Understanding the Tax Provisions of the One Big Beautiful Bill Act

On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was signed into law, bringing with it a broad set of tax and spending changes that could have meaningful impacts on individual taxpayers, business owners, and estate planning strategies. While the law covers a wide range of areas, many of the key provisions center around income tax rates, deductions, retirement planning, and business incentives.

Below, we highlight some of the major tax-related updates—including the permanent extension of the 2017 income tax brackets, a new "Senior Bonus" deduction, expanded use of 529 plans, and enhanced business and estate planning opportunities. There are also important changes to 1099 reporting requirements and the phase-out of certain clean energy credits.

Additionally, a new tax-advantaged savings vehicle for minors, referred to as “Trump Accounts” in the legislation, has been introduced—providing families with additional ways to support their children’s future.

This summary captures the most relevant provisions for our clients, but there’s much more to explore. As always, our team at Lake Tahoe Wealth Management is here to help you understand how these changes may affect your financial plan and to ensure you’re making the most of any new opportunities.

Please reach out if you'd like to schedule a time to review your strategy.

Individual Tax Provisions

1.Permanent 2017 Tax Rates & Standard Deduction

The lower marginal income tax rates from the 2017 Tax Cuts and Jobs Act (TCJA) are now permanent – no more worry about a 2025 sunset.

• The income tax brackets (10%–37%) established in 2017 are now permanent and inflation‑indexed.

• The standard deduction is boosted to $15,750 (single) and $31,500 (joint), also inflation‑indexed starting in 2026.

2. Senior Bonus Deduction

• From 2025–2028, individuals aged 65+ (or blind) receive an extra “senior bonus” deduction: up to $6,000 ($12,000 married), phasing out between $75K–$175K (single) or $150K–$250K (joint).  A married couple with taxable income of $100,000 would realize a Federal tax savings of $1,440.

3. Child Tax Credit (CTC)

• Begins in 2025, the CTC increased an additional $200 to $2,200 per child, with a refundable portion up to $1,700 and inflation‑adjustment thereafter. This would apply to children under the age of 17 and subject to income phase-outs of $200000 and $400,000 for Single and Married Filing Jointly.

4. State And Local Tax (SALT) Deduction Increase

• The state and local tax cap is temporarily raised to $40,000 (joint) for 2025, increasing 1% annually until 2029, then reverting to $10,000 in 2030. Phases out above $500K AGI for Married Filing Joint.

5. Charitable Contributions

• For those that do not itemize, an Above-the-Line deduction of $1,000 ($2,000 – MFJ) for charitable contributions will be available in 2026. A married couple with a taxable income of $100,000 that does not itemize would realize a Federal tax savings of up to $240.

• The charitable deduction limit of 60% of AGI has been made permanent.

6. 529 Education Savings Expansion

• 529 plans can now fund K–12 and homeschooling expenses, as well as post‑secondary.

7. Above‑the‑Line Deductions (2025–2028) The following three provision

• Tip Income: There will be a $25,000 deduction subject to phase-out of $100 for each $1,000 over the taxpayer’s modified adjusted gross income of $150,000 ($300,000 - MFJ).  This can save an individual taxpayer with a taxable income of $75,000 up to $5,500 a year in tax.

• Overtime Pay: There will be a deduction of $12,500 ($25,000 – MFJ) subject to a phase-out limitation of $100 for each $1,000 over the taxpayer’s modified adjusted gross income of $150,000 ($300,000 – MFJ).  With an AGI of $150,000, this could save up to $2,750 for an individual or $5,500 for a married couple.

• Car Loan Interest: Up to a $10,000 deduction for new cars purchased. For the purchase to qualify, the final assembly of the car must have occurred in the USA.  The deduction is subject to phase out limits of $200 for every $1,000 over the taxpayer’s modified AGI $100,000 ($200,000 – MFJ).  Exceptions: Does not include leased, fleet vehicles, commercial, or used vehicles. For those below the income threshold, this can save up to $2,200 in Federal income tax.

Business & Estate Planning Provisions

8. Qualified Business Income (QBI) Deduction

• The 20% deduction is made permanent, with expanded income thresholds: $75K individual and $150K joint.

9. Bonus Depreciation & §179 Expensing

• 100% bonus depreciation on qualifying business property permanently.

• Higher §179 expense limit raised to $2,500,000 for property placed in service after 12/31/24. Has been made permanent.  This provision allows small businesses to immediately write off what might have been required to depreciate over several years.

10. 1099K Reporting Requirements

• Payments made from third party settlement organizations must report transactions on payees only when they exceed $20,000 AND the aggregate of such transactions exceeds 200. Examples of companies that issue 1099-K to payees would include companies like PayPal, Square, Stripe, Etsy, Ebay, Uber, and Lyft.

11. 1099-Misc and 1099-NEC Requirements

• For those that pay for Sub-Contractors, the filing threshold for information return reporting has been increased from $600 to $2,000 per payee.

12. Estate & Gift Tax

• The Lifetime Exclusion, or the amount that a person can gift to others during their life-time tax free, has increased from the indexed $13,990,000 to $15,000,000 per person ($30,000,000 MFJ).  This new amount will continue to be adjusted with the cost of living beginning in 2026 in $10,000 increments. Eff after 12/31/25.

Energy

13. Clean Energy Credits

Consumer clean energy tax credits are repealed.

• Previously - Owned Clean Vehicle Credit.  Lesser of $4,000 or 30% of sales price – Ends 9-30-25.

• Clean Vehicle Credit. The $7,500 credit ends 9-30-25

• Energy Efficient Home Improvement Credit.  30% of qualified expenses. Limited to $3,200– Ends 12-31-25

• Residential Clean Energy Credit. Up to 30% of cost – Ends 12-31-25

• New Energy Efficient Home Credit. Up to $5,000 on new homes  – Ends 6-30-26.

New Accounts

14. Trump Accounts

• Created for children under the age of 18.

• For those born between 12/31/24 and 12/31/28 are eligible to take part in the Trump Pilot program.  This would allow for the government to initially fund the account with $1,000.

• Can be funded by parents or relatives up to $5,000 per year.

• Can be funded by an employer up to $2,500 per year as part of the $5,000 annual limit.

• Receives tax-deferred tax treatment.

• No distributions until beneficiary has attained the age of 18.

• Distributions are taxable.

There are many aspects to the new tax law that cover much more than what’s outlined above.  Should you have any questions regarding the new law, our team is here to help you navigate these new rules. Please reach out soon to discuss your personalized strategy.