The “Big Beautiful Bill” Tax Changes — Detailed Guide for Individuals & Small Businesses

The One Big Beautiful Bill Act of 2025 (OBBBA) is the most sweeping tax overhaul in years. While it’s hundreds of pages long, the provisions that matter most to individuals and small business owners fall into a handful of key categories. Below, you’ll find in‑depth explanations of each change, including eligibility rules, limits, examples, and planning considerations.

Individual

⚫ Standard Deduction & Senior Add‑On

• What changed:

  • The greater standard deduction is now permanent.

    • Single/MFS: $15,750

    • Head of Household: $23,625

    • Married Filing Jointly/QSS: $31,500

  • New $6,000 senior deduction for tax years 2025–2028.

    • Must be age 65 by year end.

    • Married individuals must file MFJ to claim it.

    • Social Security number is required for each spouse claiming it.

    • Phases out starting at $75,000 MAGI (single) / $150,000 (MFJ).
      

• Impact example: A married couple, both over 65, filing jointly in 2025:
  $31,500 standard deduction + $6,000 senior deduction each = $43,500 total before itemizing.

⚫ “No Tax on Tips” Deduction (2025–2028)

• What changed: Above‑the‑line deduction for voluntary tips only (mandatory service charges do not qualify).

  • Single or MFS: Up to $25,000.

  • MFJ: Up to $50,000, but pools are separate — one spouse cannot use the other’s unused portion.

    • Example: If one spouse has $26,000 in tips and the other has $0, the deduction is still capped at $25,000 for the spouse with tips.

  • Married individuals must file MFJ to claim.

  • Social Security number required for each spouse claiming it.

  • Phases out starting at $150,000 MAGI (single) / $300,000 (MFJ).

• Who qualifies: Employees in IRS‑designated “customarily tipped” occupations (list to be published by Oct 2, 2025). Self‑employed in those occupations may qualify, but deduction is capped at net income from that trade/business.

• Documentation: Employer/payor statements or detailed tip logs.

⚫ “No Tax on Overtime” Deduction (2025–2028)

• What changed: Above‑the‑line deduction for the premium portion of FLSA overtime pay.

  • Cap: $12,500 (single) / $25,000 (MFJ).

  • Married individuals must file MFJ to claim.

  • Social Security number is required for each tax payer

  • Phases out starting at $150,000 MAGI (single) / $300,000 (MFJ).

• Definition: Only the “half” in time‑and‑a‑half is deductible.

• Example: If your regular rate is $20/hr and OT rate is $30/hr for 10 hours, only $100 (10 hrs × $10 premium) is deductible.

⚫ SALT Deduction Expansion (2025–2029)

• What changed: SALT cap increased to:

  • $40,000 for most filers.

  • $20,000 for MFS.

  • Indexed annually until 2029, then reverts to $10,000 in 2030.

• MAGI cap & phasedown: For MAGI over $500,000, the increased cap is proportionally reduced (but not below $10,000) until it phases out entirely.

• Example: A joint filer with $36,000 in property tax and $15,000 in state income tax can deduct up to $40,000 in 2025, unless phased down due to high MAGI.

⚫ 1099 & 1099‑K Reporting Relief

• What changed:

  • 1099‑K threshold restored to $20,000 and 200 transactions, retroactive to 2022.

  • 1099‑NEC/MISC threshold rises from $600 to $2,000 starting in 2026, indexed for inflation from 2027.

• Impact: Fewer forms for casual sellers and reduced filing burden for small businesses.

⚫ Estate, Gift, and GST Exemption Increase (2026+)

• What changed: Lifetime exemption rises to $15 million per person ($30 million per couple) starting in 2026, indexed for inflation from 2027.

• Portability explained: If one spouse dies without using their full exemption, the unused portion can be transferred to the surviving spouse — but only if a timely estate tax return is filed electing portability.

🚗 Car Loan Interest Deduction (2025–2028)

• What changed: Above‑the‑line deduction for interest on qualifying new personal‑use vehicles only. Leases do not qualify.

  • Up to $10,000/year in deductible interest.

  • Final assembly must be in the U.S.

  • GVWR under 14,000 lbs.

  • First‑lien loan; VIN reported on return.

  • Phase‑out: Begins at $100,000 MAGI (single) / $200,000 (MFJ) and is fully phased out at $150,000 / $250,000.

    • This is a 20% phase‑out range — deduction is reduced proportionally as income moves through the range.

• Example: Buyer finances a new U.S.‑assembled car, pays $3,200 in interest, and has MAGI of $120,000 (single) → full deduction allowed. At $140,000 MAGI, deduction is reduced by 80%.

