By Andrew Dickens, AIF®, CEXP™, CBVS™
Director of Pension Services & Wealth Advisor
On July 4, 2025, President Donald Trump signed into law H.R. 1, formally known as the One Big Beautiful Bill Act (OBBBA). Spanning nearly 900 pages, this sweeping legislative package aims to make permanent key provisions of the 2017 Tax Cuts and Jobs Act while also introducing several new deductions and modifying spending across major federal programs. As with any legislation of this scope, it has drawn both praise and criticism, but our goal here is to focus on the provisions most relevant to households, business owners, and investors.
The OBBBA leaves several high-profile tax provisions intact. Corporate tax rates, capital gains rates, and the top marginal individual tax rate remain unchanged. Proposals for a wealth tax, a financial transaction tax, or a millionaire’s surcharge (as floated in early drafts) did not make it into the final version. Importantly, the law also makes permanent the individual income tax cuts first enacted under the 2017 tax reform, including the expanded standard deduction and higher AMT thresholds. The 20% qualified business income (QBI) deduction for pass-through entities is also permanent now.
The bill introduces or extends several targeted deductions, many with income-based phase-outs or sunset provisions.
- The standard deduction will continue to adjust for inflation starting in 2026. For 2025, there is a temporary $1,000 increase for single filers and $2,000 for joint filers.
- People aged 65 and over will receive a new $6,000 per-person deduction beginning in 2025 and running through 2028. This begins to phase out at $75,000 of adjusted gross income (AGI) for single filers and $150,000 for joint filers.
- A new deduction for tips (up to $25,000) and overtime pay (up to $12,500) is also included, with similar income limitations and a sunset date in 2028.
- The child tax credit increases from $2,000 to $2,200 per child under the age of 17, with inflation indexing beginning in 2026.
- The bill introduces a “Trump Account” for children born in the U.S., with an initial $1,000 government contribution and the option to contribute up to $5,000 annually through 2028.
Note that these deductions do not reduce AGI and thus will not lower exposure to the 3.8% net investment income tax or Medicare IRMAA surcharges.
Business owners will benefit from several tax-favorable adjustments, such as:
- 100% bonus depreciation for qualified property is reinstated and made permanent for property placed in service after January 19, 2025, with indexing for inflation starting in 2026.
- Section 179 expensing limits are increased to $2.5 million, enabling businesses to deduct the full cost of eligible assets in the year of purchase.
- R&D expensing is restored retroactively for tax years 2022 and 2023.
- Modifications to Section 163(j) make interest deductibility more generous by excluding depreciation from the calculation, which is particularly advantageous for capital-intensive industries.
To offset the cost of the tax changes, the bill includes over $1 trillion in reductions to Medicaid, SNAP, and certain clean energy subsidies over the next decade. These cuts include new work requirements, stricter eligibility thresholds, and the rollback of renewable energy tax credits. Analysts say this could result in up to 11 million people losing health coverage and increased utility costs in some regions.
The OBBBA effectively locks in the 2017 tax framework and adds targeted benefits for seniors, families, and business owners. While many of its provisions are favorable for near-term economic growth and equity markets, its long-term fiscal impact – an estimated increase of the national debt by $2.8 trillion over ten years – raises questions about sustainability and future policy shifts.
Taxpayers and business owners should review the changes carefully and consider how they may affect planning strategies beginning in 2025 and beyond.
