The One Big Beautiful Bill Act (OBBBA) FAQs

What are the key tax changes for individual taxpayers?

Tax Rates: Makes the TCJA’s rate cuts permanent with inflation indexing for lower brackets.

Standard Deduction: Makes the TCJA’s increased deduction permanent. Starting in 2025, the standard deduction will increase to $15,750 for individual filers and $31,500 for joint filers, which will also have a better index for inflation.

Personal Exemption: Permanently eliminates the deduction for personal exemptions. However, for tax years 2025-2028, individuals who are 65 or older at the end of the year will receive a new $6,000 deduction through a newly created “senior deduction.” This deduction is subject to a phaseout of 6 cents on the dollar once modified AGI exceeds $75,000 ($150,000 in case of a joint return).

Repeal of Certain Miscellaneous Itemized Deductions: Permanently repeals certain miscellaneous itemized deductions suspended under TCJA, including unreimbursed employee expenses, investment advisory fees, tax preparation fees, certain legal fees, hobby expenses, and safe deposit box rentals.

Limitation of Tax Benefit of Itemized Deductions: Permanently repeals the “Pease” limitation on itemized deductions and creates a new formula to apply to taxpayers only in the highest tax bracket (37%), generally capping the effective tax savings rate of otherwise allowable itemized deductions at 35%.

Limitation on Wagering Losses: Wagering losses, including expenses related to wagering activities (such as travel to/from casinos) remain deductible, but for years after 2025 they’re limited to 90% of a taxpayer’s wagering losses. For instance, in 2026, an individual purchases $1,000 in lottery tickets throughout the year. Their gross winnings for the year are $950. If they choose to itemize deductions, they may only deduct $900 of their gambling losses. The remaining $50 would be taxable.

Alternative Minimum Tax: The increased TCJA AMT exemption is made permanent.

How does OBBBA change the SALT deduction?

SALT Cap: Temporarily increases the cap to $40,000 for tax year 2025 with phaseouts beginning at $500,000 through $600,000 of modified adjusted gross Income. In 2026, the threshold will increase by 1% or to $40,400 for households with income under $505,000. The thresholds will continue to increase by 1% each year through 2029, after which the SALT limit is permanently reduced to $10,000.

Are there any changes to the pass-through entity (PTE)?

OBBBA maintains the status quo regarding PTET deductions, but the provision is made permanent.

What are the changes to the qualified business income (QBI) deduction?

The OBBBA makes the 20% section 199A QBI deduction permanent.

What are the changes that affect tips and overtime income?

Tip Income: OBBBA allows an above-the-line deduction for up to $25,000 in tip income with phaseout amounts beginning at $150,000 ($300,000 married filing jointly) for tax years 2025 through 2028. This applies to both employees and independent contractors in industries that customarily receive this income. The Treasury will provide a list of eligible industries.

Overtime Pay: For tax years 2025 through 2028, there is a new deduction for qualified overtime pay (defined by reference to section 7 of the Fair Labor Standards Act) of up to $12,500 ($25,000 for married filing joint filers). The deduction phases out starting at AGI of $150,000 ($300,000 for married filing joint filers).

What has changed regarding personal casualty losses?

The previous temporary limitation on personal casualty losses in section 165(h)(5) under the TCJA, where an individual taxpayer can only claim an itemized deduction for a personal casualty loss if the loss is attributable to a federally declared disaster area, is made permanent and is expanded to include state-declared disasters.

How does OBBBA affect Medicaid and ACA?

The OBBBA is expected to significantly increase the number of uninsured individuals over the next decade due to its changes to Medicaid eligibility and reductions in Affordable Care Act (ACA) premiums and cost-sharing assistance. According to projections from the Congressional Budget Office and other independent analyses, more than 15 million people could lose health coverage by 2034. This includes:

• Roughly 11.8 million people losing Medicaid coverage due to new eligibility restrictions.
• An additional 4 to 5 million individuals will lose marketplace coverage once enhanced ACA subsidies expire at the end of 2025.

