July 2025: The One Big Beautiful Bill (OBBB): Key Impacts

The “One Big Beautiful Bill,” signed into law on July 4, 2025, delivers sweeping tax reforms aimed at individuals and businesses by permanently extending the 2017 tax cuts, introducing new deductions for tip income, overtime pay, and car loan interest, and boosting credits for families and seniors. For businesses, it solidifies pass-through and corporate tax relief, expands equipment and R&D write-offs, and enhances small business expensing. While the bill promises economic growth and tax stability, it faces criticism for disproportionately benefiting high earners, phasing out green energy incentives, cutting social safety nets, and significantly increasing the federal deficit.*

For Individuals & Families

Permanent 2017 tax cuts & standard deduction

- Keeps individualized income tax brackets and doubled standard deduction from the 2017 Tax Cuts and Jobs Act in place permanently.¹
- Child Tax Credit increased temporarily (e.g., $2,200 per child).²

Expanded SALT deduction

- Raises State and Local Tax deduction cap from $10,000 to $40,000 for households earning below $500K–$600K.³

New targeted deductions (2025–2028)

- Tip income: Up to $25,000 deductible for employees and self‑employed workers in tipped occupations⁴.
- Overtime pay: Deduct the “time-and-a-half” portion up to $12,500 annually.⁵
- Car loan interest: Deduct up to $10,000 interest on a personal auto loan.⁶

“Trump Accounts”

- $1,000 account established for each U.S.-born child from 2025–2028.⁷

Higher senior standard deduction

- Additional $6,000 standard deduction for individuals over 65, helping many avoid income tax on Social Security benefits.⁸

Deficit and equity concerns

- Adds roughly $2.8–3.4 trillion to the federal deficit over 10 years.⁹
- Critics argue benefits skew toward higher earners, while cuts to Medicaid and SNAP threaten low-income individuals’ coverage.¹⁰

For Businesses

Small business & pass-through enhancements

- Makes the 20% pass-through (Section 199A) deduction permanent, with threshold increases and a $400 minimum.¹¹
- Raises Section 179 expensing cap from $1.25 M to $2.5 M.¹²

Equipment & R&D expensing

- Makes 100% bonus depreciation permanent for assets placed in service after Jan 19, 2025.¹³
- Keeps immediate expensing for domestic R&D permanently.¹⁴
- Expanded interest deduction permanently retained.¹⁵

Corporate tax cuts retained

- Permanently enshrines 2017 corporate and individual tax cuts.¹⁶

Industry-specific incentives & limits

- Terminates or phases out many clean-energy tax credits (e.g., EV, wind, solar) starting 2026–27.¹⁷
- Provides special equipment write-offs for manufacturers, semiconductors and domestic facility buildout.¹⁸

Big Picture

Pros:

Tax rate stability and certainty for individuals and businesses.
Permanent and higher deductions improve cash flow for small businesses and firms making capital investments.
New deductions aim to help tip earners, overtime workers, seniors, and newborn families.

Cons:

Massive deficit increase, risking higher interest rates and future tax pressure.¹⁹
Cuts to Medicaid, SNAP, and green energy incentives could reduce health services and employment in those sectors.
Benefits largely favor high-income earners and corporations.

Summary Table

	Highlights
Individuals	Permanent tax cuts, bigger SALT cap, new deductions (tips, overtime, car interest), extra credit for kids and seniors
Small Businesses	Ongoing pass-through deduction, bigger Section 179, full bonus depreciation, permanent R&D incentives
Corporations	2017 corporate tax relief stands; sector-specific write-offs for manufacturers; phased-out clean-energy credits
Social Policy	Work requirements added for Medicaid/SNAP, fewer safety-net benefits
Fiscal Impact	+$2.8–3.4 T deficit over 10 years; debt-to-GDP may surpass historic norms

This legislation delivers significant tax cuts and growth incentives but does so by expanding the national debt and trimming social safety nets. The effects will vary widely based on income, age, occupation, and business structure.

Sources

*The views and opinions expressed in this article are those of the author(s) and do not necessarily reflect the official policy, position, or opinion of Tealwood or any of its employees. This content is provided for informational purposes only and does not constitute investment, tax, legal, or accounting advice. It is not intended as an offer or solicitation for the purchase or sale of any financial instrument or product. Past performance is not indicative of future results. You should consult your investment, tax, and/or legal advisors before making any financial decisions.