The One Big Beautiful Bill Act (OBBB Act) introduces significant tax changes for individuals and businesses, cementing key provisions of the 2017 Tax Cuts and Jobs Act (TCJA) while adding new reforms. Signed into law on July 4, 2025, this legislation promises to reshape how taxpayers plan and comply with federal tax requirements moving forward. Whether you’re a homeowner, entrepreneur, or retiree it’s crucial to understand these changes and take action to optimize your tax strategy.
Here’s a detailed breakdown of the OBBB Act’s most significant updates, what they mean for different groups, and how to position yourself to benefit from the new tax provisions.
Key Individual Tax Changes
1. SALT Deduction Cap
The Act raises the state and local tax (SALT) deduction cap to $40,000 and will increase 1% each year for inflation from 2026 through 2029. The cap is phased out for modified adjusted gross incomes (MAGI) over $500,000. This temporary adjustment, effective through 2029, will revert to a $10,000 cap thereafter.
Key Takeaway: Taxpayers in high-tax states are likely to benefit the most from this change, although high-income filers may see diminishing returns due to phaseouts and itemized deduction limits for the top tax bracket.
2. Income Tax Updates
The OBBB Act permanently extends the TCJA income tax brackets, maintaining rates from 10% to 37%. It also adjusts income thresholds to reflect inflation for 10%, 12%, and 22% tax brackets. These adjustments expand access to lower tax rates for middle-income taxpayers.
| Tax Rate | Single Filers | Married Couples Filing Jointly | Married Couples Filing Separately | Head of Household |
| 10% | $11,925 or less | $23,850 or less | $11,925 or less | $17,000 or less |
| 12% | $11,926 to $48,475 | $23,851 to $96,950 | $11,926 to $48,475 | $17,001 to $64,850 |
| 22% | $48,476 to $103,350 | $96,951 to $206,700 | $48,476 to $103,350 | $64,851 to $103,350 |
| 24% | $103,351 to $197,300 | $206,701 to $394,600 | $103,351 to $197,300 | $103,351 $197,300 |
| 32% | $197,301 to $250,525 | $394,601 to $501,050 | $197,301 to $250,525 | $197,301 to $250,500 |
| 35% | $250,526 to $626,350 | $501,051 to $751,600 | $250,526 to $375,800 | $250,501 to $626,350 |
| 37% | $626,351 or more | $751,601 or more | $375,801 or more | $626,351 or more |
Source: Internal Revenue Service
3. Standard Deduction Increase
The Act makes the higher standard deductions from the TCJA permanent while further increasing them starting in 2025. New deduction amounts include:
These inflation-adjusted figures (after 2025) are meant to simplify the process for non-itemizers and put more money back in taxpayers’ pockets.
What This Means: Many taxpayers will likely opt for the standard deduction, reducing the need to track itemized expenses such as medical costs or paid state taxes.
4. Estate and Gift Tax Adjustments
The estate and gift tax exemption now jumps to $15 million for single filers, up from $13.99 million, indexed annually for inflation. For married couples, this figure increases to $30 million from $27.98 million.
Planning Opportunity: High-net-worth individuals can transfer more wealth tax-free. Estate planning should focus on leveraging this higher exemption through trusts or other strategies while rates remain favorable.
5. Charitable Contribution Adjustments
Charitable deductions receive targeted updates in the One Big Beautiful Bill Act:
Impact: While this motivates smaller contributions across the board, the changes may reduce the appeal for itemizers, especially those in higher-income brackets.
6. Itemized Deduction Limits
Key changes tighten itemized deductions for higher-income taxpayers:
Result: Higher-income taxpayers may face greater difficulty identifying significant offsets to their taxable income through itemized deductions.
7. Qualified Opportunity Zones Return in 2027
The reintroduction of Qualified Opportunity Zones (QOZs) provides long-term deferral benefits on capital gains through targeted investments in designated low-income and rural communities.
Under the new framework, eligibility requirements become more stringent, prioritizing genuinely distressed areas. Redesignation will occur every ten years starting in 2026 to ensure zones remain relevant. For investments made after January 1, 2027, deferred gains will be recognized on the fifth anniversary of the investment. Investors who hold their QOZ investment for at least five years will benefit from a 10% basis increase. The introduction of a new "Qualified Rural Opportunity Fund" category specifically incentivizes investment in rural communities, offering enhanced tax benefits to participants. In addition, taxpayers may be able to exclude gains from qualified opportunity zone investments held for at least 10 years, with special rules applying to investments held over 30 years.
Pro Advice: Investors should monitor designated Opportunity Zones and consider integrating QOZs into their portfolios to align with long-term tax and investment planning.