These changes are likely to result in a notable rise in the U.S. uninsured rate. For employers, this could translate into increased demand for group health plans.

What is the new loan limit on interest deduction for principal residences?

Makes permanent the TCJA $750,000 ($375,000 married individual filing separately) limit on principal residence acquisition indebtedness under section 163(h), as well as the exclusion of interest on home equity indebtedness from the definition of qualified residence interest. Allows certain mortgage insurance premiums to qualify as deductible interest.

Is there now a deduction for car loan interest?

For tax years 2025 through 2028, OBBBA allows individuals to deduct up to $10,000 in interest paid on loans used to acquire an “applicable passenger vehicle.” An applicable passenger vehicle is generally a new vehicle acquired after Dec. 31, 2024, and whose final assembly took place in the U.S. The deduction will begin to phase out once modified AGI exceeds $100,000 ($200,000 in the case of joint filers).

How does the OBBBA change research and experimentation (R&E) deductions?

For tax years beginning after Dec. 31, 2024, taxpayers are once again able to deduct all domestic R&E expenditures incurred during the year. Foreign expenditures must still be capitalized and amortized over 15 years. Taxpayers have the option to capitalize their domestic R&E expenditures and amortize them over a period of not less than five years.

For taxpayers who incurred domestic R&E expenses in years beginning after 2022 and were required to capitalize and amortize them, they may elect to deduct the unamortized portion of those expenditures in a single lump-sum amount on their return for the first tax year beginning after Dec. 31, 2024, or spread the remaining unamortized amount ratably over two years.

Small business taxpayers (generally those whose average 2022-2024 gross receipts were under $31 million and are not tax shelters) may instead choose to amend their 2022 through 2024 income tax returns and deduct the domestic R&E expenditures that they were previously required to capitalize.

How does the Act affect bonus depreciation?

100% bonus depreciation is available again for property placed in service after Jan. 19, 2025.

What should I know about the new “qualified production property” deduction?

Manufacturers can claim 100% bonus depreciation for the cost of new “qualified production property,” including real property, defined as any property used in a “qualified production activity” (“the manufacturing, production, or refining of a qualified product” which “result[s] in a substantial transformation of the property comprising the product.”). The property’s construction must begin on or after Jan. 19, 2025, and before Jan. 1, 2029. A ‘qualified product’ means any tangible personal property if such property is not a food or beverage prepared in the same building as a retail establishment in which such property is sold. The deduction does not apply to any portion of facilities that are not related to the manufacturing, production, or refining of property, such as administrative offices, parking lots, lodging, engineering, and research facilities.

How has section 179 expensing been affected?

For 2024, section 179 expensing can be used to reduce taxable income by up to $1,220,000 of qualifying property purchases. However, once the cost of section 179-eligible property placed on service during the year exceeds $3,050,000, the allowable expense amount is reduced dollar-for-dollar.

OBBBA increases the annual section 179 expense limit to $2,500,000 for property placed in service after Dec. 31, 2024. The phaseout of section 179 expensing begins once the total cost of 179-eligible property placed in service during the year exceeds $4,000,000. Both of these thresholds are indexed for inflation.

Although 100% bonus depreciation may seem, at first glance, to make section 179 expensing obsolete, most states do not allow taxpayers to claim bonus depreciation but do follow section 179 expensing rules. As a result, taxpayers may want to consider section 179 expensing instead of bonus depreciation to maximize both federal and state tax savings.

What are the changes affecting the business interest limitation?

A favorable taxpayer adjustment to the base for calculating the section 163(j) limitation on deductible business interest is made by returning depreciation and amortization to the calculation (i.e., changing the base determinant from income before interest and taxes to EBITDA). This provision takes effect for tax years beginning after Dec. 31, 2024. Also, for tax years beginning after Dec. 31, 2025, the base for calculating deductible interest expense does not include Subpart F, GILTI, or section 78 gross-up income.

