Debt, Deductions, and Cuts: The Fiscal Impact of the One Big Beautiful Bill
If you’re a taxpayer, business owner, or financial advisor, the “One Big Beautiful Bill Act” (OBBB) could impact your tax strategy in major ways. Passed by the House of Representatives in May 2025, this sweeping tax reform package is being closely watched as it moves to the Senate for negotiation.
In this article, we’ll break down what the bill includes, who it affects, and what you should do to prepare for these proposed tax law changes.
💡 What Is the One Big Beautiful Bill Act?
The One Big Beautiful Bill Act, officially known as H.R. 1, is a 389-page tax reform bill introduced and passed by the House of Representatives in May 2025. It aims to:
- Extend provisions from the 2017 Tax Cuts and Jobs Act (TCJA)
- Repeal or modify many clean energy tax credits from the Inflation Reduction Act
- Introduce new deductions, exclusions, and credits for individuals and businesses
The bill passed by a narrow 215–214 vote and now moves to the Senate, where significant amendments are expected.
📌 Projected Cost: $3.775 trillion over 10 years (2025–2034), according to the Congressional Budget Office.
📌 Potential Impact: Personal taxes, business deductions, international tax compliance, green energy investments, and more.
👥 Key Provisions for Individual Taxpayers
The OBBB includes several provisions that could directly affect your personal tax return starting in 2025.
🔢 Tax Bracket Extensions
- Permanently extends the lower individual income tax rates from the 2017 TCJA.
- Maintains the 37% top bracket without raising it, as some earlier proposals suggested.
📉 Expanded Standard Deduction
- Standard deduction increases by:
- $2,000 for joint filers
- $1,500 for heads of household
- $1,000 for single filers
- $2,000 for joint filers
- Seniors receive an additional $4,000 deduction, even if they itemize.
👶 Enhanced Child Tax Credit
- Increased from $2,000 to $2,500 per qualifying child for tax years 2025–2028.
- Phases out at higher income levels, as with prior versions.
💼 Exclusion of Tips and Overtime Pay
- Qualified workers will no longer pay income tax on tips or overtime pay.
- Overtime defined under the Fair Labor Standards Act of 1938.
🍼 Trump Accounts
- New savings accounts for children under age 8.
- Government deposits $1,000 per child for children born 2025–2028.
- Annual contributions allowed up to $5,000 (indexed).
- Funds grow tax-advantaged and are taxed as capital gains upon withdrawal for qualified uses.
🎓 Expanded 529 Plan Eligibility
- 529 plan funds can now be used for:
- K-12 tuition
- Curriculum materials
- Dual-enrollment college courses
- Trade school certifications and professional licenses
- K-12 tuition
🚗 Vehicle Loan Interest Deduction
- Up to $10,000 per year deductible for vehicles assembled in the U.S.
- Phased out for AGI above $100,000 (single) or $200,000 (married filing jointly).
💼 Key Provisions for Business Owners
Whether you own an S-corp, LLC, or partnership, the OBBB includes major tax incentives designed to support growth and investment.
✅ Qualified Business Income (QBI) Deduction
- Section 199A QBI deduction increases from 20% to 23%.
- Permanently extends QBI rules for pass-through entities.
🧪 Research & Development Expensing
- Immediate expensing for domestic R&D costs (2025–2029).
- Includes software development costs.
- Foreign R&D must still be capitalized and amortized.
🏗 Bonus Depreciation
- 100% bonus depreciation for qualified property through December 31, 2029.
- Includes qualified production property like manufacturing facilities, aircraft, and refining plants.
💻 Section 179 Expensing
- Deduction limit raised to $2.5 million; phase-out threshold to $4 million.
- Indexed annually for inflation starting in 2026.
🧑👧 Employer-Provided Childcare Credit
- Credit increases to 40% (50% for small businesses), capped at $500,000–$600,000.
👨👩👧 Family & Medical Leave Credit
- Made permanent under this bill.
⚠️ SALT Cap Workaround Limits
- PTET (Pass-Through Entity Tax) workaround limited to businesses eligible for Section 199A.
