Enactment of the One Big Beautiful Bill Act
On July 4, 2025, President Trump signed the One Big Beautiful Bill Act (OBBBA) into law after approval by both the Senate and the House. A major feature of this legislation is that it extends many taxpayer-friendly provisions from the previous Tax Cuts and Jobs Act (TCJA), while also introducing new changes. Below is a summary of the key provisions affecting individuals and businesses.
Individual Income Tax
- No tax on tips
Good news for service industry workers: a new tax credit of up to $25,000 has been created for taxpayers earning less than $150,000 annually from tips. This provision applies through 2028. Previously, tips were fully taxable as wages, but under OBBBA, part of this burden is relieved, particularly benefiting restaurant and hospitality workers - Deduction for Auto Loan Interest
Similar to the mortgage interest deduction, a new system applies to auto loans. For cars assembled in the U.S. and purchased between 2025 and 2028, taxpayers can deduct up to $10,000 in loan interest. Since cars are essential for many American households, this is expected to provide widespread relief. - Introduction of Tax Credits for Seniors
A new credit of up to $6,000 is available for taxpayers age 65 and older, reducing the burden of Social Security taxes. This measure is intended to support retirees and those living on fixed incomes. - Increase in the Child Tax Credit
The credit per child increases from $2,000 to $2,200, with adjustments tied to inflation. Not only has the amount increased, but income thresholds have been expanded, allowing more families to qualify. - Establishment of the Trump Account (a savings account for children’s assets)
A new savings vehicle has been introduced to support children’s education and long-term asset building. The account functions similarly to 529 plans or IRAs and is designed for education funding and investment.
Corporate Income Tax
- Retention of the 21% Corporate Tax Rate
The previously temporary 21% corporate tax rate is now permanent, giving businesses greater certainty for long-term planning and investment. - Revival and Expansion of Bonus Depreciation
For qualified property acquired after January 20, 2025, the TCJA’s 100% bonus depreciation provision has been permanently reinstated. Companies can now immediately expense equipment investments. Additionally, a new rule allows full expensing in the year of service for qualified U.S. manufacturing facilities (Qualified Production Property), providing a major boost to domestic manufacturers. - Revision of capitalization rules for research and development expenses (Section 174)
Previously, R&D costs had to be amortized over several years, but OBBBA restores flexibility, allowing for more immediate expensing. U.S.-based R&D costs can now be expensed immediately at the taxpayer’s election. On the other hand, foreign R&D costs must still be amortized over 15 years. For U.S. R&D costs incurred from Jan 1, 2022, to Dec 31, 2024, and already capitalized, companies can:- Expense the full remaining balance in the tax year beginning on or after Jan 1, 2025,
- Deduct 50% in each of the next two years, or
- Continue five-year amortization.
- Relaxation of Business Interest Deduction Rules
Businesses using debt financing will benefit from looser rules. The definition of Adjusted Taxable Income (ATI) has been revised so that depreciation, amortization, and depletion deductions are excluded from the calculation, effectively increasing the allowable interest deduction. - Strengthening of International Taxation
New regulations and rules will apply to businesses with foreign subsidiaries or operations, adding compliance requirements and potential tax costs for multinational corporations.
Before vs. After: OBBBA at a Glance
| Category | Before OBBBA | After OBBBA |
|---|---|---|
| Tip Income | Fully taxable as wages | Up to $25,000 tax credit (if income < $150k, through 2028) |
| Car Loan Interest | No deduction | Deduct up to $10,000 for U.S.-assembled car loans (2025–2028) |
| Senior Tax Credit | None | New credit up to $6,000 for age 65+ |
| Child Tax Credit | $2,000 per child | $2,200 per child + inflation adjustments + broader eligibility |
| “Trump Account” (Kids’ Savings) | Not available | New tax-advantaged account for education & savings (rules pending) |
| Corporate Tax Rate | 21% (temporary) | 21% permanent |
| Bonus Depreciation | Phasing out | 100% immediate expensing for qualified property (permanent) |
| Manufacturing Facilities | Standard depreciation rules | Full expensing in year of use (U.S. facilities only) |
| R&D Expenses (Sec. 174) | Must amortize (5–15 yrs) | U.S. R&D = immediate expensing (retroactive options) |
| Business Interest Deduction | Stricter ATI definition (limited deductions) | Looser ATI rules, higher deductions allowed |
| International Tax Rules | Existing TCJA framework | New restrictions & compliance rules for multinationals |
Summary
The One Big Beautiful Bill Act primarily aims to:
- Reduce household costs for individuals, and
- Encourage investment and growth for businesses.
However:
- Credits and deductions are subject to income limits and conditions,
- International tax provisions may increase burdens for some corporations, and
- Details of the new “Trump Account” are still pending regulatory guidance.
In short, OBBBA does not provide across-the-board benefits for everyone—it creates targeted advantages and trade-offs depending on each taxpayer’s situation.
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