Anaya Nolan
On July 4, 2025, former US President Donald Trump signed the One Big Beautiful Bill Act (OBBBA) into law, extending the personal tax cuts from his 2017 Tax Cuts and Jobs Act (TCJA) indefinitely. The TCJA, which was the largest tax code overhaul in nearly three decades, lowered individual and corporate tax rates and was criticized for disproportionately benefiting the wealthy. Trump's 2025 tax law will impact state returns, with some states preparing for the budgetary fallout. With the possibility of further tax law changes, accountants and financial advisors must stay informed to provide guidance to their clients.
| Characteristics | Values |
|---|---|
| Name of the bill | One Big Beautiful Bill Act (OBBBA) |
| Date signed into law | July 4, 2025 |
| Passed in the House | July 3, 2025 |
| Passed in the Senate | July 1, 2025 |
| Bill signed by | President Trump |
| Bill approved by | Vice President JD Vance |
| Bill supported by | Leading Republicans, including Vice President Mike Pence, Republicans in Congress, such as Paul Ryan, Mitch McConnell |
| Bill opposed by | Bill Gates, Warren Buffett, more than 400 millionaires and billionaires, including George Soros and Steven Rockefeller |
| Impact | Permanence for major individual and corporate provisions of the TCJA, additional temporary tax cuts for individuals and businesses, increase in GDP, increase in jobs, increase in wages, reduction in federal tax revenue, impact on state returns |
| Previous tax law | Tax Cuts and Jobs Act (TCJA) |
| Year of enactment of previous tax law | 2017 |
Explore related products
What You'll Learn
The One Big Beautiful Bill Act
The OBBBA is a significant piece of legislation that has far-reaching implications for Americans. It is designed to reduce taxes for individuals and businesses, with the aim of boosting economic growth and simplifying the tax filing process. The Act includes a range of measures, such as:
- NO tax on tips
- NO tax on overtime
- NO tax on social security
- Permanently increasing the Child Tax Credit for over 40 million families
- Strengthening Medicaid by eliminating waste, fraud, and abuse, and blocking illegal immigrants from receiving Medicaid
- Protection for two million family farms from double taxation
- Creating Trump Accounts for every American newborn
- A $12.5 billion modernization of the air traffic control system
According to the Joint Committee on Taxation, the OBBBA will primarily benefit workers and families earning less than $50,000 per year, resulting in bigger paychecks and increased annual take-home pay. The Tax Foundation estimates that the tax provisions in the OBBBA will increase long-run GDP by 1.2%, create 938,000 jobs, increase wages by 0.4%, and expand the capital stock by 0.7%.
However, it is important to note that there have been criticisms of the OBBBA and Trump's tax policies more generally. Some argue that the tax cuts disproportionately benefit the wealthy while adding to the national debt and eroding the revenue base. There are also concerns about the potential impact on state budgets and the effectiveness of the tax cuts in promoting economic growth and benefiting workers.
The Evolution of Underage Drinking Laws
You may want to see also
Explore related products
Tax Cuts and Jobs Act
The Tax Cuts and Jobs Act (TCJA) was enacted in 2017 and included a variety of tax provisions that affected both individuals and businesses. The Act reduced average tax burdens for taxpayers across the income spectrum, with the top 20% of Americans by income projected to receive roughly 65% of the tax savings. The TCJA also simplified the tax filing process through structural reforms and made changes to deductions, depreciation, expensing, and tax credits.
One of the notable provisions of the TCJA was the cap on the state and local tax (SALT) deduction at $10,000 per year, consisting of property taxes plus state income or sales taxes, but not both. The Act also included a tax credit for employers who provide paid family and medical leave to their employees, as well as a variety of miscellaneous tax provisions, such as a tax break for citrus growers and the extension of "full expensing" for film and television production companies.
The TCJA had a mixed impact on the economy. While it lowered corporate debt and brought money back from overseas, there was little evidence of changes in real economic activity, such as physical investment, wages for non-owners, or employment. It also led to a steep falloff in federal revenue, resulting in far fewer tax dollars flowing to the Treasury Department. According to the Congressional Research Service, the TCJA had a relatively small first-year effect on the economy, and there was little growth in wage rates for ordinary workers.
The individual portions of the TCJA were set to expire at the end of 2025, with 62% of filers potentially facing a tax increase in 2026. In response, President Trump advocated for extending and adding additional tax cuts during his 2024 campaign. In May 2025, the House Budget Committee approved the One Big Beautiful Bill Act (OBBBA), which included permanence for major individual and corporate provisions of the TCJA, along with additional temporary tax cuts. The bill was signed into law by President Trump on July 4, 2025, extending the personal tax cuts indefinitely.
Abstract Disputes: Constitutional Law's Complex Conundrums
You may want to see also
Explore related products
State and local tax (SALT) deduction
The State and Local Tax (SALT) deduction permits taxpayers who itemize when filing federal taxes to deduct certain taxes paid to state and local governments. These taxes include state property taxes, income taxes, and sales taxes.
The Tax Cuts and Jobs Act (TCJA) of 2017 imposed a $10,000 cap on the SALT deduction, limiting the amount taxpayers could deduct for state and local taxes on their federal returns. Before TCJA, there was no cap on SALT deductions. This limit particularly affected residents in high-tax states, such as New York and California, where state and local tax liabilities often exceed the $10,000 threshold.
