What the ‘One Big Beautiful Bill’ Means for Your Taxes and Your Business

The Senate recently passed the “One Big Beautiful Bill Act,” or OBBBA for short. This massive piece of legislation makes permanent several provisions from the 2017 Tax Cuts and Jobs Act (TCJA), introduces a mix of new tax breaks, and alters how businesses and individuals plan their finances for years to come. If you’re a business owner, investor, or just someone who wants to know how this will impact your wallet, here’s what you need to know in plain English.

Key Permanent Tax Changes

First, OBBBA locks in some significant elements of the TCJA. The lower income tax brackets and bigger standard deductions will no longer expire in 2025. That means most individuals and families can continue to expect lower tax bills and simpler filing.

The estate tax exemption is also going up permanently. Starting in 2026, individuals can pass on $15 million tax-free, and couples can transfer $30 million. This will significantly reduce federal estate tax exposure for many families, making estate planning a bit easier.

For business owners using passthrough entities like S corporations or partnerships, the 20 percent qualified business income deduction under Section 199A is now here to stay. That deduction was initially set to expire, but this bill keeps it intact and even expands access for lower-income business owners.

Temporary Tax Breaks from 2025 to 2028

In addition to the permanent changes, the bill also adds a few temporary tax deductions for working Americans:

• If you work in a tipped profession, you can deduct up to $25,000 of tip income.

• If you earn overtime, you may deduct up to $12,500, or $25,000 if you’re married filing jointly.

• And if you buy a new car that’s assembled in the United States, you can deduct up to $10,000 in auto loan interest.

These deductions start in 2025 and run through 2028. But there’s a catch. Each one is phased out for higher earners, and they require thorough documentation. For example, if you’re claiming a deduction for tips, you’ll need to maintain detailed daily records, not just guesswork. The IRS has the authority to reconstruct income if records aren’t solid, and they’ve done so before in similar cases.

What Business Owners Need to Watch 

There’s big news for business deductions, too. Research and development costs can once again be fully expensed immediately, allowing businesses to write them off in the year they’re incurred. This applies retroactively to small businesses, covering expenses incurred after December 31, 2021. That could be a massive win for eligible companies, but only if they’ve kept clean records.

Bonus depreciation is also back at 100 percent. If your business purchases qualifying property after January 19, 2025, you can deduct the full cost upfront instead of spreading it over several years. And this also applies to certain types of buildings, as long as they’re placed in service before 2031.

Interestingly, this also interacts with estate planning. If someone passes away and leaves a business asset to an heir, that asset receives a step-up in basis, meaning it’s treated as if it were purchased at the current market value. Under this bill, the heir can then take full bonus depreciation on that stepped-up basis. It’s a robust planning strategy.

There’s also a change in how businesses calculate interest expense deductions. Previously, it was based on EBIT (earnings before interest and taxes). Now it’s back to EBITDA (earnings before interest, taxes, depreciation, and amortization), which is a more generous formula. Businesses must report this using IRS Form 8990 and keep proper records to avoid issues.

International and Cross-Border Changes 

For businesses with international operations, OBBBA makes several updates. The Global Intangible Low-Taxed Income (GILTI) regime is being renamed Net CFC Tested Income (NCTI), with new calculation rules and a slightly higher effective rate. A similar change occurs to the FDII regime, which is now referred to as Foreign-Derived Deduction Eligible Income.

The Base Erosion and Anti-Abuse Tax (BEAT) is increasing to 10.5 percent. These adjustments will require multinational businesses to revisit how they allocate foreign income and use foreign tax credits.

Compliance Will Matter More Than Ever

With new deductions and credits come new responsibilities. For example, to claim a tip or overtime deduction, taxpayers must maintain accurate and detailed records. The IRS expects contemporaneous documentation; if that’s missing, they can and will estimate your income based on other available data.

The child tax credit rules are also getting tighter. Both parents now need valid Social Security numbers to qualify. This could affect families with mixed immigration status.

If your business needs to change how it accounts for things like depreciation or expense deductions, you’ll have to follow formal procedures. These include IRS approval or automatic consent through specific revenue procedures. You may also need to file amended returns if retroactive deductions apply to you.

Does This Change Your Business Structure?

That depends. With Section 199A now permanent, many small businesses will want to reassess whether their current legal structure remains effective. In some places, such as Washington, D.C., S corporations may not be eligible for the QBI deduction, which could impact whether it’s the right fit for your business.

Also, if you’re a passive investor in a partnership or S corporation, remember that your losses may be limited if you don’t materially participate. The rules on passive activity losses and at-risk basis still apply and can prevent you from taking full advantage of your deductions.

A New Tool for Estate Planning

Here’s a bright planning idea. Let’s say you own a depreciable asset, such as real estate or equipment. Under this bill, you could transfer that asset at death and give your heirs a stepped-up basis. If the asset qualifies, they can take an immediate 100 percent depreciation on the stepped-up value. This could significantly lower their income tax in the year they inherit the asset, making it a very strategic play for estate planning.

What About Safe Harbors? 

This bill could lead to additional safe harbor rules from the IRS, especially around depreciation, method changes, and modifications to business property. Prior court cases and revenue procedures provide us with a good idea of how these may look, but we’ll need to watch for formal guidance in the months ahead.

The Big Picture 

The bill is expected to increase the country's GDP in the long run by approximately 1.2 percent. But it’s not without cost. Deficits are projected to increase by at least $3.7 trillion over 10 years. The debt-to-GDP ratio is expected to climb significantly, and some of the temporary tax breaks may not be renewed.

Still, the distributional impacts look favorable to most middle-income taxpayers. Many households will see noticeable after-tax income increases, particularly through 2034, when the economic growth effects are entirely in effect.

What Should You Do Next?

If you’re a business owner, investor, or high-net-worth individual, the OBBBA could affect your tax position in significant ways. It’s a good time to revisit your entity structure, estate plan, and tax strategies. Both the permanent and temporary provisions come with both opportunities and obligations.

We’re here to help. Reach out to our team if you’d like to discuss how the new law could impact your specific situation or if you need assistance amending prior-year returns, restructuring your business, or navigating new documentation requirements.