OBBBA: The One Big Beautiful Bill Act: What Actually Changed

#What OBBBA is

The One Big Beautiful Bill Act (“OBBBA,” sometimes also “OBBB” or “Big Beautiful Bill”) is a federal tax + spending statute. The 119th Congress passed it, and President Trump signed it on July 4, 2025. It’s the largest tax legislation since the Tax Cuts and Jobs Act of 2017.

OBBBA does three big things at once:

1. Makes most TCJA individual provisions permanent. They were set to sunset at the end of 2025.
2. Adds new deductions and savings vehicles (tip income, overtime pay, auto loan interest, seniors, Trump Accounts)
3. Phases out the Inflation Reduction Act’s clean energy credits

For ETS clients, the headline provisions are tax-strategy-relevant. Most affect business owners, high-income households, real estate investors, and families with children, exactly the segments we serve.

#The provisions that matter most to ETS clients

#1. Permanent 100% bonus depreciation

Effective: Property acquired after January 19, 2025

The bonus depreciation phase-down that was running its course (60% in 2024, 40% in 2025, 20% in 2026, then 0%) is dead. OBBBA restored permanent 100% bonus depreciation for property with a recovery period of 20 years or less.

For real estate investors running cost segregation, this is the single biggest provision in the bill. On a $500K rental with about $140K in 5-, 7- and 15-year parts, 100% bonus depreciation adds about $84,000 to the year-one deduction. That’s compared with the old 40% rate. That’s the rate scheduled for property placed in service in 2025. (The 20% rate was scheduled for 2026.) At a 32% bracket, that’s about $27,000 less tax in year one. Part of it only moves deductions earlier.

Deep dive: Permanent 100% Bonus Depreciation: What It Means for Your Business

#2. Permanent QBI deduction (Section 199A)

Effective: Tax years beginning after December 31, 2025

The 20% qualified business income deduction for pass-through entities (LLCs, S-corps, partnerships) was set to expire at the end of 2025. OBBBA removed the expiration date entirely. It’s now permanent.

Two important enhancements:

• Wider phase-in range starting 2026: the income range where the QBI limits phase in gets wider. It’s now $75,000 for single filers and $150,000 for joint filers (it was $50,000 and $100,000). For 2026 the phase-in starts at $201,750 single or $403,500 joint.
• New $400 minimum deduction for taxpayers with at least $1,000 of aggregate QBI from active trades/businesses where they materially participate

For solo S-corp owners, single-member LLC owners, and partnership members, this is the single most-impactful provision in OBBBA. Permanence eliminates the planning uncertainty that’s hung over pass-through structures since 2017.

Deep dive: Permanent QBI Deduction Explained

#3. Permanent estate tax exemption: $15M per individual

Effective: January 1, 2026

The estate and gift tax exemption was set to revert to ~$7M per individual at the end of 2025 (down from $13.99M in 2025). OBBBA permanently increased it to $15M per individual ($30M MFJ) and indexed it for inflation going forward.

For households with $5M+ net worth, this changes the entire shape of estate planning. The “rush to use the exemption before sunset” pressure is gone. The exemption now grows annually.

Deep dive: Estate Tax Exemption Permanently at $15M

#4. SALT cap raised to $40,000

Effective: 2025 tax year through 2029, with annual 1% adjustments

The state and local tax deduction cap was $10,000 under TCJA. OBBBA raises it to $40,000 starting in 2025, with 1% annual increases (so $40,400 in 2026) through 2029. The cap reverts to $10,000 in 2030 unless extended.

Phase-down: if modified AGI is over $500,000 in 2025 ($505,000 in 2026), the cap drops by 30 cents for each dollar over that amount. It stops at $10,000.

For ETS clients in high-tax states (or who itemize on a Texas return because of high property taxes), the new cap lets you deduct up to $30,000 more state and local tax than before, if you itemize. At a 24% bracket, that’s about $7,200 less tax. Say your income is over about $600,000. Then you get no change.

