Cecily Zamora
The One Big Beautiful Bill Act, also known as the Tax Cuts and Jobs Act (TCJA), is a recent tax law enacted in 2025 that introduces significant changes to the US tax code. The law affects individuals, businesses, tax-exempt organisations, and governments, with key provisions including adjustments to tax brackets, deductions, retirement contributions, and credits. The act also provides tax relief for those affected by federally declared disasters and offers enhanced deductions for seniors and parents.
| Characteristics | Values |
|---|---|
| Name of the recent tax law | One Big Beautiful Bill Act (OBBB) |
| Date | July 4, 2025 |
| Signed by | President Donald Trump |
| Main purpose | To make permanent most of the tax cuts embedded in the 2017 Tax Cuts and Jobs Act (TCJA) |
| Other purposes | To lower taxes for some taxpayers, provide an additional tax boost for seniors and parents, and avoid a tax increase that would occur on December 31, 2025 |
| Changes | Adjustments to tax brackets, deductions, and retirement contributions; extension of TCJA provisions; no taxes on tips or overtime income for certain workers; increased standard deduction; lower tax brackets; higher lifetime estate tax exemption amount; higher gift and estate tax exemptions; charitable deductions for non-itemizers reinstated; new deduction on auto loan interest for cars made in the US |
| Impact | The law will further lower taxes for some taxpayers and will provide an additional tax boost for seniors and parents |
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What You'll Learn
The One Big Beautiful Bill Act (OBBB)
One of the key features of the OBBB is its focus on making permanent many of the tax cuts and provisions from the TCJA. This includes maintaining the larger standard deduction, which has been increased from $12,700 to $24,000 for married couples and from $6,350 to $12,000 for single filers. Additionally, the OBBB retains the lower tax brackets introduced by the TCJA, ensuring that most individuals will continue to benefit from reduced income taxes.
The new law also introduces some significant additional tax changes. For example, it provides a deduction for certain qualified tip income and a temporary additional deduction for older taxpayers. The OBBB also allows for a deduction of up to $10,000 in loan interest for vehicles assembled in the US and offers an enhanced senior tax deduction of $6,000 for individuals aged 65 and older.
Furthermore, the OBBB addresses the state and local tax (SALT) deduction cap, increasing it to $40,000 for certain taxpayers, although this amount will revert to $10,000 in 2030. The law also includes provisions for charitable deductions, with a new deduction of up to $1,000 for single filers and $2,000 for joint filers who do not itemize. Additionally, the OBBB eliminates taxes on tip and overtime income for certain workers, providing a cap on deductions for tipped income of up to $25,000 and overtime income of $12,500.
While the OBBB offers a range of tax benefits, it is important to note that not all changes are permanent. Some provisions are temporary and set to expire after a few years. Most of the changes in the OBBB took effect on January 1, 2026, with a few retroactive changes impacting the 2025 tax returns filed in 2026.
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Tax Cuts and Jobs Act (TCJA)
The Tax Cuts and Jobs Act (TCJA) is a United States federal law that amends the Internal Revenue Code of 1986. It was passed in 2017 and is also known as the Trump Tax Cuts. The TCJA is considered the most sweeping tax overhaul in decades, making significant changes to the tax code by reforming individual and business taxes.
The TCJA has simplified the tax code for some, lowered corporate debt, and brought money back from overseas. It reduced the American corporate tax rate from 35% to 21%, lowered most individual income tax rates, and increased the standard deduction and family tax credits. The law also eliminated personal exemptions and made it less beneficial to itemize deductions, limiting deductions for state and local taxes, mortgage interest, and charitable contributions.
The effects of the TCJA on economic growth and median wages were smaller than expected. While it led to an estimated 11% increase in corporate investment, the top 20% of Americans by income were projected to receive about 65% of the tax savings. The bottom 80% of taxpayers were estimated to receive 35% of the benefit in 2018, 34% in 2025, and none of the benefit in 2027.
The One Big Beautiful Bill (OBBB) of 2025 makes many of the TCJA's changes permanent while adding some temporary and permanent changes to the tax code. The OBBB keeps the larger standard deduction, elimination of personal and dependent exemptions, lower tax brackets, and limitations on certain itemized deductions from the TCJA. It also introduces additional changes, such as the limitation on personal casualty losses and miscellaneous itemized deductions.
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FairTax Act of 2025
The FairTax Act of 2025, also known as H.R.25, is a bill introduced in the 119th US Congress. The bill proposes significant changes to the tax code, with the aim of simplifying the tax law, reducing administration and compliance costs, enhancing cooperation among tax administrators, and increasing the role of state governments in federal tax administration.
