The One Big Beautiful Bill Act — also known as the Big Beautiful Bill, or One Big Beautiful Bill (OBBB) — recently passed the House of Representatives and is now headed to the Senate for approval. While it proposes several changes to the tax code, remember: These changes are not law yet. If passed, the new tax policy wouldn’t take effect until tax year 2025 and future tax years.
In the meantime, let’s break down what’s in the Big Beautiful Tax Bill, what it could mean for taxpayers, and where it goes from here.
What is the One Big Beautiful Bill?
The One Big Beautiful Bill is a broad tax proposal from House Republicans, connected to President Trump’s push for continued tax cuts. It’s designed as an update to the 2017 Tax Cuts and Jobs Act (TCJA) and includes a variety of new tax provisions that would affect individuals, families, and small business owners. While it covers a lot of ground, it’s still just a proposal at this time — nothing’s official yet.
Did the Big Beautiful Bill pass?
At this time, the House of Representatives passed the House bill, but the Senate has not officially reviewed or voted on it yet. If the OBBB passes the Senate, the changes would need to be reviewed again by the House before they can be signed into law. Until the final bill gets passed, changes to your federal taxes aren’t set in stone just yet.
Tax reform 2025: Key tax changes in the One Big Beautiful Bill
Let’s walk through some of the biggest proposed changes in the tax bill, starting with individual taxpayers and then moving to business owners.
Tax changes for individuals
Extension of the TCJA
First off, the One Big Beautiful Bill proposes extending key parts of the 2017 Tax Cuts and Jobs Act (TCJA) that were set to expire after 2025. For example, the standard deduction, which was nearly doubled under the TCJA, would remain at those higher levels instead of reverting back to pre-2017 amounts.
Other extended provisions include changes to tax brackets, repeal of the personal exemption, and updates to various tax credits and deductions, some of which we’ll touch on more below.
SALT deduction cap increase
Under current law, the SALT deduction (a tax deduction for state and local taxes) is capped at $10,000. This mainly affects filers in states with higher tax rates like New York, California, or New Jersey.
The Beautiful Bill would raise the SALT cap to $40,000 for married couples earning up to $500,000, then gradually phase it down for higher earners. It would remain at $10,000 for those with higher adjusted gross income (AGI).
What this means for you: If you itemize deductions and live in a state with high income tax or property taxes, you could deduct more of those local taxes if you fall under the income threshold.
Extra deduction for seniors
If you’re a taxpayer aged 65 or older, the bill would give you an extra $4,000 standard deduction starting in tax year 2025 (up from an additional $2,000 currently). The extra deduction would phase out at higher income levels once your AGI exceeds $75,000 for single filers or $150,000 for those married filing jointly.
No tax on tips
This part of the One Big Beautiful Bill could mean more take-home pay for workers who rely on tips. Tips earned from 2025 through 2028 would qualify for an above-the-line deduction (meaning you don’t need to itemize deductions to claim it) from federal income tax for qualifying individuals.
Who qualifies?
Some restrictions apply to this tax break. Workers must:
Earn less than $160,000.
Have a Social Security number (your spouse must also have an SSN if you are married).
Work a specific job where “tipping is customary.”
Do I still have to report my tips?
Yes. Under this provision, your tips still count as income, so you need to report your tips to your employer and on your tax return. However, you would get a deduction at the federal level for tips earned during the qualifying years.
Remember that state taxes may still apply to your tips depending on where you live.
Is the Big Beautiful Bill different from the No Tax on Tips Act?
Yes. The Senate passed the No Tax on Tips Act in May 2025, but it still needs House approval. The Senate bill differs slightly from the OBBB tax-free tip provision — mainly, it does not specify a temporary time limit or that an SSN is necessary to claim the deduction.
No tax on overtime pay
Does the Big Beautiful Bill take away tax on overtime?
The Big Beautiful Bill would also create an above-the-line deduction for overtime pay for hourly workers. Like the no tax on tips provision, this would only apply for tax years 2025 through 2028.
Who qualifies?
Workers would need an SSN to claim this tax break (your spouse would need one too, if you’re married).
Your earned income must be less than $160,000.