❤️ Charitable Giving Changes (2026+)

• Above‑the‑line deduction for non‑itemizers: Up to $1,000 (single) / $2,000 (MFJ) for cash gifts to qualified charities.

  • Excludes Donor‑Advised Funds (DAFs) and most private foundations.

  • Only cash donations qualify — non‑cash gifts do not.

• Itemizer floor: 0.5% of AGI for individuals; only amounts above the floor are deductible.

  • Example: If AGI is $100,000, the first $500 of charitable giving is not deductible; only the amount above $500 counts toward the deduction.

• High‑income cap: Itemized charitable deduction benefit capped at 35% for high‑bracket taxpayers.

🏠 Mortgage Insurance Premiums Deduction (Made Permanent)

• What changed:

  • The deduction for mortgage insurance premiums (PMI) is now treated as qualified residence interest and made permanent for all tax years after 2017.

  • Previously, this deduction expired in 2021 and was unavailable unless Congress extended it annually.

👶 Child Tax Credit (CTC) — Increased & Made Permanent

• What changed:

  • The CTC is now $2,200 per qualifying child under age 17, up from $2,000.

  • The refundable portion (Additional Child Tax Credit) is $1,700 for 2025, indexed for inflation starting in 2026.

  • The credit is now permanent and will grow with inflation.

• Phaseout thresholds:

  • Single: Begins at $200,000 MAGI

  • MFJ: Begins at $400,000 MAGI

• Requirements:

  • Child must be a U.S. citizen, national, or resident alien.

  • Must live with the taxpayer for at least 6 months.

  • Social Security numbers are required for both the child and the taxpayer (or one spouse if MFJ).

• Other Dependent Credit:

  • $500 credit for non-child dependents (e.g., elderly parents), also made permanent.

👶 Child and Dependent Care Tax Credit (CDCTC) — Expanded in 2026

• What changed:

  • Starting in 2026, the credit rate increases from 35% to 50% of qualifying expenses.

  • Qualifying expenses:

    • $3,000 for one dependent

    • $6,000 for two or more dependents

  • Phaseout structure:

    • Tier 1: Credit rate reduced by 1% for every $2,000 of AGI over $15,000

    • Tier 2: For AGI over $75,000 (or $150,000 MFJ), rate reduced by 1% per $2,000 ($4,000 MFJ)

    • Minimum rate: 20%

• Limitations:

  • Credit remains nonrefundable, so it only offsets tax liability — no refund if liability is zero.

📚 529 Plan Expansion — More Flexibility & Higher Limits

• What changed:

  • Starting in 2025, 529 funds can be used for a broader range of K–12 and postsecondary expenses, including:

    • Books, curriculum materials, tutoring, online platforms

    • Standardized test fees (SAT, ACT, AP)

    • Credentialing and licensing programs (CPA, CDL, HVAC, cosmetology, etc.)

  • Annual K–12 withdrawal limit: Increased from $10,000 to $20,000 per beneficiary starting in 2026.

👶 Adoption Credit — Now Partially Refundable

• What changed:

  • Starting in 2025, up to $5,000 of the adoption credit is frefundable.

  • Previously, the entire credit was nonrefundable — meaning it could only reduce tax liability, not generate a refund.

• Total credit amount:

  • Up to $17,280 in 2025 for qualified adoption expenses.

  • Phaseout begins at $259,190 MAGI, fully phased out at $299,190.

• Refundable portion:

  • Indexed for inflation.

  • Cannot be carried forward — use it in the year of adoption.

Business

📈 Permanent 20% Pass‑Through (QBI) Deduction

• What changed: The §199A deduction is now permanent.

  • Still subject to wage/UBIA limits and SSTB restrictions at higher incomes.

  • Phase‑out ranges:

    • For SSTBs, deduction phases out over a $75,000 range (single) / $150,000 range (MFJ) above the income threshold.

    • For non‑SSTBs, wage/UBIA limits phase in over the same ranges.

📈 100% Bonus Depreciation Restored

• What changed: Made permanent.

  • Allows up to 100% immediate deduction of qualifying property placed in service on 01/20/2025 or later, or the business owner may elect to apply 40% instead.

  • Applies to new or used property that meets eligibility rules.

  • No dollar limit on the amount claimed.

• Eligible property: Tangible property with ≤20‑year recovery period, certain software, and qualified improvement property.

• Example: Buy $50,000 in qualifying equipment in 2025 → deduct the full $50,000 that year, or elect to deduct $20,000 (40%) and depreciate the rest.