The One Big Beautiful Bill (OBBB) is a sweeping tax and spending package signed into law on July 4, 2025. It’s one of the most significant tax reforms since the Tax Cuts and Jobs Act of 2017. We’ve covered some of the most important tax law changes in the bill, so you can better understand what it means for you – and your refund.
Quick takeaways
- Some tax cuts introduced initially by the Tax Cuts and Jobs Act (TCJA) are here to stay. The bill makes key parts of the 2017 act permanent, including lower tax rates and an increased Child Tax Credit.
- New tax breaks are in place. Tips and overtime are deductible at the federal level, and seniors may benefit from a new $6,000 deduction.
- Credits for electric vehicles and energy efficiency improvements were eliminated.
- Some changes have started. Others will kick in for the 2026 tax year, so you’ll see the impact when you file in 2027.
When does the Big Beautiful Bill go into effect?
Most of these tax changes apply to the 2026 tax year (you’ll see them when you file in 2027), but some provisions, like the deduction for tips and overtime, are effective immediately.
| Tax Law Change | Effective Year | Notes |
| Tax brackets (10%–37%) made permanent | 2025 | Codifies TCJA rates permanently |
| 20% pass-through deduction made permanent | 2025 | Additional $400 minimum deduction starts in 2026 |
| Miscellaneous itemized & moving expense deductions eliminated permanently | 2025 | Previously set to expire in 2025 |
| $750,000 mortgage interest deduction limit made permanent | 2025 | Mortgage insurance premiums deductible starting in 2026 |
| Child Tax Credit set at $2,200; ACTC at $1,700 | 2025 | Adjusted in $100 increments going forward |
| Adoption credit set at $17,280 (refundable up to $5,000) | 2025 | |
| Casualty loss deduction made permanent | 2025 | Expanded to include state-declared disasters in 2026 |
| Standard deduction increased | 2025 | OBBB increased it beyond TCJA levels |
| SALT deduction cap raised to $40,000 | 2025 | Increases 1% annually through 2029, then reverts to $10,000 in 2030 |
| Car loan interest deduction (up to $10,000) | 2025 | Applies through 2028 |
| Tip income deduction (up to $25,000) | 2025 | Phases out at $150K/$300K AGI; expires in 2028 |
| Overtime income deduction (up to $12,500/$25,000) | 2025 | Same phase-out and expiration as tip deduction |
| $6,000 deduction for taxpayers over age 65 | 2025 | Above-the-line; expires in 2028 |
| Bonus depreciation increased to 100% | 2025 | Permanent; includes manufacturing buildings placed in service before 2031 |
| Clean Vehicle Tax Credit expires | 2025 | Ends September 30, 2025 |
| Energy Efficient Home Improvement Credit expires | 2025 | Ends December 31, 2025 |
| Minimum $400 pass-through deduction for material participation | 2026 | Requires $1,000+ in business revenue |
| Mortgage insurance premiums deductible | 2026 | Applies to returns filed in 2027 |
| Casualty loss deduction expanded to state-declared disasters | 2026 | |
| Dependent Care FSA contribution limit increased to $7,500 | 2026 | $3,750 if married filing separately |
| Child & Dependent Care Credit increased to 50% of expenses | 2026 | Up to $3,000 for one child, $6,000 for two or more; remains nonrefundable |
| Educator expense deduction moved to Schedule A | 2026 | Expanded to include coaches and athletic equipment; no $300 cap |
| Gambling loss deduction reduced to 90% of winnings | 2026 | Previously allowed 100% |
What’s in the One Big Beautiful Bill?
Here’s a look at some of the most notable changes that will affect taxpayers this year and in the years to come.
Parts of the Tax Cuts and Jobs Act (TJCA) were made permanent
The TCJA created seven tax brackets: 10%, 12%, 22%, 24%, 32%, 35% and 37%. The BBB made those rates permanent.
The 20% pass-through deduction, which allows small businesses that are pass-through entities to deduct up to 20% of qualified business income on their federal income tax return, is now permanent. And starting in 2026, you can get a minimum deduction of $400 if you “materially participate” in a business that earns at least $1,000 in revenue.
The TCJA eliminated miscellaneous itemized deductions and the deduction for moving expenses (with a few exceptions) through 2025. The OBBB made these changes permanent.
The $750,000 limit on the mortgage interest deduction was made permanent, and mortgage insurance premiums can be deducted as part of your mortgage interest starting in 2026 (returns filed in 2027).
The Child Tax Credit is worth $2,200 per qualifying child in 2025 and will be adjusted by $100 increments going forward. The refundable portion, known as the Additional Child Tax Credit (ACTC), is now $1,700 for the 2025 tax year. The adoption credit will hold steady at $17,280 and is refundable up to $5,000.
The itemized deduction for personal casualty losses due to a federally declared disaster is now permanent. The bill expanded the provision so it will include certain state-declared disasters starting in 2026.
