President Donald Trump signed the One Big Beautiful Bill Act (OBBB) into law on July 4, 2025. The OBBB introduces new tax laws for tips and overtime, energy credits, senior filing, and car loan interest. The Act also makes many tax law changes permanent, which were set to expire with the Tax Cuts and Jobs Act (TCJA). As a tax preparer, you must familiarize yourself with the new law and ensure your tax software is up to date for the new tax year. TaxSlayer Pro has you covered. Our article breaks down the new changes to the tax code and how they will affect your client’s tax returns.
Key changes tax preparers need to know about the OBBB:
- The One Big Beautiful Bill Act makes many of the Tax Cuts and Jobs Act provisions permanent, including:
- Expanded Standard Deduction
- Elimination of personal and dependent exemptions
- Limits to itemized deductions
- The bill consists of a few new additions to the tax code, such as:
- Deduction for qualified tips
- Deduction for qualified overtime pay
- Deduction for car loan interest
- New deduction for seniors
- Many of the new tax provisions go into effect for tax year 2025 (taxes filed in 2026). However, several provisions do not go into effect until tax year 2026 (taxes filed in 2027) or tax year 2027 (taxes filed in 2028).
How does the One Big Beautiful Bill affect my tax clients?
The OBBB will affect your clients this tax season and in the coming seasons as the different provisions phase in. Here are some of the more common changes that will affect the majority of clients and the dates the provisions go into effect.
| Name | Provision | Effective date |
| Tax brackets | Permanently lower the tax brackets and adjust certain brackets for inflation. (10%, 12%, 22%, 24%, 32%, 35%, 37%). | January 1, 2025 |
| Standard deduction | Permanently increase the standard deduction as well as increase them by up to $1,500 for inflation. The 2025 Standard Deduction will be $31,500 for joint filers, $23,625 for head of household, and $15,750 for all other filers. Also includes increases every year for inflation. | January 1, 2025 |
| Miscellaneous itemized deductions | Permanently eliminate miscellaneous itemized deductions. | January 1, 2025 |
| Personal exemptions | Permanently eliminate personal and dependent exemptions. | January 1, 2025 |
| Child Tax Credit | Permanently increase the Child Tax Credit to $2,200 for qualified taxpayers in 2025 with adjustments for inflation annually. | January 1, 2025 |
| SALT | The SALT deduction will increase from $10,000 to $40,000 in 2025. It will increase by 1% each year for inflation. However, in 2030 it will revert to $10,000. | January 1, 2025 |
| Additional Child Tax Credit | Increase the maximum Additional Child Tax Credit to $1,700. | January 1, 2025 |
| AMT | Permanently increase the alternative minimum tax (AMT) exemption. | January 1, 2025 |
| Electric vehicle credits | Repeal energy-efficient credits for electric vehicles on September 30, 2025. | September 30, 2025 |
| Energy credits | Repeal credits for energy-efficient home improvements after December 31, 2025. | December 31, 2025 |
| Gift tax | Permanently increase the estate and lifetime gift exemption to $15 million for single filers and $30 million for joint filers. | January 1, 2026 |
| Home mortgage interest deduction | Permanently limit the home mortgage interest deduction to $750,000. Mortgage insurance premiums can be deducted as part of mortgage interest beginning in 2026. | January 1, 2026 |
| Charitable donations | New above-the line deduction of $1,000 for single filers and $2,000 for joint filers. It will be adjusted each year for inflation. | January 1, 2026 |
| Personal casualty losses | Permanent limitation on personal casualty losses for most taxpayers, however it will include certain state-declared disasters beginning in 2026. | January 1, 2026 |
| Gambling losses | 90% of gambling losses will be deductible on Schedule A. | January 1, 2026 |
| Moving expenses | Permanent limitation on moving expense deductions for most taxpayers. | No change from the TCJA |
When does the Big Beautiful Bill go into effect for my clients?
Most provisions enacted by the OBBB will take effect in tax year 2025 (taxes filed in 2026). A few provisions will be retroactive to tax year 2024 (taxes filed in 2025) or will only apply beginning in tax year 2026 (taxes filed in 2027). More specific dates are covered in each detailed section below.
What is the new deduction for tips for my clients?
