at least not from this.
⨠New Deductions & Credits â¨
Tips Deduction: You can deduct up to $25,000 of reported tip income (2025-2028), as long as your total income is under $150,000 (single) or $300,000 (married filing jointly).
This applies to both employees and self-employed people in tipped industries - including service providers like hair stylists, barbers, and estheticians. The deduction is only available on tips that are properly reported, so itâs important to give customers a way to clearly separate tips from other payments (especially if you're using platforms like Venmo or Zelle).
Overtime Deduction: Deduct up to $12,500 in overtime income ($25,000 MFJ), only for 2025â2028.
The deduction only applies to the portion of your overtime pay that represents the "half" part of time-and-a-half - not the full amount. So if your regular rate is $20/hour, and you're paid $30/hour for overtime, only the $10/hour "bonus" portion counts toward this deduction. If your income is over $150,000 (single) or $300,000 (married filing jointly), the deduction may be reduced or phased out gradually.
Car Loan Interest: Deduct up to $10,000 in interest on new, U.S.-assembled vehicle or motorcycle loans.
The deduction begins to phase out at $100,000 MAGI for single filers and $200,000 for married filing jointly. The deduction is reduced by $200 for every $1,000 of income over the limit and fully phases out at $150,000 and $250,000, respectively. It only applies to new U.S.-assembled vehicles purchased between 2025 and 2028. Final assembly must take place in the U.S., so itâs important to confirm eligibility before purchasing.
Charitable Giving (Above-the-Line): Deduct up to $1,000 ($2,000 MFJ) without itemizing.
Makes small charitable donations actually count for tax purposes, even if you donât itemize.
SALT Cap Temporarily Raised: From $10,000 to $40,000 through 2029.
This allows a much larger deduction for state and local taxes if you itemize. The $40,000 cap applies per return, not per person, and begins to phase out gradually once AGI exceeds $500,000. Above that level, the cap is reduced but never drops below $10,000. The phase-out threshold is indexed for inflationâso it will rise above $500,000 in future years. This could be helpful for taxpayers with significant property or state income taxes, especially in higher-cost-of-living areas.
âTrump Babyâ Accounts: Kids born 2025â2028 get $1,000 in a savings account (canât access until age 18).
Political branding aside, itâs a free $1,000 toward a future expense, but not something you can touch now.
New $6,000 Deduction for Seniors (65+): Applies even if youâre not collecting Social Security.
Whether youâre still working or fully retired, this deduction reduces your taxable income once you turn 65. It can help offset taxable Social Security income, and in some cases, it may even reduce how much of your Social Security benefits are taxable, since the taxable portion depends on your total income. The deduction begins to phase out once income exceeds $75,000 (single) or $150,000 (married filing jointly), and is fully phased out at $175,000 and $250,000, respectively.
Adoption Credit Now Partially Refundable: Up to $5,000 back, even if you owe no taxes.
This one is especially important to me. Previously, the adoption credit could only be used to reduce the taxes you owed, but it couldnât generate a refund. Now, even if you donât owe any tax, you can still receive up to $5,000 as a refund, which makes a big difference for families navigating the cost of adoption.
Education Scholarship Credit: Up to $1,700 credit for donations to approved Kâ12 scholarship nonprofits.
If you already give to school choice or education orgs, youâll want to funnel it through qualified programs to claim this.
⨠Business-Related Wins â¨
100% Bonus Depreciation Made Permanent
No more phase-downs. Buy qualifying equipment or property and write off all of it in year one - huge for cash flow.
Section 179 Expanded: You can now expense up to $2.5 million in equipment costs.
This gives businesses more flexibility to write off big purchases immediately instead of spreading them out over years.
⨠Phase-Outs & Reductions â¨
Clean Energy Credits: EV and home energy tax breaks now expire in 2025, not 2032.
Most home energy credits end on December 31, 2025. The new and used EV credits expire slightly earlierâon September 30, 2025. A few others, like alternative fuel refueling credits, continue into mid-2026. If you're planning solar or buying an EV, itâs best to act soon.
Gambling Loss Deduction: Now capped at 90% of winnings.
Casual players probably wonât care, but pros or high rollers? Your losses no longer offset 100% of your wins.
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Final Notes These changes are law. The IRS will release guidance later this year (probably Q4) explaining exactly how the new deductions (like for tips, OT, car loans) will work in practice.
If you're a business owner or freelancer, some of these are major. Especially QBI, bonus depreciation, and the new 179 limits. I'm keeping an eye out for clarification and will post more when that guidance drops.
Tell me what you think about these new changes.
