Tax Changes Under the One Big Beautiful Bill Act (OBBBA)

Written By Joel Gelb

The greatest impact (in dollars) of the bill is merely the continuation of current tax law that was otherwise scheduled to expire in 2026. Those provisions are ignored below.

Items related to foreign income and uncommon energy credits are also excluded.


Below is a brief summary of the new tax provisions in the bill:


Permanent Provisions:

  • The standard deduction increased to $31,500 (MFJ).

  • Child tax credit increased to $2,200, refundable portion is $1,700.

  • 20% QBI deduction phases out over a range of $150,000 (MFJ), i.e. more earners over $394,000 (MFJ) will qualify.

  • Mortgage insurance premiums will qualify for the mortgage interest deduction.

  • Charity deduction of $2,000 cash (MFJ) for non-itemizers. Donor-advised fund contributions are ineligible (effective 2026).

  • Charity contributions equal to 0.5% of AGI are not deductible and carried forward. A similar 1% limitation applies to C corporations (effective 2026).

  • Tax savings from itemized deductions are now capped at 35 cents per dollar for the 37% bracket. (effective 2026).

  • Gambling deduction is limited to 90% of gambling losses, and cannot exceed gambling winnings (effective 2026).

  • Taxpayers who received advanced Premium Tax Credit towards health insurance will have to repay the full amount of excess ineligible credit received during the year.

  • Bronze and catastrophic health insurance plan holders are eligible to contribute to an HSA.

  • Trump Accounts for children under 18 years, contributions can be $5,000 of post-tax dollars and $2,500 of pre-tax if paid by an employer. Funds are locked until the child turns 18, at which point it follows traditional IRA rules for contributions & distributions. The accounts can be opened after July 4, 2026.

  • Bonus depreciation is back to 100% for property placed into service after January 19, 2025.

  • Research & experiment deduction is back to 100% if conducted in the U.S.

  • Section 179 deduction is increased to $2.5 million and phases out if property contributed exceeds $4 million.

  • Business interest deduction for large taxpayers will be limited to 30% of earnings before interest, tax, depreciation and amortization (instead of EBIT). The limitation now also includes interest capitalized.

  • Cafeteria food provided to employees for free is no longer deductible.

  • Credit of up to $600,000 for 50% of employer-provided child care. The credit limit is $500,000 and 40% for larger taxpayers. Childcare can be contracted to external providers. (New York has a similar credit at 200% of the federal credit) (effective 2026).

  • Up to $7,500 of employer-provided childcare is not taxable to the employee (effective 2026).

  • The child care credit increases to 35-50% of expenses if AGI is below $150,000, and to 20-35% if AGI is below $206,000 (MFJ) (effective 2026).

  • The adoption credit becomes partially refundable.

  • 100% credit up to $1,700 of contributions to a scholarship organization (SGO) who remits the funds to a private school. The governor of each state has to enroll (effective 2027).

  • Allowed withdrawals from 529 plans increased to $20,000.

  • Re-opening of the QOZ program: Capital gains tax can be deferred for up to 5 years if invested within 180 days. If QOZ is held for 5 years, 10% of the gain is permanently excluded (30% for rural QOZ). Gains from the QOZ investment itself are excluded if the QOZ is sold after 10 years, up to 30 years (effective 2027).

  • Qualified Small Business Stock (QSBS) is eligible for 50% gain exclusion if held for 3 years, 75% if held for 4 years, and 100% if held for 5 years. Amount eligible for exclusion is $15 million or 10 times the basis in stock, whichever is greater. The issuer asset limitation increased to $75 million. (effective July 4, 2025)

  • All residential construction is now eligible for the completed-contract accounting method.

  • 1099-K reporting is only required for merchants with $20,000 and 200 transactions.

  • 1099-NEC reporting is only required for recipients of over $2,000 (effective 2026).

  • The credits for electric vehicles, electric vehicle chargers, energy-efficient home improvements, solar panels, and the credit for contractors (45L) are terminated. The deduction for commercial energy-efficient improvements is also terminated. 

  • The de-minimis exemption that allows customs-free imports of up to $800 is terminated (effective July 1, 2027, terminated earlier by the President).



Temporary Provisions:

  • Additional deduction of $6,000 to seniors over 65, with AGI under $150,000 (MFJ)(2025-2028).

  • State & local taxes are deductible up to $40,000 with AGI up to $500,000, after which it phases down to $10,000 (2025-2028).

  • Non-itemized deduction of tips income up to $25,000 with AGI up to $300,000 (MFJ) (2025-2028).

  • Non-itemized deduction of overtime income up to $25,000 (MFJ) with AGI up to $300,000 (MFJ). The deduction only applies to the "extra half" of time-and-a-half pay (2025-2028).

  • Non-itemized deduction of car loan interest up to $10,000 with AGI up to $200,000 (MFJ). The vehicle must have final assembly in the U.S (2025-2028). 

  • The IRS will deposit $1,000 into the Trump Accounts of children born between January 1, 2025 and December 31, 2028.

  • 100% bonus depreciation for buildings used in manufacturing, if placed in service between July 4, 2025 and December 31, 2030.




Joel Gelb