Understanding the One Big Beautiful Bill (OBBB): Key Tax Updates for 2025

bostontaxadvisors
Jul 6, 2025
2 min read

Updated: Oct 1, 2025

On July 4, 2025, President Donald Trump signed the One Big Beautiful Bill (OBBB) into law. This comprehensive legislation includes various provisions that significantly affect individuals and small businesses. Boston Tax Advisors has highlighted the most relevant tax updates to help you navigate these changes.

Individual Tax Highlights

Tax Rates

The lower tax brackets established by the 2017 Tax Cuts and Jobs Act (TCJA) are now permanent. The top individual tax rate remains at 37%. Additionally, inflation adjustments for the 12% bracket thresholds will be in effect for 2025.

Standard Deduction for 2025

Single / MFS: $15,750
Head of Household: $23,625
Married Filing Jointly (MFJ): $31,500

State & Local Tax Deduction

The cap for state and local tax deductions increases to $40,000, indexed annually. For those with a Modified Adjusted Gross Income (MAGI) over $500,000, the deduction will be reduced by 30% of the excess. However, it will not fall below $10,000.

Child Tax Credit

The nonrefundable portion of the child tax credit has been raised to $2,200 per child.
The refundable portion of $1,400 is now permanent and will be adjusted for inflation.
Phaseouts are set at $200,000 for single filers and $400,000 for joint filers.

No Tax on Tips

From 2025 to 2028, tipped workers can deduct up to $25,000 of reported tip income above the line. The phaseout begins at a MAGI of $150,000 for single filers and $300,000 for joint filers.

No Tax on Overtime

An above-the-line deduction of up to $12,500 for single filers and $25,000 for joint filers applies to reported overtime income for the years 2025 to 2028. Employers must report overtime income separately.

Vehicle Loan Interest

You can now deduct up to $10,000 in interest on loans for personal-use vehicles. This applies to U.S.-assembled vehicles acquired after December 31, 2024. The deduction phases out at a MAGI of $100,000 for single filers and $200,000 for joint filers.

Dependent Care Benefits

The exclusion for employer-sponsored dependent care benefits has increased from $5,000 to $7,500.

Charitable Contributions

For non-itemizers, the deduction is now $1,000 ($2,000 for joint filers).
Itemizers will be subject to a new 0.5% AGI floor.

Business & Investment Tax Updates

Qualified Business Income (QBI) Deduction

The 20% QBI deduction is now permanent. A minimum deduction of $400, indexed for inflation, applies to those with at least $1,000 in QBI and material participation.

Bonus Depreciation

Bonus depreciation has been permanently extended at 100% for qualifying business property placed in service on or after January 19, 2025. This is a significant change from the previous schedule, which planned for a phase-out by 2027.

Planning Ahead: How These Changes Affect You

These tax updates may significantly impact your tax strategy for 2025 and beyond. Understanding these changes is crucial for effective financial planning. Whether you are an individual taxpayer or a small business owner, it's essential to adapt your strategies accordingly.