How the "One Big Beautiful Bill" Reshapes Tax Planning in 2025 and Beyond
On July 4, 2025, President Trump signed into law a sweeping tax and spending package officially titled H.R. 1, although almost universally dubbed the "One Big Beautiful Bill Act" (OBBB).
With roughly 870 pages of legislation, this was the most dramatic tax overhaul since the 2017 Tax Cuts and Jobs Act (TCJA).
While OBBB permanently locks in key TCJA benefits, it also introduces new deductions and tax credits, and strategically targets clean-energy incentives and safety-net programs.
Below is a comprehensive breakdown of how these provisions will impact individuals, families, businesses, and financial planning.
Individual Income Tax: Rates & Deductions
Permanent Lock-In of TCJA Brackets
OBBB makes the TCJA's seven individual tax brackets (10% to 37%) permanent, preventing the scheduled reversion to higher rates starting in 2026.
Enhanced Standard Deduction
The near-doubled standard deductions—such as $15,750 for single filers and $31,500 for married joint filers—are not only made permanent but also receive additional 2025 "bonus" boosts and will be indexed for inflation thereafter.
Charitable Deduction Boost
Taxpayers who claim the standard deduction may now deduct an extra $1,000 (singles) or $2,000 (joint filers) for charitable contributions—a welcome benefit for donors who haven't itemized.
Child and Family Tax Benefits
Child Tax Credit Is Now $2,200
OBBB will raise the federal Child Tax Credit per qualifying child from $2,000 to $2,200 starting in 2025 and permanently index it to inflation.
"Trump Accounts" for Kids
New tax-deferred savings vehicles—and a one-time $1,000 seed from the federal government—can be opened for each child born between 2025 and 2028, with up to $5,000 annual contributions. These may be used for education, training, or home purchases.
New "Experimental" Individual Deductions (2025–2028)
For tax years 2025 through 2028, several nontraditional deductions aim to reward workers and consumers.
- Tip and Overtime Income: Up to $25,000 in combined tips and overtime is now deductible for eligible employees, though subject to income-phase‑outs.
- Auto Loan Interest: Interest on auto loans (for U.S.-assembled, 2025–2028 vehicles) may qualify for up to $10,000 yearly in deduction, again with income limits.
- Senior Deduction: Taxpayers aged 65+ qualify for a temporary $6,000 deduction, helping offset Social Security taxation.
State & Local Tax (SALT) Overhaul
From 2025 to 2029, the SALT deduction cap will increase to $40,000 for taxpayers earning under $500,000 annually. After that, it will revert to the previous $10,000 cap.
This is particularly impactful in high-tax states, but it also deepens debt concerns.
Green-Energy Incentives Phased Out
OBBBA rolls back significant clean-energy benefits that were in effect during the last administration.
- EV Credits: New and used electric-vehicle tax credits will expire by September 2025.
- Home Energy: Residential clean-energy credits (solar, heat pumps, chargers) end between December 2025 and June 2026.
Households should accelerate clean-energy investments into 2025 to lock in savings.
Business & Pass‑Through Provisions
20% QBI Deduction Made Permanent
The 20% deduction for qualified business income—popular among small business owners and pass-through entities—is now permanent.
Depreciation & Section 179 Enhancements
OBBBA reinstates 100% bonus depreciation for new production assets and expands Section 179 expensing to a $2.5 million threshold.
Interest Deduction Favorability Restored
The preferred EBITDA standard (rather than EBIT) is reinstated to loosen limits on business interest deductions.
Estate, Gift & International Tax Highlights
Estate/GST Exemption Permanently Raised
Estate and generation-skipping transfer exemptions increase to $15 million (inflation-indexed), avoiding a sunset back to roughly $7 million.
FDII & GILTI Tweaks
International rules are refined: FDII deduction becomes 33.34%, GILTI drops to 40%, and global minimum tax ties into international profit-shifting controls.
Safety-Net and Spending Offsets
Despite its tax breaks, OBBB still delivers sweeping spending cuts.
- Medicaid funding has been slashed by 18%, and work requirements plus stricter eligibility rules will phase out coverage for 10–12 million Americans over 10 years.
- SNAP (food stamps) loses about 20% funding, with a shift in administrative costs toward states, potentially increasing food insecurity.
Big‑Picture Takeaway: Net Benefit ≠ Tax Cuts
Cost to the Nation
Independent analysis from the Congressional Budget Office and others projects OBBB could increase the federal deficit by $3.3–$4.5 trillion over a decade.
Distribution of Benefits
While middle-income taxpayers see relief via rate locks, deductions, and credits, most value flows to high earners (> $400,000/year) due to permanent rate structure and SALT hikes .
Polls suggest public skepticism about whether lower- and middle-income households are truly advantaged.
Planning Essentials
Given the complex trade-offs, taxpayers should still do some research and preparation.
- Run individualized scenarios to measure net benefits (or costs).
- Accelerate energy-efficiency, EV, and home improvements into 2025 to qualify for expiring credits.
- Evaluate temporary deductions and the new child "Trump Accounts."
- Reassess estate plans under the higher exemption.
- Note that business owners can optimize timing for asset purchases and may see improved deductions.
Work With Meramec Financial Planners
The "One Big Beautiful Bill" Act locks in a lower-tax future for individuals and businesses, especially high earners, while funding those cuts through substantial safety-net reductions and clean-energy rollbacks.
As with any budget changes or new spending bills, savvy financial planning is essential: taxpayers must model their unique situations, budget for lost credits, and weigh delayed benefits against immediate opportunities.
This piece of legislation rewrites America's tax script—and the performance depends entirely on your role.
At Meramec Financial Planners, we help clients achieve their life plans and take their growth and security seriously. We are an independent boutique advisory firm with national coverage and decades of industry experience.
