I plan to benefit you today by giving you informational bullet points on how the OBBBA will affect your 2025 and 2026 taxes. You can also use this information to help you research and plan your financial transactions throughout 2026, rather than at the end.
In my office, I focus on serving middle-class individuals and closely held businesses. Therefore, I present you with the facts that most likely will affect you:
The “One Big Beautiful Bill Act”: Key Impacts for the Middle Class and Business Owners
The “One Big Beautiful Bill Act” (OBBBA), signed into law on July 4, 2025, by President Trump, represents a sweeping legislative package with significant, permanent changes to the U.S. tax code and federal spending. For middle-class individuals and owners of closely held businesses, the law provides a mix of new opportunities for deductions and credits, alongside permanent extensions of existing tax rates.
Here are seven key facts about the OBBBA and its implications:
For Individuals and Middle-Class Families
- Permanent Tax Rate and Standard Deduction Structure: The OBBBA permanently extends the individual income tax brackets (ranging from 10% to 37%) that were set to expire at the end of 2025. The law also makes permanent the increased standard deduction, simplifying filing for many taxpayers.
- Increased SALT Deduction Cap: The cap on the State and Local Taxes (SALT) deduction has been temporarily raised from $10,000 to $40,000 for married couples filing jointly (and $20,000 for single filers), a change effective from 2025 through 2029. This offers significant relief for those in high-tax states.
- Deductions for Tips and Overtime Pay: The act introduces a temporary tax deduction (through 2028) for qualified tips (up to $25,000) and qualified overtime pay (up to $12,500, or $25,000 for joint filers) for eligible individuals who meet certain income limitations.
- Enhanced 529 Plans: The law expands the use of 529 education savings plans, allowing up to $20,000 per year (up from $10,000) to be used for K-12 education expenses, including tuition, books, and tutoring.
For Closely Held Businesses
- Permanent 20% Qualified Business Income (QBI) Deduction: The popular 20% QBI deduction (Section 199A) for owners of pass-through entities (S corporations, partnerships, and sole proprietorships) is now a permanent fixture of the tax code, offering long-term tax certainty for business owners.
- Restored 100% Bonus Depreciation: The OBBBA permanently restores the ability for businesses to immediately deduct 100% of the cost of eligible new and used equipment and certain production property placed in service after January 19, 2025, encouraging capital investment.
- Immediate Expensing of R&D Costs: The prior requirement to amortize domestic research and development (R&D) expenses over five years has been repealed. Businesses can now immediately deduct 100% of these costs, a change that also allows certain small businesses to file amended returns for previous years.
The OBBBA’s provisions require careful review with a tax advisor to navigate the complexities and leverage the opportunities available for your specific situation. The IRS provides official guidance on the changes related to the One, Big, Beautiful Bill provisions on its website at https://www.irs.gov/newsroom/one-big-beautiful-bill-provisions.
I am available for consulting with you on how these changes personally apply to you for 2025 and 2026. My contact information is: Marlen C. Rosales, CPA, Founder & Principal at Certified Accounting Services Co., 1120 – 2nd Street, Suite 105, Brentwood, CA 94513, (925) 392-8047, marlen@cpa-casco.com, www.rosales-cpa.com. Looking forward to hearing from you soon! Otherwise, look out for our ad in this issue of The Monthly Grapevine!
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