Deep dive: SALT Cap Changes Under OBBBA

#5. Trump Accounts for kids

Effective: Federal seed starts for births 2025-2028; contributions begin July 4, 2026

A new tax-advantaged savings vehicle for children. Key terms:

• Federal $1,000 seed deposit for every child born between Jan 1, 2025 and Dec 31, 2028 (does not count against contribution limit)
• $5,000 annual contribution limit (after-tax) by anyone: parents, grandparents, employers, nonprofits
• Employer contributions up to $2,500/yr don’t count as taxable income to the employee
• No earned-income requirement for the child (unlike IRAs)
• Tax-deferred growth. Contributions are made with after-tax money. After the child turns 18, the account works like a traditional IRA, with earnings taxed as ordinary income when taken out.
• Locked until age 18, then converts to a Traditional IRA
• Must be a U.S. citizen child with an SSN

For ETS clients with children born 2025-2028, this is free money from the federal government. It’s also a new planning vehicle alongside 529s and UGMA/UTMA accounts.

Deep dive: Trump Accounts for Kids Explained

#6. New worker deductions: tips, overtime, auto loan interest, seniors

Effective: January 1, 2025

OBBBA created four new above-the-line-ish deductions targeted at working Americans. All four are temporary: tax years 2025 through 2028. They shrink as income goes up and are gone at higher incomes.

• Tip income deduction: up to $25,000/yr for workers in IRS-designated tipped occupations
• Overtime pay deduction: covers only the extra half of time-and-a-half pay, up to $12,500 ($25,000 MFJ)
• Auto loan interest deduction (car loan interest): up to $10,000/yr on interest from a qualifying vehicle purchase; this one ends at $150,000 for single filers and $250,000 for joint filers
• Senior additional deduction: $6,000 for taxpayers age 65+, on top of the existing additional standard deduction

These are narrower than the headline provisions but matter for specific situations. Most ETS clients won’t qualify for the tip deduction. High-income service business owners aren’t typically in tipped occupations. But the senior deduction and auto loan interest deduction reach many households.

Deep dives:

• New Tip Income Deduction
• New Overtime Pay Deduction
• New Auto Loan Interest Deduction
• New $6,000 Senior Deduction

#7. Enhanced + permanent Opportunity Zones (with Rural OZ category)

Effective: July 4, 2025 (effective date varies by provision)

OBBBA permanently extended the Opportunity Zone program and added a new Rural Opportunity Zone category with enhanced benefits. The new rules start for investments made after December 31, 2026. Gains put into funds under the old rules are still taxed on December 31, 2026.

• 30% basis step-up after 5 years for rural-OZ investments (vs. the standard step-up rules)
• Reduced substantial improvement requirement of 50% (vs. 100% for standard OZs)
• 10-year governor redesignation cycle: next round of QOZ designations on July 1, 2026

For real estate investors with capital gains looking to defer + reinvest, the new rules start for investments made after December 31, 2026. Gains put into funds under the old rules are still taxed on December 31, 2026. The Rural OZ category opens a new low-population-area investment lane.

Deep dive: OBBBA Opportunity Zones + Rural OZ

#8. Expanded Child Tax Credit

Effective: 2025 tax year

The Child Tax Credit increased from $2,000 to $2,200 per qualifying child (effective 2025), with the maximum refundable portion at $1,700. The credit will be indexed for inflation starting in 2026.

One operational change: the child, and at least one parent (on a joint return, at least one spouse), now need valid SSNs. These must be issued before the return’s due date. Previously, the SSN requirement was only on the child.

The income phase-out remained at $200K single / $400K MFJ, with the same $500 nonrefundable credit for non-child dependents.

#9. Phased-out clean energy credits

OBBBA accelerated the phase-out of clean energy credits passed under the 2022 Inflation Reduction Act:

• EV tax credit: phased out by September 2025
• EV charging credit: phased out by June 2026
• Wind + solar credits: projects had to begin construction by July 4, 2026, or be in service by December 31, 2027, to keep the credit. The July 4, 2026 date has now passed. So only projects that already began construction can use the longer in-service window, with expanded “foreign entity of concern” restrictions.