The standard deduction increased
You might recall that the standard deduction nearly doubled in 2018 under the TCJA. The One Big Beautiful Bill didn’t just make this increase permanent – it increased the deduction for 2025. The standard deduction amounts for tax year 2025 are as follows:
| Filing Status | Standard Deduction (2025) |
| Single | $15,750 |
| Married Filing Separately | $15,750 |
| Married Filing Jointly | $31,500 |
| Qualifying Widow(er) | $31,500 |
| Head of Household | $23,625 |
Increased State and Local Tax (SALT) deduction
When it was signed in 2017, the TCJA put a cap on how much you could deduct for state and local taxes at $10,000. Under the OBBB, the limit is temporarily increasing to $40,000 beginning in 2025, and it will increase by 1% for the next five years before it drops back down to $10,000. Here’s how this deduction has changed in detail:
| Tax Code | SALT Deduction Limit | Notes |
| Before the TCJA (2017 and earlier) | Unlimited | Taxpayers could deduct the full amount of state and local taxes paid |
| TCJA (2018-2024) | $10,000 ($5,000 if married filing separately) | Limit applied to combined state income, property, and sales taxes |
| One Big Beautiful Bill (2025–2029) | $40,000 ($20,000 if married filing separately) | Limit will increase 1% per year through 2029, then revert to $10,000 in 2030 |
New car loan interest deduction
For 2025 through 2028, up to $10,000 in interest paid on qualifying car loans can be taken as an above-the-line deduction. The vehicle must have been assembled in the U.S., purchased after December 31, 2024, and be for your personal use (not a business vehicle). The deduction doesn’t apply to used or leased vehicles, and it phases out if your modified AGI is over $100,000 ($200,000 if you file jointly).
New deduction for tips and overtime
Tips are considered earned income and are still subject to federal income tax withholding, FICA, and Medicare tax. You’ll still need to report them on your W-2. But the OBBB allows you to deduct up to $25,000 per person in tip income as an above-the-line deduction.
If you receive overtime pay, you can deduct the amount you earn above your regular rate (like the “half” in “time-and-a-half”) up to $12,500 if you file as single, or $25,000 if you file jointly.
Both of these deductions will begin to phase out if your modified AGI as a single filer is $150,000 (or $300,000 for joint filers). These provisions are in effect beginning in 2025 and are set to expire in 2028.
Dependent Care FSA limit increase
Starting in 2026, the annual contribution limit for employer-sponsored Dependent Care FSAs will increase from $5,000 to $7,500 (or from $2,500 to $3,750 if you’re married filing separately). This increase means you can set aside more pretax dollars to cover child or dependent care.
Child & Dependent Care Credit increase
In 2026, the Child and Dependent Care Tax Credit will increase to 50% of qualifying care expenses – up to $3,000 for one child or $6,000 for two or more – but it will remain nonrefundable.
Changes to the educator expense deduction
Beginning in 2026, educator expenses will be claimed as a deduction on Schedule A, so you’ll have to itemize your deductions to take it. The amount will no longer be capped at $300 per educator. The deduction is expanding to apply to coaches and sports administrators, and the list of qualifying expenses will also include non-instructional athletic equipment.
Additional $6,000 deduction for seniors over age 65
Taxpayers who are 65 or older already receive an increased standard deduction under the current tax code. In 2025, that amount is $2,000 for single filers or heads of household, and $1,600 for those filing jointly ($3,200 if both spouses are age 65).
With the OBBB, seniors will get a bonus deduction of $6,000 per eligible person beginning in 2025 (expiring in 2028).
This tax break is intended to help offset taxes on Social Security benefits, but you don’t have to receive Social Security to qualify. The deduction phases out if your modified AGI is more than $75,000 ($150,000 for joint filers). This new deduction is an above-the-line deduction, so you can take it whether you itemize your deductions or take the standard deduction.
Reduced gambling loss deduction
Recall that the TCJA allowed you to deduct 100% of your gambling losses up to the amount you won. This deduction will be reduced starting in 2026, so you can only deduct losses equal to 90% of your gambling winnings.
Residential energy and EV credits rolled back
The Clean Vehicle Tax Credit will now expire on September 30, 2025, and the Energy Efficient Home Improvement Tax Credit will expire on December 31, 2025. Under the Inflation Reduction Act, these tax incentives weren’t set to expire until 2032.
Bonus depreciation increased to 100%
Businesses can now deduct the full cost of eligible equipment, machinery, and other qualified property in the year it’s placed into service, instead of spreading the deduction over time. Bonus depreciation is now permanently set at 100%, instead of 40%.
The definition of “qualified property” now includes manufacturing buildings – but only if they’re placed in service before January 1, 2031. Normally, those buildings would be depreciated slowly over 39 years, so this is a big upfront tax break.
Additional One Big Beautiful Bill FAQs
Here are answers to some common questions about the bill and what it means for taxpayers like you.
Does the One Big Beautiful Bill include no tax on tips?
Not exactly. Tips should still be reported as income on your W-2, and they’re subject to federal withholdings, FICA, and Medicare tax. But the bill allows you to deduct up to $25,000 in tip income if you’re filing as single and earning less than $150,000 (or jointly earning less than $300,000). It’s an above-the-line deduction, so you can claim it even if you don’t itemize.
Did the One Big Beautiful Bill increase the Child Tax Credit?
This bill ensured that the increase in Child Tax Credit is permanent. Before 2018, the CTC was $1,000 per qualifying child. Under the TCJA and now the OBBB, the amount has more than doubled. In 2025, parents can claim $2,200 per qualifying child.
Is there a tax break for overtime?
Yes. Single taxpayers who qualify can claim up to $12,500 of overtime income as an above-the-line deduction (up to $25,000 if they’re married filing jointly).
Are Social Security benefits tax-free now?
Not exactly. Social Security income can be taxable, depending on your total income and filing status. The One Big Beautiful Bill includes a temporary deduction for seniors, but they don’t have to receive Social Security to qualify.
