The One Big Beautiful Bill Act (OBBBA) represents one of the most extensive legislative overhauls to U.S. tax, healthcare, education, business law, and military and immigration funding in recent history. Framed as a modernization of outdated systems, the bill brings sweeping changes that will likely affect millions of Americans, from everyday taxpayers and retirees to small business owners and large corporate investors.
It is big and it is a bill, but whether or not it’s beautiful depends on your specific circumstances. Below is a One Big Beautiful Bill Act analysis and how it could impact individuals and businesses across various sectors and financial contexts.
One Big Beautiful Bill Act Tax Provisions: Changes in 2025
This bill includes a number of tax changes that could affect you as an individual, some directly and some indirectly.
1. Extended Tax Brackets
OBBBA adjusts the income thresholds for federal tax brackets, allowing you to earn more before moving into higher tax categories. The extended tax bracket can favor middle- and upper-middle-income earners by offering moderate tax relief without changing the actual rates.
2. Standard Deduction Increase
All taxpayers could benefit from an expanded standard deduction (up to $15,750 for individuals, or $31,500 for married couples filing jointly), with an additional $6,000 deduction for individuals aged 65 and older. The extra $6,000 deduction can help you if you are retired, especially if you are on a fixed income.
3. SALT Deduction Limit Raised
The cap on State and Local Tax (SALT) deductions, previously limited to $10,000, has been temporarily increased to $40,000 for five years. This deduction limit is specifically for you if you make less than $500,000.
The new SALT deduction could be particularly beneficial if you live in high-tax states like California and New York, given that it allows you to deduct more of your property and income taxes. On the flip side, it means that many states will receive less income from taxpayers. In fact, for the Supplemental Nutrition Assistance Program (SNAP), some states may even be required to contribute funds if they have an error payment rate of 6% or higher.
4. No Tax On Tips
“No tax on tips” is a campaign promise Trump did keep. According to the provisions of the OBBBA, your overtime and tips will not be taxed if your income is less than $150,000 (for individuals) or $300,000 (for those filing jointly).
5. Energy Tax Credits
Energy tax credits approved by the Biden administration will be phased out between the end of 2025 and 2026. This change has caused much contention between the two major political parties, with Republicans agreeing to phase them out gradually.
One Big Beautiful Bill Act Summary: Healthcare Changes
Medicare Adjustments
The bill doesn’t directly restructure Medicare’s funding, but it does offer tax relief if you are a senior (through the increased standard deduction for those over 65). However, it leaves broader concerns, such as cost management and costly prescription pricing, unaddressed.
Additionally, only U.S. citizens, green card holders, and certain Cuban-Haitian individuals will qualify for Medicare. This leaves out other legal immigrants who currently receive Medicare coverage as a part of working and paying into the Medicare program. Those people will lose their coverage sometime in the next 18 months.
Medicaid Restructuring
OBBBA introduces significant and controversial changes to Medicaid:
- Budget Cuts: Although these may succeed in reducing overall federal expenditure, they are also likely to reduce access to vital medical services for many.
- Work Requirements: To maintain eligibility for Medicaid, you must work or volunteer 80 hours per month if you are a childless adult without disabilities or a parent of children aged 15 and older.
- More Frequent Reenrollment: As a beneficiary, you must now re-enroll every six months rather than annually, which adds administrative burdens that could result in lost coverage.
According to the Congressional Budget Office, these changes may cause nearly 12 million Americans to lose Medicaid coverage by 2035.
One Big Beautiful Bill Act Summary: Education and Savings Enhancements
1. Trump Accounts
Trump Accounts are newly introduced savings vehicles aimed at early financial literacy and security. You can open one as a parent of a child under age 18. The accounts have annual contribution limits of:
- $5,000 from a parent,
- $2,500 from the parents’ employer, and
- $1,000 from the federal government for children born between 1/1/2025 and 12/31/2028.
2. 529 Plans
OBBBA has expanded qualified uses for these education savings accounts: you can now fund trade schools, certification programs, and work training, in addition to traditional college expenses. Access to funds for training could be a boost to help encourage more young people to enter a trade career.
3. Health Savings Accounts (HSAs)
Bronze and Catastrophic plans from the Affordable Care Act (ACA) will now qualify as High-Deductible Health Plans (HDHPs). Adding them as HDHPs theoretically qualifies more Americans to open and contribute to HSAs for tax-advantaged medical savings.
4. Student Loan and Financial Aid Reforms
Parent PLUS and Grad PLUS Loans: These federal loans will see changes to eligibility, repayment structures, and possibly loan forgiveness terms. These PLUS loans will now have two payment options for you, removing some of the deferment and low-cost repayment options. How this will affect student loan repayment problems remains to be seen.
Free Application for Federal Student Aid (FAFSA) and Pell Grant Overhaul: The FAFSA application is being redesigned to factor in your family assets more heavily, reducing automatic qualifications for federal aid.