What are the changes to the Excess Business Loss Limitation?

The excess business loss (EBL) rule applies to non-corporate taxpayers and provides for a deferral of business-related losses of individuals over a threshold amount. Currently, such net business losses are allowed only up to $626,000 for joint filers and $313,000 for other filers. Any business losses above these thresholds are EBLs and are disallowed for the current year. Any disallowed EBL is carried forward and is treated as a net operating loss in future years, subject to 80% on taxable income limitation.

The EBL rules were scheduled to expire after 2028. The OBBBA makes the EBL rule permanent.

What happens with Employee Retention Tax Credit claims I have in process?

OBBBA provides that no credit is allowed for claims involving Q3 2021 (and Q4 2021 in certain cases – collectively the “affected quarters”) if filed after Jan. 31, 2024. Also, the IRS now has six years (increased from five) from the filing date of an ERTC claim to examine and deny or claw back erroneous or excessive ERTC claims for the affected quarters. Likewise, taxpayers whose ERTC claims for affected quarters are denied or reduced have six years from the claim filing date to file amended income tax returns to claim refunds related to increased wage deductions for denied ERTC claims. OBBBA did not extend the time the IRS has to assess additional income tax on wage deductions related to ERTC claims.

What changes does OBBBA make to information reporting return rules?

Currently, businesses that make payments to noncorporate service providers and certain other payees are required to issue a Form 1099-MISC or 1099-NEC to report aggregate payments that exceed $600 during the year. The $600 threshold was first established in 1954 (and would be over $7,000 in 2025 dollars) and has remained unchanged ever since. Beginning in 2027 (for payments made in calendar year 2026), the threshold is increased to $2,000 and will be adjusted for inflation in $100 increments thereafter.

Also, third-party settlement organizations (payment applications, online marketplaces) who process payments to persons in excess of $600 during the year are required to issue Form 1099-K to recipients and the IRS reporting the aggregate payments made during the year. However, the IRS has used a much higher limit for the past several years. OBBBA increases this threshold to $20,000 (not indexed for inflation) and also couples it with a more than 200 payments threshold. This aligns with the limits that the IRS administratively imposed.

How are clean energy credits affected by the OBBBA?

The Act makes significant changes in clean energy credits. It terminates the 45Y clean energy production tax credit and 48E clean energy manufacturing credit for wind and solar projects after 2027, levies a penalty against new wind and solar projects that come online after 2027 unless they can prove their products are made without Chinese parts, and repeals the investment tax credit and production tax credit for wind and solar projects. The Act also ends the 25E, 30D, and 45W electric vehicle credits after September 2025, as well as the 25D residential solar credit after Dec. 31, 2025.

What changes were made to the Opportunity Zone (OZ) program?

A new permanent rolling 10-year designation period will begin on Jan.1, 2027. The Act maintains the current OZ designation process and provides strengthened eligibility requirements with a renewed focus on rural areas and simpler reporting requirements.

How does the legislation affect trusts, estates, and gifts?

Tax Rates: Permanently extends the TCJA income tax rates and brackets for estates and trusts.

Exemption: The unified estate and gift tax exemption is made permanent at an inflation-indexed $15 million per individual for taxable years beginning after Dec. 31, 2025. The generation-skipping transfer tax exemption is also permanently increased to an inflation-indexed $15 million.

What are the key international tax changes?

Global Intangible Low-taxed Income (GILTI): New effective tax rate on GILTI of 14%.

Foreign-derived Intangible Income (FDII): Reduces to 33.34% the currently applicable 37.5% deduction for FDII, which was scheduled to decline to 21.875% after 2025. Therefore, the effective tax rate on FDII is slightly increased to 14%, consistent with GILTI.

Base Erosion and Anti-abuse Tax (BEAT): Permanently increases the BEAT rate from 10% to 10.5%.

