Breaking Down the OBBBA – Reason Top 10 List

Breaking Down the OBBBA: What the ‘One Big Beautiful Bill Act’ Means for Your Tax Strategy

Signed July 4, 2025, the landmark tax legislation offers permanent extensions, temporary relief, and strategic incentives for individuals and business owners alike.

The “One Big Beautiful Bill Act” (OBBBA), signed into law on Independence Day 2025, delivers sweeping tax reforms that solidify and expand many of the provisions initially introduced under the Tax Cuts and Jobs Act (TCJA). While the title may sound tongue-in-cheek, the substance of this bill is anything but casual.

Here are Reason Financial & Tax Top 10 most impactful takeaways from the new legislation, with practical implications for both households and enterprises.

1. Tax Rate Certainty Through Permanent Individual Rate Extension

OBBBA cements the TCJA’s individual income tax rates into law, topping out at 37%, with continued annual inflation adjustments. This permanence removes a significant source of tax planning uncertainty and allows for more strategic income recognition across future years.

2. Expanded deductions for Households and Families

Several core deductions received a notable boost:

• Standard Deduction: Now permanently indexed for inflation, it rises to $15,750 for single filers, $23,625 for heads of household, and $31,500 for joint filers in 2025.
• Child Tax Credit: Increased to $2,200 per child, with annual indexing going forward.
• Senior Deduction: Those aged 65+ can claim an additional $6,000 deduction through 2028, though the benefit phases out at $75,000 (single) or $150,000 (joint).
• Charitable Deductions: Starting 2026, itemizers deduct contributions over 0.5% AGI, (capped at 35% of AGI for 37% bracket taxpayers) non-itemizers get $1,000 (single) or $2,000 (joint) for cash to public charities, excluding donor-advised funds and private foundations.

3. Qualified Business Income (Section 199A) Lives On

The 20% deduction for qualified business income, also known as Section 199A, is now permanent. The bill also expands the phase-in ranges and institutes a $400 minimum deduction for active owners. This enhancement is especially meaningful for S corporations and LLCs, where strategic entity planning can yield meaningful tax savings year over year.

4. Capital Investment Incentivized Through 100% Bonus Depreciation

A cornerstone for capital-intensive businesses, 100% bonus depreciation is now restored indefinitely for qualified property placed in service after 2025. This allows businesses to frontload deductions for investing in equipment.

5. Full Deduction for Domestic R&D Starts in 2025

Domestic research and development expenses can once again be fully expensed immediately starting in 2025, with retroactive options available to eligible small firms. For startups and innovation-driven companies, this provision will reduce early-stage tax burdens and promote reinvestment.

6. Temporary SALT Cap Relief for High-Tax States

The State and Local Tax (SALT) deduction cap is raised to $40,000 for joint filers through 2029, before reverting to prior thresholds. Phase-outs begin at $500,000 of income. This temporary expansion offers meaningful relief for taxpayers in states like California, New York, and New Jersey, where high property and income taxes have long eroded federal deductibility.

7. Deductions for Tips and Overtime Provide Blue-Collar Relief

For workers who rely on variable income, OBBBA introduces deductions for both tips (up to $25,000) and overtime ($12,500 single, $25,000 joint). These temporary deductions run through 2028 and phase out at higher income levels, offering targeted relief for service and hourly workers.

8. Expanded Estate and Gift Tax Exemptions Secure Generational Wealth

Beginning in 2026, the estate and gift tax exemption increases to $15 million per individual—or $30 million for married couples—adjusted for inflation. For high-net-worth families, this provides a powerful estate planning window to transfer intergenerational wealth more efficiently.

9. Auto Loan Interest Now Deductible—But Only Temporarily

Interest paid on loans for U.S.-assembled vehicles is now deductible up to $10,000, available through 2028. The deduction phases out above $100,000 (single) and $200,000 (joint). For taxpayers planning big-ticket vehicle purchases, timing will be key to maximize the benefit.

10. Green Energy Credits Ending—Act Now or Miss Out

Tax credits for clean vehicles and residential solar installations are set to sunset soon:

• Clean Vehicle Credits: $7,500 (new) and $4,000 (used) credits expire after September 2025.
• Residential Solar: 30% federal tax credit phases out completely after December 2025.
• Commercial Solar: Benefits end by 2027.

These rapidly closing windows call for urgent planning for those considering solar upgrades or EV purchases.

While the One Big Beautiful Bill Act preserves the spirit of TCJA, it introduces new complexities and opportunities for strategic financial planning. From income deferral and business structuring to estate planning and capital investments, taxpayers must now adapt to a new set of rules with both permanent and time-sensitive components.

Whether you’re a business owner considering entity restructuring or a family evaluating the timing of large purchases or charitable giving, this legislation underscores the importance of proactive tax strategy. We’re here to help navigate the evolving landscape.