- Professional services (doctors, lawyers, investment firms) would lose access to this workaround starting 2026.
Excess Business Losses
- Permanently extend the limitation on Sec. 461(l) excess business losses for taxpayers other than corporations and disallow net operating losses (“NOLs”) in future years.
- Carryforwards from 2025 and later will no longer be characterized as NOLs.
- EBL carryforward will only be able to offset trade or business income in future years.
- This provision was slated to expire in 2028
🌐 International Tax and Trade Changes
The bill introduces more aggressive U.S. international tax policy:
🌍 GILTI, FDII, and BEAT
- Permanently extends current deductions and rates:
- 49.2% for GILTI
- 36.5% for FDII
- 10.1% for BEAT
- 49.2% for GILTI
💸 5% Excise Tax on Foreign Transfers
- Applies to remittances sent abroad, paid by the sender.
📜 New Retaliatory Tax (IRC Sec. 899)
- Targets countries imposing digital services taxes or “unfair” foreign taxes on U.S. businesses.
- Removes treaty benefits and raises tax rates in response.
🏥 HSA and HRA Account Changes
Several changes enhance the utility of Health Savings Accounts (HSAs) and Health Reimbursement Arrangements (HRAs):
- HRAs renamed to CHOICE Accounts.
- HSA funds can now cover:
- Gym memberships
- Sports league fees
- Pre-HSA setup medical expenses (within 60 days)
- Gym memberships
- Married couples can combine catch-up contributions into one HSA.
- Rollovers now allowed from FSA and HRA to HSA.
- Medicare-eligible individuals can still contribute if only enrolled in Part A.
🏘 Qualified Opportunity Zones (QOZs) & ERC Changes
🏙 Opportunity Zones
- Existing QOZs expire December 31, 2026.
- New zones start January 1, 2027, through 2033.
- Rural communities prioritized (33%+ of new zones).
- 10%–30% basis step-ups for investments held 5+ years.
- Ordinary income deferral up to $10,000 allowed.
❌ Employee Retention Credit (ERC)
- All ERC claims filed after January 31, 2024, are invalid—even if they were otherwise timely.
- IRS can now audit ERC claims for up to 6 years.
🌱 Green Energy & Industry-Specific Changes
🔋 Green Energy Credits Rolled Back
- Phases out or eliminates credits for solar, wind, and clean energy leasing.
- Projects must start within 60 days of enactment to qualify.
🎭 Industry-Specific Tax Breaks
- Sound recording, film, and live performance productions get extended deductions.
- Manufacturing firms can now use the cash method of accounting (threshold raised to $80 million).
- Repeals:
- Excise tax on indoor tanning
- Excise tax on firearm silencers
- Excise tax on indoor tanning
🏛 Tax-Exempt Organization Changes
🏫 New Excise Tax Rates
- Private foundations with $50M+ assets face excise tax rates up to 10%.
- Universities with large endowments face a tiered tax based on net investment income.
❗ Terrorism Clause
- Treasury can revoke an organization’s tax-exempt status if it is found to support terrorism.
🧾 What Happens Next?
The bill now goes to the Senate, where negotiations will:
- Revisit Medicaid and SNAP cuts
- Possibly reinstate or protect clean energy incentives
- Address the controversial SALT deduction caps
- Expand expired business credits like the Work Opportunity Tax Credit and New Markets Credit
📣 Final Thoughts: What Should You Do?
While this bill is not yet law, it gives strong insight into the legislative priorities of Congress in 2025.
✅ If you’re a taxpayer: Be prepared for changes to deductions, credits, and exclusions that could affect your 2025 tax return.
✅ If you own a business: Start planning for bonus depreciation, Section 179 upgrades, and QBI changes.
✅ If you serve clients as an advisor, or attorney: Help your clients adjust their planning strategies to reflect these potential changes.
📅 Need help planning your 2025 tax strategy?
Our team is monitoring this legislation closely and can help you prepare for the opportunities—and risks—it may bring.
📞 Contact us today to schedule a tax planning consultation.
