President Trump signed the One Big Beautiful Bill Act (OBBBA) into law on July 4, 2025. The OBBB is a massive piece of legislation covering immigration, energy, taxes, defense spending, and much more.

So what are some of the significant tax changes?

Permanent Changes from the TCJA

One pivotal element of the OBBB is locking in many changes implemented under the 2017 Tax Cuts and Jobs Act (TCJA).

• Individual Income Tax Rates: The seven brackets (10%, 12%, 22%, 24%, 32%, 35%, 37%) stay put—no reversion to pre-2018 hikes.
• Standard Deduction: Doubled under TCJA, now boosted further with a $1,000 increase ($2,000 for joint filers) annually through 2028.
• Qualified Business Income (QBI) Deduction: The 20% pass-through tax deduction for non-corporate businesses such as partnerships (Form 1065), S corporations (Form 1120-S), and sole proprietorships (Schedule C) is now permanent.

Increases to the Child Tax Credits (CTC)

• Child Tax Credit (CTC): The CTC was $2,000 per child with phaseouts for high-income taxpayers with income of $200,000 for single filers or $400,000 for married filing joint returns. Under the OBBB, the CTC is increased to $2,200 per child starting in 2025, with the $1,400 refundable additional child tax credit (ACTC) portion made permanent and inflation-adjusted.
• Senior Citizen Deduction: A temporary $6,000 “bonus” for those taxpayers over 65 years old (phasing out above $75,000 for single filers and $150,000 for joint-filed tax returns).

Tax Relief for Service Industry Workers Relying on Tip Income

Effective for years 2025 through 2028, employees who receive qualified tip income as part of their wages may be entitled to a deduction for a portion (or all) of their tip income.

The maximum annual deduction is $25,000 of tip income, subject to phaseouts if the taxpayer’s modified adjusted gross income (MAGI) exceeds $150k for single filers, or $300k for married filing joint tax returns.

It is unclear how businesses and taxpayers will report these tax deductions on Forms W-2 and 1040. However, the deduction will likely be reported on Schedule 1 of Form 1040.

No Tax On Overtime Wages

Effective for years 2025 through 2028, employees who receive overtime compensation for working more than 40 hours per week may be entitled to a tax deduction for their overtime compensation.

The maximum annual deduction is $12,500 for single-filing taxpayers and $25,000 for married-filing joint returns. Phaseouts begin when a taxpayer’s MAGI exceeds $150k for single filers and $300k for joint returns.

It is unclear how businesses and taxpayers will report these tax deductions on Forms W-2 and 1040. However, the deduction will likely be reported on Schedule 1 of Form 1040.

Tax Deduction for Personal Auto Loan Interest for Individuals

Effective for years 2025 through 2028, individuals may be able to deduct the interest expense paid on their personal auto loans. For a taxpayer to qualify for the deduction, the loan must have originated after December 31, 2024, and the taxpayer must have purchased a qualified vehicle.

A qualified vehicle includes a car, minivan, van, SUV, or pickup truck, with a gross vehicle weight under 14,000 pounds. The car’s final assembly must have occurred within the United States.

The intent of the provision is to encourage U.S. taxpayers to purchase automobiles manufactured inside the U.S. and auto manufacturers to complete the final assembly in the U.S.

The tax provision is significant because taxpayers are generally not allowed to deduct interest expense on personal use assets, including vehicles, personal credit cards, personal loans, etc. U.S. persons should save hundreds of dollars in yearly taxes by allowing taxpayers to deduct personal auto loan interest.

The OBBB caps the amount of deductible interest expense at $10,000 per year. Remember, you can only deduct the interest expense component of the payment. Many taxpayers make fixed monthly payments that comprise both an interest and a principal component. Taxpayers must determine how much interest expense they pay in a given year as part of their gross yearly payments to the financing company.

Bonus Depreciation is Back on the Menu for Small Business

Under the TCJA, businesses can claim a 100% bonus depreciation deduction for qualified property, which proved highly beneficial to many small businesses. However, starting in 2023, the TCJA reduced the bonus depreciation percentage by 20% annually until it reached 0%.

The following applicable percentages applied under the TCJA.

• 2018 through 2022. 100% bonus depreciation
• 2023. 80% bonus depreciation
• 2024. 60% bonus depreciation
• 2025. 40% bonus depreciation
• 2026. 20% bonus depreciation
• 2027. 0% bonus depreciation

The passage of the OBBB revived the bonus depreciation to 100% of the cost of qualified property. The 100% bonus depreciation is now PERMANENT for all qualified asset purchases placed into service after January 15, 2025.