One of the key provisions of the FairTax Act of 2025 is the repeal of Subtitle B of the Internal Revenue Code of 1986, which relates to estate and gift taxes. The act also includes conforming amendments to the Internal Revenue Code, such as striking out provisions related to the financing of presidential election campaigns and updating references to the Internal Revenue Code of 1986 to the Internal Revenue Code of 2025.
The FairTax Act of 2025 also addresses funding for Social Security, with provisions for funding the Social Security Trust Funds from general revenue outlined in the bill. Additionally, the act includes definitions for terms such as "affiliated firms" and "conforming state sales tax", and outlines the process for a qualified family to receive the family consumption allowance.
While the FairTax Act of 2025 proposes a mix of permanent and temporary tax provisions, it is important to note that it has been criticized by some who argue that it is unworkable. Critics suggest that the proposed tax rate would need to be higher than advertised to effectively replace income, payroll, and estate and gift tax revenue. Additionally, there are considerations regarding potential tax evasion and avoidance, which could impact the overall revenue generated by the proposed tax changes.
Overall, the FairTax Act of 2025 represents a significant shift in tax policy and has the potential to impact both businesses and individuals. It is important for taxpayers to stay informed about the evolving tax landscape and to seek professional advice to understand how specific provisions may impact their financial situations.
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Child tax credit increase
The recent tax law changes introduced by President Donald Trump in July 2025 include a boost to the maximum child tax credit. This change is part of the One Big Beautiful Bill (OBBB), which makes permanent many of the 2017 Tax Cut and Jobs Act (TCJA) tax law changes while adding some temporary and permanent amendments to the tax code.
The child tax credit has been increased from $2,000 to $2,200 for the 2025 tax year, with the potential for this to rise in future years as it will be indexed to inflation from 2026 onwards. This increase is expected to cost the federal government around $817 billion over the next decade. However, it is important to note that the new legislation does not expand eligibility rules, meaning that the number of American families seeing the full benefit will likely remain the same.
The child tax credit is a federal income tax credit available to certain families with children. While the credit has been in place since 1997, its structure has previously prevented families with the lowest incomes from receiving the full amount. The recent change means that the credit phases in depending on income and the number of children, so families will need to earn more before claiming the full amount. This has resulted in an estimated 19 million children being blocked from receiving the full credit, compared to 17 million prior to the change.
In addition to the increased credit amount, the new law has introduced a requirement for children and at least one of their parents or guardians to have a Social Security number to qualify for the credit. This change is expected to affect an estimated 2.7 million American children who may have previously qualified for the credit. For parents or guardians filing jointly, only one parent needs to have a Social Security number.
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Tax benefits for businesses and individuals
The One Big Beautiful Bill Act (OBBB) of 2025, also known as the Tax Cuts and Jobs Act (TCJA), introduces several tax benefits for both businesses and individuals. The OBBB makes permanent several provisions of the 2017 TCJA while adding some temporary and permanent changes to the tax code.
Tax Benefits for Businesses
- The OBBB introduces a mix of permanent and temporary tax provisions, with most changes taking effect on January 1, 2026.
- There are adjustments to tax brackets, deductions, and retirement contributions.
- Retirement plan contribution limits were not impacted by the new tax laws.
- The legislation makes taxpayer-friendly changes to FDII and GILTI, but these are paired with reductions in deduction rates.
- The Internal Revenue Code of 1986, relating to estate and gift taxes, is repealed.
- The legislation aims to simplify the tax law and reduce administration costs and the costs of compliance.
Tax Benefits for Individuals
- Most individual income taxes are reduced until 2025, with the number of income tax brackets remaining at seven.
- The standard deduction nearly doubles, from $12,700 to $24,000 for married couples and from $6,350 to $12,000 for single filers.
- The child tax credit (CTC) is doubled from $1,000 to $2,000, with a $500 credit for other dependents.
- Charitable deductions for non-itemizers are permanently reinstated, with a new deduction for cash contributions of $1,000 for single filers and $2,000 for joint filers.
- There is a new deduction of up to $10,000 for loan interest on vehicles assembled in the US.
- The legislation provides an additional tax boost for seniors, with people aged 65 and older receiving an additional $6,000 deduction.
- There are no taxes on tips or overtime income for certain workers.
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Frequently asked questions
The One Big Beautiful Bill Act.
It brings a significant number of new tax laws for 2025 and beyond. This includes adjustments to tax brackets, deductions, and retirement contributions, as well as repealing energy-efficient credits for EVs, hybrids, charging, and energy-efficient home improvements.
The Act affects individuals, businesses, tax-exempt, and government entities. This includes high-income filers, self-employed individuals, and seniors.
