In recent months, the U.S. Congress has been actively debating a major tax bill known as the One Big Beautiful Bill Act (OBBBA). With many provisions of the 2017 Tax Cuts and Jobs Act (TCJA) set to expire at the end of 2025, the OBBBA aims to extend and revise these tax rules, potentially reshaping the tax landscape for individuals, seniors, families, and businesses.
At JS Morlu, we believe staying informed on these developments is critical for smart tax planning. This blog post breaks down the most important proposed changes in the House and Senate versions of the OBBBA and explains what you should consider as the bill moves through Congress.
Why the OBBBA Matters
The TCJA introduced sweeping tax reforms, including lowering rates, increasing deductions, and providing new credits. However, most of these provisions are temporary and scheduled to expire after 2025. The OBBBA seeks to make many of these tax benefits permanent or enhance them, while also introducing new deductions and terminating certain credits.
Since the House and Senate bills differ in several respects, Congress is still negotiating a final version, expected by July. Until then, it’s essential to monitor these changes and plan accordingly.
Key Provisions of the OBBBA You Should Know
1. Permanent Extension of Increased Standard Deduction & Tax Brackets
One of the core components of the TCJA was a substantial increase in the standard deduction, simplifying filing for millions. The OBBBA proposes:
- Making the increased standard deductions permanent.
- Temporary boosts in standard deductions from 2025 through 2028:
- An additional $1,000 for individuals,
- $1,500 for heads of household,
- $2,000 for married couples filing jointly.
- Permanently keeping the TCJA’s modified tax brackets and adjusting how they’re indexed for inflation.
This provision aims to provide long-term tax relief and predictability.
2. Senior Bonus Deduction to Reduce Social Security Taxation
Currently, up to 85% of Social Security benefits can be taxable depending on your income level. The OBBBA offers seniors aged 65+ a bonus standard deduction of $4,000 to $6,000 from 2025 through 2028, phased out at higher income levels:
- Phases out when modified adjusted gross income (MAGI) exceeds $150,000 for married couples,
- And $75,000 for others.
This aims to ease the tax burden on seniors during these years.
3. Increase to Qualified Business Income (QBI) Deduction
The popular QBI deduction for pass-through business owners is proposed to increase from 20% to 23%, with simplified phase-in limits. This change would:
- Help many small business owners keep more of their income,
- Provide a clearer and more generous deduction structure.
4. Higher Estate and Gift Tax Exemptions
The OBBBA would permanently raise the unified estate and gift tax exemption to $15 million, indexed for inflation. This is a significant benefit for estate planning, allowing more assets to transfer tax-free to heirs.
5. Child Tax Credit Enhancements
Families with children are set to benefit from temporary increases in the child tax credit:
- The credit would rise to $2,200–$2,500 per qualifying child through 2028,
- Then revert back to $2,000 starting in 2029.
- Other changes include updates to refundability, indexing, and Social Security number requirements.
6. Saver’s Credit Adjustments to Encourage Retirement Savings
The bill promotes savings by permanently allowing contributions to ABLE accounts (for people with disabilities) to qualify for the Saver’s Credit, treating them like traditional retirement accounts.
7. New “No Tax” Deductions on Overtime and Tips
Two new above-the-line deductions would be introduced:
- Overtime premium pay deductions, subject to income limits and differences between House and Senate versions.
- Tips received in tipping occupations (must be voluntary and customer-determined), with restrictions excluding high earners.
These changes could reduce taxable income for many workers.
8. Bonus Depreciation Reinstatement for Businesses
Businesses would regain the 100% first-year depreciation deduction for qualifying property placed in service from 2025 through 2030, encouraging capital investments.
9. Increased State and Local Tax (SALT) Deduction Limit
A key area of debate is the SALT deduction cap:
- The bill proposes increasing the cap from the current $10,000 to as much as $30,000, with a phase-out for higher-income taxpayers.
- This change could substantially benefit taxpayers in states with higher local taxes.
10. New Deduction for Car Loan Interest
Taxpayers could deduct up to $10,000 of interest paid on auto loans for vehicles assembled in the U.S. between 2025 and 2028, phased out above income thresholds ($100,000 for individuals, $200,000 for joint filers).
What’s Being Terminated?
The OBBBA also proposes ending several popular credits and deductions, including:
- Clean vehicle tax credits for new and used vehicles after 2025 (with exceptions for certain manufacturers),
- Residential solar and renewable energy credits after 2025,
- The 30% energy efficient home improvement credit,
- Personal exemptions (already repealed by TCJA, now permanently so),
- And permanent restrictions on miscellaneous itemized deductions.
These changes could increase tax liabilities for certain taxpayers.
What Should You Do Now?
With the OBBBA still under negotiation, taxpayers and businesses should approach planning with caution:
- Stay updated on legislative progress,
- Review your tax strategies with your advisor,
- Consider timing of income, deductions, and credits,
- Prepare for potential changes to retirement and estate planning.
Final Thoughts
The One Big Beautiful Bill Act promises to make significant changes to the tax code starting in 2025. While it preserves and extends many benefits of the TCJA, it also introduces new deductions and phases out certain credits.
At JS Morlu, we are committed to helping you navigate these changes with confidence. If you have questions or want to discuss how the OBBBA might impact your tax situation, please contact our office. Early planning is the key to maximizing your tax benefits and minimizing surprises.
Stay informed. Stay prepared. Let JS Morlu guide you through the evolving tax landscape.