Pell Grant Eligibility will be determined based on a regional cost-of-living index, potentially expanding access if you live in a low-income, high-expense area. Further, Pell grants will not be available to you if you have the entire cost of your schooling covered by scholarships and grants.
One Big Beautiful Bill Act Summary: Military and Immigration Shifts
Military
The U.S. military will see a budget increase of $150 billion. This money is generally set to go to building additional ships and Trump’s “Golden Dome” project.
The “Golden Dome” project is an attempt to build a system that would be able to track and defend the United States against missile attack. The project is taking notes from Israel’s defense programs like the “Iron Dome” and “David’s Sling”.
Immigration
Immigration is a hot topic right now, and this bill added $100 billion to its management budget, up from $8 billion under the previous administration. This money will be largely assigned to Immigration and Customs Enforcement (ICE), an agency that has primarily focused on cracking down on illegal immigration, following executive orders from President Trump.
One Big Beautiful Bill Act Summary: Tax Incentives and Structural Changes for Businesses
1. Gift and Estate Tax Exemption
The Gift and Estate Tax exemption, previously set to revert to the pre-TCJA limit of $5 million at the end of 2025, is now permanently set at $15 million for 2026, potentially offering significant estate planning relief if you happen to be an ultra-profitable business owner or high-net-worth individual.
2. Research and Development (R&D) Deduction
Businesses can now fully expense R&D costs, reversing a 2022 rule that required amortization over five years. The R&D deduction is retroactive to 1/1/25 for large companies and 1/1/22 for small businesses.
3. Qualified Small Business Stock (QSBS) Gain Exclusion
Qualified Small Business Stock Gain previously required you to have a 5-year holding period for 100% tax exclusion on gains. This has changed to a new tiered system, which offers more flexibility. The gain exclusion cap also increased from $10 million to $15 million. The tiered system is as follows:
- 50% exclusion after 3 years
- 75% after 4 years
- 100% after 5 years
4. Energy Credits
A One Big Beautiful Bill summary of energy credits is that most clean energy tax incentives will expire by the end of 2025 or 2026. If you plan to sell or restructure your business before this expiration, you may benefit from acting quickly, especially if the transaction would generate taxable gains.
One Big Beautiful Bill Act Summary: Labor and Compliance Reforms
1. Gift and Estate Tax Exemption
The Gift and Estate Tax exemption, previously set to revert to the pre-TCJA limit of $5 million at the end of 2025, is now permanently set at $15 million for 2026, potentially offering significant estate planning relief if you happen to be an ultra-profitable business owner or high-net-worth individual.
2. Research and Development (R&D) Deduction
Businesses can now fully expense R&D costs, reversing a 2022 rule that required amortization over five years. The R&D deduction is retroactive to 1/1/25 for large companies and 1/1/22 for small businesses.
3. Qualified Small Business Stock (QSBS) Gain Exclusion
Qualified Small Business Stock Gain previously required you to have a 5-year holding period for 100% tax exclusion on gains. This has changed to a new tiered system, which offers more flexibility. The gain exclusion cap also increased from $10 million to $15 million. The tiered system is as follows:
- 50% exclusion after 3 years
- 75% after 4 years
- 100% after 5 years
4. Energy Credits
A One Big Beautiful Bill summary of energy credits is that most clean energy tax incentives will expire by the end of 2025 or 2026. If you plan to sell or restructure your business before this expiration, you may benefit from acting quickly, especially if the transaction would generate taxable gains.
One Big Beautiful Bill Act Summary: Labor and Compliance Reforms
1. Overtime and Tip Reporting
As an employer, you will likely have to update payroll systems and maintain new documentation standards, increasing administrative duties, as part of the “no taxes on tips” policy. This is particularly true if you operate in the hospitality and service industries.
2. Student Loan Repayment by Employers
Your employer contributions to employee student loans are now tax-free, making this an attractive benefit offering. However, businesses must implement formal tracking systems to ensure compliance and eligibility, which may add more paperwork and human resource responsibilities for you.
One Big Beautiful Bill Act Analysis: What Can You Do With All of This Information?
Taken as a whole, the One Big Beautiful Bill Act can definitely seem daunting. You could end up on both the winning and losing sides of this bill – but which is true for your unique situation?
Winners in the short term may include:
- Middle- and high-income taxpayers in high-tax states;
- Small business owners and startup investors; and
- Retirees benefiting from larger deductions and estate exemptions.
Losers could include:
- Medicaid recipients facing added administrative hurdles or work mandates;
- Low-income families affected by FAFSA and Pell Grant changes; and
- Employers burdened with new compliance requirements.
If you’re worried or wondering about how the OBBBA 2025 could impact your family or business, know that here at Iron Point Financial, we have both Certified Financial Planners (CFPs®) and Retirement Income Certified Professionals (RICPs) ready and willing to help.
Our staff is dedicated, knowledgeable, and experienced in helping people like you create a financial roadmap flexible enough to suit your goals and preferences while taking into account legislation like the OBBBA 2025. We would love a chance to review your financial situation in light of the OBBBA, so why not contact us today to set up an appointment?
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