8. Social Security Deduction for Seniors
The OBBB Act does not eliminate taxes on social security. However, it introduces a new $6,000 deduction through 2028 for seniors with incomes below $75,000 for single filers or $150,000 for joint filers. This deduction is in addition to the current $2,000 for single filers and $3,200 for joint filers over 65 years of age.
Who Benefits: This provision primarily supports retirees with moderate incomes, helping reduce the tax impact on Social Security benefits and retirement account withdrawals.
9. Elimination of Green Energy Credits
The Act phases out individual-focused energy credits from the 2022 Inflation Reduction Act, including:
Advice: If you’re planning energy-efficient home upgrades or an EV purchase, act quickly to take full advantage before these incentives disappear.
Key Business Tax Provisions
1. Bonus Depreciation
The OBBB Act reinstates 100% bonus depreciation for qualified investment property, allowing businesses to deduct the full expense in the year of purchase.
Why It Matters: Companies that invest in machinery, technology, or infrastructure can significantly reduce taxable income upfront, providing a robust incentive for capital investment.
2. Section 1202 QSBS Enhancements
Qualified Small Business Stock (QSBS) gains new investor-friendly rules:
Opportunity: Startups and entrepreneurial ventures could see enhanced interest from long-term investors while expanding benefits to founders holding QSBS.
3. R&D Expense Deduction
The Act restores the immediate expensing of domestic research and development (R&D) costs, reversing the previous requirement to capitalize and amortize these expenses over time.
Small businesses with average annual gross receipts under $31 million can retroactively expense R&D costs incurred after December 31, 2021. They may amend returns for 2022–2024 to claim these deductions or take a catch-up deduction.
Benefit: Innovation-heavy sectors, such as tech and pharmaceuticals, can significantly reduce their tax liabilities, while smaller enterprises benefit from improved cash flow and greater flexibility in tax planning.
4. 199A Deduction Maintained
Pass-through entities continue to benefit from the 20% qualified business income (QBI) deduction. Expanded phaseout thresholds will enable more small businesses to meet the qualification requirements.
Why It’s Important: This deduction remains vital for partnerships, S corporations, and sole proprietors, allowing them to mitigate their tax burdens.
Who Benefits From the One Big Beautiful Bill Act?
High-income taxpayers are poised to benefit from access to higher estate exemptions and the permanence of the TCJA rates, offering them substantial advantages. Business owners will find additional opportunities for growth through the continuation of R&D expense deductions, bonus depreciation, and retained 199A deductions. Seniors, particularly those living on fixed incomes, are set to gain from new deductions that improve overall tax efficiency.
This article provides a summary of the key provisions for individuals and businesses affected by the OBBB Act. For a complete review of the legislation, you can access the full bill on Congress.gov.
Preparing for the OBBB Act
This reform may offer opportunities to reduce tax burden for both individuals and businesses, but it also demands proactive planning. Key steps include:
1. Update Estate Plans: Capitalize on elevated exemptions before potentially unforeseen policy changes.
2. Reassess Charitable Giving Strategies: Optimize deductions using adjusted thresholds.
3. Leverage QSBS (Qualified Small Business Stock) Reforms for Long-Term Planning: Review your eligibility and holding period plans with a tax advisor to potentially unlock tax-free exit opportunities for founders and investors. This is especially relevant if you're planning fundraising rounds or contemplating a reorganization in the next few years.
4. Time Capital Expenditures Strategically to Maximize Bonus Depreciation: Consider accelerating planned investments in equipment, software, or infrastructure before year-end to maximize upfront deductions. Conversely, if your business expects to enter a higher tax bracket in future years, it may be more beneficial to defer certain discretionary expenses to offset those future liabilities more effectively. A cost-benefit analysis with your tax advisor can help determine the most advantageous timing.
5. Act on Expiring Credits: Take prompt advantage of EV or renewable energy incentives before they expire by the end of the year.
6. Consult a Professional: Tax advisors can tailor strategies to maximize your financial benefits under this new legislation.
The OBBB Act presents both challenges and opportunities. By taking a thoughtful and strategic approach, individuals and businesses alike can capitalize on these changes to optimize their financial futures.
Take the Next Step: Contact an LTax tax advisor today to schedule a consultation and ensure you’re prepared to take advantage of the OBBB Act. Tax efficiency starts with planning—don’t wait to build your roadmap for success.
LEGAL OR TAX: The information herein is not legal, such as trust or estate planning, advice, or tax advice. Any such information is provided for illustrative purposes only and must not be relied upon without the benefit of the advice of your lawyer and/or tax professional. Lido specifically disclaims any liability from any reliance on such information. Lido is not a legal service provider or tax professional and does not offer legal or tax advice. Should you desire to obtain tax or legal services or advice, you must enter into your own, independent engagement agreement with a licensed attorney or tax professional.