The OBBB creates an above-the-line deduction for qualified tips up to $25,000 for tax years 2025 through 2028. Your clients do not need to itemize their deductions to take this. However, their modified AGI must be below $150,000 when filing single or $300,000 when filing married filing jointly, or the deduction begins to phase out.
How does the new overtime deduction reduce tax for my clients?
The OBBB introduces an above-the-line deduction for qualified overtime income up to $12,500 for single filers and $25,000 for joint filers. This will reduce your client’s AGI and therefore could reduce their tax liability. This deduction will be available for tax years 2025 through 2028. The deduction only applies to income exceeding your client’s regular pay rate. This tax break may apply to your clients who are work in a service field or another field requiring overtime, such as nurses, police officers, construction workers, retail workers, other first responders, and more. As with the new tax law on tip income, your client’s modified AGI must be below $150,000 when filing single or $300,000 when filing married filing jointly, or the deduction begins to phase out.
What is the new deduction for car loan interest for my clients?
The OBBB introduces a new tax deduction allowing your clients to deduct up to $10,000 in qualified auto loan interest annually. Your client’s vehicle must be for personal use and assembled in the United States to qualify. Used vehicles do not qualify. This deduction will be available for tax years 2025 through 2028. This deduction phases out for clients with modified AGI above $100,000 if filing single and $200,000 for married clients filing jointly.
What is the senior deduction for my clients under the One Big Beautiful Bill?
A new deduction for your senior clients will be up to $6,000 each for individuals over 65 for tax years 2025 through 2028. This deduction phases out for clients with modified AGI above $75,000 if filing single and $150,000 for married clients filing jointly.
What tax breaks can my self-employed or business clients take?
The OBBB permanently extends the 20% Qualified Business Income Deduction for your self-employed clients or clients who own a business. The phase-in range for your clients who have taxable income above the thresholds before taking the QBID has increased from $75,000 to $150,000 for married filing jointly clients and from $50,000 to $75,000 for all other clients.
Your clients who are business owners will also benefit from the following:
- Permanent restoration of 100% bonus depreciation
- Permanent restoration of expensing of certain R&D costs
- Permanent restoration of the EBITDA-based limitation on business net interest deductions
- Temporarily provide 100% expensing for specific manufacturing structures
- Increase Section 179 expensing cap to $2.5 million
What tax breaks can my clients who are parents take?
The OBBB permanently increases the Child Tax Credit to $2,200 per child under 17, with annual adjustments for inflation. In addition to the dependent child being required to have a valid social security number, the taxpayer and their spouse must also have a valid SSN to claim this credit. An ITIN will no longer suffice.
What tax breaks can my clients who have recently adopted a child take?
The existing adoption credit for tax year 2025 of $17,280 is now partially refundable up to $5,000 for your clients who are adopting.
What tax breaks can my clients who are homeowners take?
If your client is a homeowner who paid property taxes and state income or sales tax, the State and Local Taxes (SALT) deduction will increase from $10,000 to $40,000 for tax years 2026 through 2029. The TCJA cap of $10,000 was set to expire in 2025. The new bill reinstated the cap and increased it to $40,000 for tax years 2025 through 2029.
Starting in 2026, mortgage insurance premiums can be deducted as part of mortgage interest. The limit will still be $750,000 as set out by the TCJA.
How does the OBBB affect third-party payment processors reporting payments on Form 1099-K?
The OBBB restores the $20,000 and 200 transaction threshold that existed prior to the American Rescue Plan Act of 2021.
Can my clients still claim credits for making energy-efficient improvements to their houses?
Yes, your clients can still claim energy-efficient tax credits for improvements made in 2025 on their tax return filed in 2026. However, the OBBB will eliminate these credits for tax year 2026 (taxes filed in 2027) and beyond.
Can my clients still claim electric vehicle credits?
The OBBB eliminates the clean vehicle credit for electric vehicles purchased after September 30, 2025. If your client bought an electric vehicle before this date, they may still be eligible for a credit.
Will personal and dependent exemptions be reinstated for my clients?
The OBBB permanently eliminated personal and dependent exemptions. Exemptions were possibly going to return in tax year 2026 when the Tax Cuts and Jobs Act (TCJA) expired, but the new bill makes the law permanent. Your clients will not be able to take exemptions.