On July 4, 2025, President Trump signed the One Big Beautiful Bill Act (OBBBA) into law. The new mega tax legislation included a temporary increase in the SALT deduction cap to $40,000 per household, but only for those with adjusted gross incomes (AGI) at or below $500,000. This increase is set to last from 2025 through 2029, with the cap reverting to $10,000 in 2030. Both the $40,000 cap and the $500,000 income limit will be subject to a 1% inflation adjustment each year.
Critics of the expansion of the SALT deduction argue that it will disproportionately benefit the wealthy and add to the federal deficit. The Tax Foundation estimated that the House proposal to permanently raise the cap to $40,000 would cost $320 billion more than maintaining the $10,000 limit. Conversely, removing the cap entirely would result in a significant loss of federal revenue, estimated at just over $1 trillion by the Committee for Responsible Budget.
US Tax Laws: Corporations' Best Friend?
You may want to see also
Explore related products
2025 Budget Reconciliation
The 2025 Budget Reconciliation refers to the One Big Beautiful Bill Act (OBBBA), which was signed into law by President Trump on July 4, 2025. The act included permanence for major individual and corporate provisions of the Tax Cuts and Jobs Act (TCJA) of 2017, along with additional temporary tax cuts for individuals and businesses.
Reconciliation is a fast-track option that allows for enacting tax, spending, and debt limit changes outlined in a budget resolution. It bypasses the Senate filibuster, which would otherwise require 60 votes to avoid. While it allows Republicans to rely on a party-line vote for legislation, they still face slim majorities in both chambers. The 2025 Budget Reconciliation was initiated when the Senate approved its budget resolution on February 21, 2025, which did not include any tax cuts.
The OBBBA was passed by the House on July 3, 2025, and by the Senate on July 1, 2025, with Vice President JD Vance casting a tie-breaking vote. The act extends the personal tax cuts indefinitely and includes additional tax cuts on corporations, tips, and social security payments. It also provides permanence for the state and local tax (SALT) deduction, which permits taxpayers who itemize when filing federal taxes to deduct certain taxes paid to state and local governments.
The Tax Foundation estimates that the tax provisions included in OBBBA will increase long-run GDP by 1.2%, create 938,000 jobs, increase wages by 0.4%, and increase the capital stock by 0.7%. However, it is projected to reduce federal tax revenue by $5.0 trillion from 2025 to 2034. On a dynamic basis, the revenue loss is estimated to be $4.1 trillion, with economic growth offsetting 19% of the loss.
The 2017 TCJA, which was set to expire at the end of 2025, reduced average tax burdens for taxpayers across the income spectrum and simplified the tax filing process through structural reforms. It also boosted capital investment and improved the international tax system. Without congressional action to extend the TCJA, a significant number of filers would face a tax increase relative to current policy in 2026.
Virginia's Law: Monkeys and Their Owners
You may want to see also
Explore related products
Impact on taxpayers
The Tax Cuts and Jobs Act (TCJA) was signed into law by President Trump in 2018. It was a major tax code overhaul that impacted taxpayers and business owners, particularly through tax cuts. The TCJA reduced average tax burdens for taxpayers across the income spectrum and temporarily simplified the tax filing process through structural reforms.
The TCJA introduced several relief measures aimed at reducing taxable income for some workers. For example, under the new law, income from qualified tips and overtime is exempt from federal income tax. Additionally, the legislation raised the child tax credit and created a non-refundable credit for non-child dependents. The law also increased the estate tax exemption and allowed for 529 plans to fund K-12 private school tuition of up to $10,000 per year, per child.
However, the TCJA also capped the state and local tax (SALT) deduction at $10,000 per year, consisting of property taxes plus state income or sales taxes, but not both. This change reduced the benefits for high-earners and impacted taxpayers who itemize deductions. Additionally, the TCJA removed the mandate requiring individuals to purchase health insurance, a key provision of the Affordable Care Act.
Many of the tax benefits for individuals and families under the TCJA were set to expire at the end of 2025. This includes the estate tax exemption, the child tax credit changes, and the exemption for qualified tips and overtime from taxes. The expiration of these provisions could result in a tax increase for a significant number of taxpayers, especially those in the middle-income quintile.
In 2025, President Trump signed the One Big Beautiful Bill Act (OBBBA) into law, which extended the personal tax cuts indefinitely and included permanence for major individual and corporate provisions of the TCJA. The OBBBA also included additional temporary tax cuts for individuals and businesses, such as the "no tax on tips" provision. While the OBBBA is expected to increase long-run GDP, it will also result in a significant reduction in federal tax revenue.
Creating Laws: Understanding the Legislative Branch's Role
You may want to see also
Frequently asked questions
Trump's tax laws, known as the Tax Cuts and Jobs Act (TCJA), came into effect in 2018.
The TCJA was the largest tax code overhaul in nearly three decades and included reducing the corporate tax rate to 21%capping deductions for state and local taxes (SALT) at $10,000, doubling standard deductions, and expanding the child tax credit.
The TCJA reduced average tax burdens for taxpayers across the income spectrum and temporarily simplified the tax filing process. However, it also resulted in a steep fall in federal revenue, with tax revenues for 2018 and 2019 falling short by more than $430 billion.