The EV credits ended for vehicles acquired after September 30, 2025. The home solar credit (25D) and home improvement credit (25C) ended after December 31, 2025. See clean energy credit deadlines for small businesses for what’s still available.

#10. Permanent TCJA individual rates

The individual income tax rates passed under TCJA in 2017 were set to expire at end of 2025. OBBBA made them permanent. Top rate stays at 37%, brackets at TCJA levels, indexed annually for inflation.

This is what stops the “automatic tax increase” that would have hit every American household in 2026.

See also: Section 174A and domestic R&D expensing, another OBBBA provision, which matters for businesses with research or software development costs.

#What didn’t change (planning rules still active)

#CBO budget impact

Important context: the CBO initially estimated OBBBA adds $2.4 trillion to federal debt over 10 years, later revising to $2.8 trillion. The deficit impact is the primary criticism of the legislation.

For tax-strategy purposes, this matters because:

• Future Congresses may rebalance via offsetting tax increases on other provisions
• Permanence of OBBBA’s tax cuts doesn’t mean those cuts can’t be changed later by a different Congress
• Long-term planning should account for the possibility of tax-rate increases on high-earners in future legislation

The “permanence” of OBBBA’s provisions is legal permanence, not political permanence. Plan accordingly.

#What we’re telling ETS clients

For most ETS clients, the OBBBA-driven planning moves we’re walking through on quarterly check-ins:

1. Real estate investors: revisit cost seg studies for properties placed in service in 2025, the 40% phase-down doesn’t apply if acquired after Jan 19. Recover full year-one deduction.
2. S-corp + pass-through owners: QBI is now permanent. The “lock in benefits before 2026 sunset” pressure is gone. Long-horizon entity structure decisions can go back to normal time horizons.
3. $5M+ net worth households: estate planning recalibration. The $15M exemption changes which generational-wealth strategies make sense.
4. High-SALT-state filers: itemize again in 2025-2029 with the $40K cap. Document state + local taxes carefully.
5. Families with 2025-2028 newborns: open Trump Accounts to capture the $1,000 federal seed.
6. Workers with significant overtime or tip income: ensure W-2 employers are reporting correctly so the new deductions can be claimed.
7. Owners considering vehicle purchases: model the auto loan interest deduction into the after-tax cost.

#Common questions

When did OBBBA take effect? Signed July 4, 2025. Most provisions effective for the 2025 tax year. Some (estate exemption, Trump Account funding) effective in 2026.

Is OBBBA fully implemented yet? Most provisions, yes. The IRS issued substantial guidance throughout 2025-2026 on implementation details (bonus depreciation transition rules, opportunity zone reporting, Trump Account mechanics). Some operational details continue to evolve.

What’s the difference between OBBBA and TCJA? TCJA (2017) was the original Trump tax cuts. Many TCJA individual provisions were scheduled to sunset at end of 2025. OBBBA (2025) made most of them permanent + added new provisions.

Will OBBBA be reversed by a future administration? Possibly. Tax legislation can be changed by any Congress. “Permanent” in tax statutes means “until amended”, not actually forever. Long-term planning should consider the possibility of future tax-law changes.

Does OBBBA affect my state taxes? Federal law only. Each state decides on its own. Many states do not follow the federal bonus depreciation rules or the new deductions. Check your state’s rules. We model state-level impact in your Tax Analysis.

Where can I read the official IRS guidance? The IRS landing page is at irs.gov/newsroom/one-big-beautiful-bill-provisions. They update this regularly with implementation guidance.

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OBBBA is the biggest tax legislation since 2017 and most of its provisions hit ETS-client situations directly. If you haven’t run the post-OBBBA planning numbers on your specific situation, the Discovery call is the right next step. We model the OBBBA impact as part of every Tax Analysis engagement now.