The One Big Beautiful Bill (OBBB) introduces several tax changes that could impact millions of taxpayers beginning with the 2025 tax year. While the legislation contains hundreds of provisions, these are the ten changes most likely to affect individuals, families, retirees, and business owners.
1. Child Tax Credit Expansion
The Child Tax Credit has been increased and indexed for inflation. Families with qualifying children may see additional tax savings depending on their income and filing status.
2. Deduction for Tip Income
Certain taxpayers who receive tip income may qualify for a new deduction. This provision is intended to provide tax relief for workers in industries where tips represent a significant portion of compensation.
3. Deduction for Overtime Pay
A new deduction is available for qualifying overtime compensation. Employees who regularly work overtime should review their eligibility and maintain accurate records.
4. Additional Deduction for Seniors
Taxpayers meeting age requirements may qualify for an additional deduction designed to reduce taxable income during retirement years.
5. Vehicle Loan Interest Deduction
For the first time in many years, some taxpayers may be able to deduct interest paid on qualifying vehicle loans, subject to limitations and income thresholds.
6. SALT Deduction Changes
The State and Local Tax (SALT) deduction limitation has been modified, potentially allowing higher deductions for certain taxpayers.
7. Business Owner Tax Benefits
Business owners may benefit from changes affecting the Qualified Business Income (QBI) deduction and other business tax provisions.
8. 100% Bonus Depreciation Returns
Businesses may once again be able to immediately expense qualifying assets through 100% bonus depreciation, creating significant planning opportunities.
9. Estate Tax Exemption Increase
The federal estate and gift tax exemption has increased, creating new planning opportunities for high-net-worth individuals and family business owners.
10. Energy Credit Changes
Several clean-energy incentives are being modified or phased out. Taxpayers considering qualifying projects should evaluate timing carefully.
What Should You Do Next?
The OBBB creates both opportunities and challenges. Because many provisions contain income limitations, phase-outs, and qualification requirements, individualized tax planning is more important than ever.
At TNT Accounting Services, LLC, we are helping clients evaluate how these changes may affect their tax situation and identify opportunities to reduce future tax liability.
If you would like assistance developing a proactive tax strategy, contact our office to schedule a consultation.
