One Big Beautiful Tax Bill? Here’s What’s Inside

Tax Relief Insights & IRS Help Articles

Brace yourself—Congress has passed a tax bill dubbed the “One Big Beautiful Bill Act” (OBBBA). Let’s delve into the key tax provisions of this legislation, referencing the official congressional documents.

INDIVIDUAL TAX RELIEF: EXTENSIONS AND MODIFICATIONS

Reduced Income Tax Rates: The lower marginal tax rates established by the TCJA are extended.
Increased Standard Deduction: The higher standard deduction amounts continue.
Suspension of Personal Exemptions: The suspension remains in effect.
Expanded Child Tax Credit: The enhanced child tax credit is maintained. These extensions are detailed in Title XI, Subtitle A of the bill.

CHILD TAX CREDIT ENHANCEMENTS

Increased Credit Amount: The child tax credit is increased to $2,500 per qualifying child through 2028.
Reversion: After 2028, the credit reverts to $2,000.

These changes are outlined in Title XI, Subtitle A, Part 1 of the legislation.

STATE AND LOCAL TAX (SALT) DEDUCTION CAP ADJUSTMENTS

Temporary Increase: The SALT deduction cap is raised to $40,000 for taxpayers with AGI under $500,000 (MFJ) or $250,000 (Single) from 2026 to 2030.
Reversion: The cap returns to $10,000 after 2030.

Refer to Title XI, Subtitle A, Part 2 for specifics.

NEW DEDUCTIONS FOR TIPS AND OVERTIME

Tip Income Deduction: Workers can deduct up to $25,000 of reported tip income.
Overtime Pay Deduction: Up to $25,000 of overtime pay is deductible.
Duration: These deductions apply from 2026 through 2028.

“TRUMP ACCOUNTS” FOR CHILDREN

Government-Funded Accounts: A $1,000 government-funded account is established for each child born between 2025 and 2028.
Parental Contributions: Parents can contribute up to $5,000 annually, tax-deferred.

This initiative is described in Title XI, Subtitle B.

AUTO LOAN INTEREST DEDUCTION

Deduction Amount: Up to $10,000 per year in auto loan interest is deductible.
Eligibility: Applies to U.S.-assembled vehicles purchased between 2025 and 2028, with income phase-outs above $250K (Single) and $500K (MFJ). See Title XI, Subtitle C for more information.

SENIOR TAX RELIEF

Additional Deduction: Seniors aged 65 and older with incomes under $75K (Single) or $150K (MFJ) receive a $6,000 additional deduction.
Duration: This provision is effective from 2026 through 2028.

1% REMITTANCE TAX

New Tax: A 1% tax is imposed on money transfers sent abroad. This measure is included in Title XI, Subtitle E.

IMPACT ON SOCIAL PROGRAMS AND ECONOMY

Medicaid and SNAP Adjustments: The bill includes changes to Medicaid and the Supplemental Nutrition Assistance Program (SNAP), shifting more responsibility to states.
Clean Energy Incentives Reduction: Several clean energy tax credits are phased out, while fossil fuel incentives are increased.
Defense and Border Spending: An additional $150 billion is allocated to defense and border enforcement, including increased funding for Immigration and Customs Enforcement (ICE).
Debt and Deficit Implications: The Congressional Budget Office estimates the act will add approximately $2.8 trillion to the national debt by 2034. These provisions are detailed throughout various titles in the bill.

FINAL THOUGHTS FROM IRSProb.com

The “One Big Beautiful Bill Act” introduces significant changes to tax policy and federal spending. While it offers tax relief to certain groups, it also introduces complexities and potential challenges, particularly for low-income individuals and social programs. Tax professionals should stay informed and prepared to navigate these changes to provide optimal advice to clients.

For a comprehensive understanding, refer to the full legislative text: H.R.1 – One Big Beautiful Bill Act