The One Big Beautiful Bill (OB3)

While I put together videos on OB3, please enjoy the summary below on key parts

Tax Summary

President Trump signed H.R. 1, the "One Big Beautiful Bill Act" (OBBBA), into law on July 4, 2025. The law makes permanent many provisions from the 2017 Tax Cuts and Jobs Act (TCJA), while introducing new reforms aimed at simplifying the tax code, encouraging investment, and enhancing taxpayer benefits. This summary provides a detailed breakdown of the business and individual provisions in the legislation.

Business Provisions

Bonus Depreciation (§168(k))

• Permanently allows 100% expensing of qualified property.

• Repeals phase-down rules; simplifies definitions.

• Expands eligibility for plant property—removes January 1, 2027 deadline.

• Transitional election allows for 40%/60% expensing on certain assets for first year post-enactment.

• Effective: For property acquired after January 19, 2025.

  
  

Section 179 Expensing

• Limit increased: From $1M to $2.5M.

• Phase-out threshold: Now begins at $4M (up from $2.5M). Fully phased out at $6.5M.

• Inflation-indexing: Uses 2024 as base year (previously 2016).

• Effective: For property placed in service after December 31, 2024.

  
  

Qualified Business Income (QBI) (§199A)

• Deduction made permanent.

• Phase-in limits increased: $75K for single/$150K MFJ (up from $50K/$100K).

• Minimum deduction: $400 if $1,000 QBI from an active trade/business.

• Inflation-adjusted from 2027.

• Effective: For tax years beginning after December 31, 2025.

  
  

R&D Expensing (§174A)

• Domestic R&E expenditures fully deductible.

• Foreign R&E: Still amortized over 15 years.

• Optional amortization over 60 months.

• Effective: For tax years beginning after December 31, 2024.

  
  

Charitable Contributions (§170)

• Introduces a 1% income floor before deductions apply.

• Deduction remains capped at 10% of taxable income.

• New carryforward rules distinguish between disallowed by cap vs. floor.

• Effective: For tax years beginning after December 31, 2025.

  
  

Other Key Provisions

• Business meals: New 100% deductions for maritime vessels and remote processing facilities.

• New Markets Tax Credit: Made permanent; 5-year carryforward for unused allocation.

• QSBS (§1202): Graduated exclusion—50% after 3 years, 75% after 4 years, 100% after 5 years.

• Form 1099 reporting threshold: Raised from $600 to $2,000 (indexed).

• Business interest limitation: Adjusted ATI permanently includes depreciation/amortization.

• Energy incentives: Phased out beginning 2025–2027.

  
  

Individual Provisions

Tax Rates

• TCJA’s lower brackets (10%–37%) permanently extended.

  
  

Standard Deduction

• TCJA-enhanced levels locked in.

• 2025 base: $31,500 MFJ / $15,750 Single (inflation-indexed).

  
  

Personal Exemptions

• Permanently repealed.

  
  

Senior Deduction (also known as "no tax" on social security)

• $6,000/person (ages 65+) available 2025–2028. Phased out at higher income levels.

  
  

Child Tax Credit (CTC)

• Permanently set at $2,000, rising to $2,200 in 2025. Refundable portion indexed.

  
  

Child & Dependent Care Credit

• Up to 50% of expenses based on AGI. Phased out for higher incomes.

  
  

Above-the-Line Deductions (2025–2028)

• Overtime Pay: Deductible up to $12,500 (single) or $25,000 (MFJ).

• Tips: Deduction up to $25,000.

• Car loan interest: Up to $10,000/year for non-itemizers.

  
  

SALT Deduction Cap

• Cap raised to $40,000 (indexed through 2029).

  
  

Retirement & Education

• Trump Accounts: New IRA for children with $1,000 seed.

• Expanded §529: Covers dual enrollment, credentials.

  
  

Mortgage & Misc. Deductions

• Mortgage interest deduction extended ($750K cap).

• PMI deductibility extended.

• Miscellaneous itemized deductions permanently repealed.

  
  

Estate & Gift Tax

• Exemption raised to $15 million (indexed).

  
  

Health Provisions

• HSAs allowed with Bronze and Catastrophic ACA plans.

• Direct Primary Care (DPC): Treated as qualified expense under HSAs, FSAs, HRAs.

  
  

Ending Unemployment Payments for High-Income Individuals

• Bars federal UI benefits for those with base period income >$1 million.

  
  

Effective Dates

Provision Type	Effective Date
Business Provisions	Jan 19, 2025 onward
Individual Provisions	Most changes effective Jan 1, 2025 (unless noted)

For questions or personalized planning, contact Erik Humphrey, CPA, EA📧 erikh@humphreyaccounting.com

360‑469‑4170