The exemption only applies to wages earned from overtime hours — your regular pay would be taxed like usual.
The government would need to provide more guidelines specifying who qualifies.
Do I still need to report my overtime pay?
Just like with tips, you still need to report your overtime earnings, but you would be able to claim a tax deduction for your overtime compensation to reduce your taxable income. State taxes may still apply.
Bigger child tax credit
The Child Tax Credit (CTC) would increase from $2,000 to $2,500 per qualifying child from 2025 through 2028.
Starting in 2029, it would return to $2,000, but with an inflation adjustment built in.
Elimination of certain energy tax breaks
Several clean energy incentives created by the Inflation Reduction Act (passed by the Biden administration in 2022) would go away under the OBBB. That includes:
Home improvement credits for energy-efficient upgrades
Car loan interest deduction
The One Big Beautiful Bill also provides a tax break for vehicle owners: an above-the-line deduction of up to $10,000 for qualified passenger vehicle loan interest each year.
The deduction phases out for those with a modified AGI of over $100,000 ($200,000 for joint filers).
Be manufactured mainly for use on public roads,
Have at least two wheels,
Be a car, minivan, SUV, pickup truck, van, motorcycle, all-terrain vehicle (ATV), or recreational vehicle (RV), and
Have its final assembly take place in the United States.
Just like tips and overtime, this would be a temporary tax deduction available for 2025 through 2028.
Tax changes for business owners
QBI deduction (Section 199A deduction) expanded and made permanent
The qualified business income (QBI) deduction, originally part of the TCJA, is set to expire in 2025. This Big Beautiful Bill would:
Increase the deduction from 20% to 23% starting in 2026.
Add stricter eligibility rules for what businesses qualify.
Impact on SSTBs
If your business is a specified service trade or business (SSTB) — like law, health care, consulting, or accounting — you’ll still face income-based limits. The bill keeps a phase-out for these businesses starting at $483,900 for joint filers in 2024 (increasing to $494,600 in 2025).
Changes to SALT workarounds for pass-through businesses
Many pass-through entities (like partnerships, LLCs, and S corps) have used pass-through entity taxes (PTETs) available in many states to sidestep the $10,000 SALT cap for individuals. Here’s how it works today:
The business pays state-level tax.
That tax is deductible as a business expense at the federal level.
Business owners typically get a tax credit on their individual state return.
But under the One Big Beautiful Bill, these SALT cap workarounds would likely no longer be allowed for specified service trades or businesses, even if they still qualify for the QBI deduction under the income limit. This would mean:
Non-SSTBs may still benefit from both the bigger QBI deduction and state-specific PTET deductions.
SSTBs may lose both, depending on income.
The Senate will likely need to clarify how these rules will apply in practice, especially for SSTBs, so we’ll keep this page updated as new details emerge.
100% bonus depreciation returns
Under current law, the bonus depreciation rules from the TCJA will phase out after 2026. The One Big Beautiful Bill would bring back 100% bonus depreciation for qualifying property placed in service on or after Jan. 20, 2025, and before Jan. 1, 2030.
What is bonus depreciation?
Bonus depreciation lets businesses immediately deduct the full cost of certain assets — like machinery, equipment, or qualifying property — in the year they buy them instead of spreading that depreciation deduction out over several years.
What happens next?
Right now, the One Big Beautiful Bill has not changed the tax law yet. It’s passed the House, but it still needs to clear the Senate before it is officially signed into law.
Even if it does pass, changes would only apply to tax year 2025 and future tax years. If you still need to file your 2024 income tax return, these changes will not affect that.
The bottom line
The 2025 tax reform proposal in the OBBB could bring changes for both individual filers and small business owners. But until the Senate acts and we get official word from the IRS, it’s all hypothetical at this point. No changes to the tax code have happened yet.
We’ll keep you updated on any tax legislation changes. And if you’re wondering how these proposals might impact your 2025 tax return, as always, TaxAct will be here to guide you through the filing process step by step and put your mind at ease.
This article is for informational purposes only and not legal or financial advice.
All TaxAct offers, products and services are subject to applicable terms and conditions.