Controlled Foreign Corporation (CFC) provisions: Several CFC provisions, including making the CFC look-through rule permanent, repealing the one-month deferral in section 898(c), reinstating section 958(b)(4) to prevent downward attribution, adding section 951B to cause certain foreign corporations to be treated as CFCs, and amending pro rata share rules under section 951A.

Are there any new tax-advantaged savings plans in the OBBBA?

OBBBA creates Trump accounts that allow parents to open accounts for qualifying persons under age 18. Parents and others can contribute up to $5,000 annually (adjusted for inflation) until the beneficiary reaches the age of 18. Although there is no deduction for the amounts contributed, the account earnings are tax-deferred and enjoy preferential tax treatment when amounts are spent on certain qualifying expenses. The trustee can access the account after reaching the age of 18 and has until the age of 31 to use the funds in a tax-advantaged manner. OBBBA also provides a pilot federal government complementary contribution of a one-time transfer of $1,000 into Trump accounts for children born between 2025 and 2028. To be eligible, the child needs to be a U.S. citizen at birth with an SSN, which must be provided. There are no income limits or phaseouts. The new rules apply to tax years starting after Dec. 31, 2025.

What are the changes to 529 plans?

OBBBA allows tax-exempt distributions from sec. 529 savings plans to be used for additional educational expenses in connection with enrollment or attendance at an elementary or secondary school. The Act also allows tax-exempt distributions from 529 savings plans to be used for additional qualified higher education expenses, including “qualified postsecondary credentialing expenses.” These rules apply to distributions made after the date of enactment.

Which key provisions affect nonprofits?

The Act makes changes to endowment taxation and charitable limits, requiring a strategic response. Schools may be affected by increased excise taxes, and nonprofits will need to reconsider their planned giving strategies.

What are the changes regarding charitable contributions?

OBBBA establishes a permanent deduction for non-itemizing taxpayers, effective after Dec. 31, 2025. The deduction is $1,000 for a single filer ($2,000 for joint filers) for certain charitable contributions. For itemizing taxpayers, OBBBA limits otherwise allowable charitable contribution deductions to amounts in excess of a 0.5% floor over the contribution base (generally adjusted gross income without regard to NOLs) for tax years beginning after Dec. 31, 2025. New carryover rules apply to amounts not eligible for deduction, and the increased 60% contribution limit for cash gifts to qualified charities is permanently extended.

What are the changes for colleges and universities?

• Excise Tax on Colleges and Universities: Increases TCJA excise tax on endowments. Certain colleges and universities with at least 500 students paying tuition and endowments exceeding $500,000 per student must now pay an excise tax on a tiered schedule of 1.4% to 8%:
  • Student-endowment Ratio of up to $500,000 – no excise tax applies
  • Student-endowment Ratio of $500,001 to $750,000 – 1.4%
  • Student-endowment Ratio of $750,001 to $2,000,000 – 4%
  • Student-endowment Ratio of over $2,000,000 – 8%

An applicable education institution must have at least 3,000 tuition-paying students in a prior year, have more than 50% tuition-paying students located in the U.S., not be a state college or university, not be a qualified religious institution, and have a student-adjusted endowment of at least $500,000.

How is personal insurance coverage affected?

The Act may also influence personal insurance coverage through broader economic and policy shifts, including climate change, inflation, taxes and incentives, and tech-driven underwriting. If the Act’s economic policies contribute to further inflationary pressure, homeowners and auto insurance premiums could rise significantly. If individuals need to reallocate limited resources to healthcare or basic needs, personal insurance premiums may be one of the first spending categories to fall by the wayside — increasing the risk of coverage lapses. Employers offering voluntary coverage for personal lines should prepare for increased questions, more dynamic risk profiles, and the need for targeted financial wellness support.

What should I do right now to prepare for these changes?

It is crucial to stay ahead of these changes by speaking with your financial and business advisors. CBIZ will continue to provide timely insights and practical strategies to help you understand what it means and how to respond.

Visit our One Big Beautiful Bill Act Resource Center for further updates.