The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, is a major U.S. federal statute containing extensive tax and spending policies forming part of President Donald Trump’s second-term agenda.
The Act permanently extends key provisions of the 2017 Tax Cuts and Jobs Act (TCJA) that were set to expire at the end of 2025 and introduces new tax deductions, credits, and adjustments affecting individuals, families, and businesses.
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One Big Beautiful Bill Act Tax Policies
The One Big Beautiful Bill Act (OBBBA), signed into law in July 2025, makes permanent the individual tax rates from the 2017 Tax Cuts and Jobs Act and extends the larger standard deduction with slight increases. It raises the state and local tax deduction cap to $40,000 for most taxpayers through 2029 and provides new deductions for tips, overtime pay, and auto loan interest.
The child tax credit is permanently increased by $200 per child, and new tax-deferred “Trump Accounts” are created for children’s education and entrepreneurship. Some clean energy tax credits are phased out, and the estate tax exemption is increased. Overall, the act secures tax relief for individuals and families while introducing targeted new benefits and modifications through 2028.
What is One Big Beautiful Bill Act?
“The One, Big, Beautiful Bill Act, signed into law on July 4, 2025, permanently locks in many provisions of the 2017 Tax Cuts and Jobs Act while introducing important new tax benefits for working Americans and seniors. This includes deductions for tip income and overtime pay, as well as enhanced child and senior tax credits.”- IRS
Also Read
IRS $1,400 Payments 2025 — Everything You Need to Know“The One Big Beautiful Bill is exactly what the country needs to jumpstart the economy and guarantee the safety and prosperity of Americans for decades to come. It empowers workers, supports families, and strengthens American competitiveness by expanding tax cuts and investing in the future.”- whitehouse.gov
Key Features and Details
The One Big Beautiful Bill Act (OBBBA), effective from 2025, introduces permanent changes and new tax provisions for individuals and families:
- Permanent Tax Cuts and Rate Lock-in: The Act locks in the TCJA’s lower income tax brackets and higher standard deduction amounts permanently, with inflation adjustments starting in 2026. For 2025, the standard deduction is $15,750 for singles, $23,625 for heads of household, and $31,500 for married filing jointly.
- New Worker-friendly Deductions: Workers can claim deductions on tip income (up to $25,000) and overtime pay (up to $12,500), subject to income phase-outs. There is also a deduction of up to $10,000 for interest paid on car loans, aimed to benefit middle and lower-income individuals.
- Increased Child Tax Credit and Senior Deductions: The child tax credit is raised from $2,000 to $2,200 for eligible taxpayers. Additional senior citizen tax deductions of up to $6,000 per individual (ages 65+) are available from 2025 through 2028, phasing out at higher incomes. This is stacked on the existing senior or blindness deductions.
- Higher SALT Deduction Cap Temporary Increase: The cap on state and local tax deductions increases from $10,000 to $40,000 for tax years 2025-2029, subject to income phase-outs, after which it reverts unless Congress acts.
- Estate and Gift Tax Exclusions: The Act permanently raises the estate and gift tax exemption to $15 million per individual, effectively doubling the exemptions from pre-2025 levels.
- Ending of Some Green Energy Credits: The $7,500 electric vehicle tax credit and other energy efficiency credits are phased out by the end of 2025.
- New Savings Vehicles: The Bill introduces “Trump savings accounts” for children, a type of IRA with a $1,000 tax credit for accounts opened from 2025 to 2028, supporting long-term savings.
Analysis
“We support the One Big Beautiful Bill for its balanced approach to economic growth that provides certainty for businesses and relief for workers, promoting a stronger American economy.”- whitehouse.gov endorsements
| Tax Provision | Details | Impact Analysis | Duration/Phaseout |
|---|---|---|---|
| Standard Deduction | 2025: $15,750 (Single), $31,500 (MFJ), $23,625 (HoH) 2026: $16,100 (Single), $32,200 (MFJ), $24,150 (HoH) | Increases basic personal deduction, reducing taxable income for most taxpayers | Permanent with inflation adjustment |
| Income Tax Rates | TCJA 2017 rates made permanent: 10%, 12%, 22%, 24%, 32%, 35%, 37% | Provides tax rate stability and predictability | Permanent |
| Child Tax Credit | Increased to $2,200 per eligible child | Enhances family tax relief | Permanent with phaseout at higher incomes |
| Senior Deduction | Additional $6,000 deduction for individuals 65+ | Provides targeted relief for seniors | 2025-2028, phases out at MAGI $75K-$175K (S), $150K-$250K (MFJ) |
| SALT Deduction Cap | Increased to $40,000 for 2025-2029 (phased out by income) | Eases burden for taxpayers in high-tax states | Temporary (2025-2029), reverts in 2030 |
| Estate and Gift Tax Exemption | Raised to $15 million per individual | Significantly reduces estate tax exposure | Permanent |
| Worker Deductions | New deductions on tip income (up to $25,000) and overtime (up to $12,500) | Supports service and hourly workers | 2025 start, phases out by income |
| Mortgage Interest Deduction | Permanent $750,000 acquisition debt limit | Maintains affordability for homebuyers | Permanent |
| Green Energy Tax Credits | Phased out end of 2025 | Reduction in clean energy incentives | Ends 2025 |
| Trump Savings Accounts | New tax-exempt savings accounts for children with $1,000 credit | Encourages long-term savings and financial education | 2025-2028 |
Long-Run Economic Effects
The long-run economic effects of the One Big Beautiful Bill Act (OBBBA) present a mixed outlook:
- Short-Term Boost: The Act provides a modest boost to the U.S. economy in the short term, increasing real GDP growth by about 0.2% annually from 2025 to 2027 due to tax cuts and increased disposable incomes. This creates a positive environment for consumption, employment, and business investments initially.
- Rising Debt and Interest Rates: The bill significantly increases federal deficits and national debt adding about $4.1 to $5.5 trillion to the debt through 2034 according to various estimates. This rising debt drives up interest rates over time, with the 10-year Treasury yield projected to be 1.4 percentage points higher by 2054, increasing government interest costs substantially.
- Long-Term GDP Slowdown: The increase in debt and interest rates causes crowding out of private investment and slows economic growth in the long run. By the 2050s, GDP is projected to be around 3% lower than it would have been without the Act, reflecting dampened capital formation and slower productivity gains.
- Higher Deficits as % of GDP: The budget deficit is expected to be about 3.5 percentage points of GDP higher by the 2050s than baseline, largely due to the compounding effects of debt servicing costs and structural tax cuts that persist.
- Sectoral and Global Effects: Some sectors like fossil fuels and defense may benefit, while others, including clean energy, healthcare, and consumer sectors, face setbacks due to reduced incentives and spending cuts. The bill also influences global trade dynamics, with impacts on tariffs and alliances potentially adding inflation risks.
“The OBBBA’s permanent tax relief for small businesses and expanded tax deductions will help fuel entrepreneurship across the country.”- Job Creators Network
FAQ’s
What is the OBBBA?
A 2025 U.S. law making many 2017 Tax Cuts and Jobs Act provisions permanent and adding new tax benefits.
How does it affect tax rates?
It permanently keeps the lower income tax rates and higher standard deductions.
Any new deductions for workers?
Yes, deductions for tip income (up to $25,000) and overtime pay (up to $12,500) from 2025 to 2028.
What about the SALT deduction?
The SALT cap increases temporarily to $40,000 (2025–2029) before reverting.
Are there changes for seniors?
Seniors 65+ get an additional $6,000 deduction (2025–2028).