Last updated July 3, 2025
1. Where does the bill stand today?
On July 3 the Senate narrowly approved the One Big Beautiful Bill Act (OBBB), one day after the House passed its own version. The two chambers still have to reconcile differences, but because both versions extend the 2017 Tax Cuts and Jobs Act and layer on new breaks, most analysts expect only minor tweaks before President Trump signs the final package. theguardian.com
Effective date: Unless Congress changes the transition rules in conference, most provisions kick in January 1, 2026, meaning the first returns affected will be the ones you file in spring 2027.
2. Key changes for individual taxpayers
| Provision | Current law (sunsets after 2025) | What OBBB does | Why it matters |
|---|---|---|---|
| Standard deduction | $13,850 single / $27,700 married (indexed) | Boosts to $16,500 / $31,500 through 2028, then indexed. waysandmeans.house.gov | Higher deduction + lower rates = lower taxable income for most households. |
| SALT cap | $10,000 | Raises cap to $40,000 through 2028. theguardian.com | Good news for high-tax-state filers—but bunching deductions will matter again. |
| Tips & overtime pay | Fully taxable | Excludes 100 % of tips and OT earned after 1/1/26 (sunsets 2028). waysandmeans.house.gov | Service-industry and hourly workers could see $1.3-$1.4 k more take-home pay each year. |
| Child Tax Credit | $2,000, partially refundable | Locked in and boosted to $2,200, with refundability tweaks. waysandmeans.house.gov | Families get a bigger credit and (under House language) larger refunds. |
| Senior extra deduction | None | Adds a $6,000 deduction for 65+ with AGI below $75 k/$150 k. theguardian.com | |
| Estate & gift tax exemption | $5 m base, doubled to $13.61 m but scheduled to drop in 2026 | Makes the $15 million exemption permanent and indexes it. frostbrowntodd.com |
Planning pointers for 2025-26
- Run a mid-year projection: Higher deductions in 2026 may let you delay certain deductions (charitable, property-tax prepayments) into 2026 to offset higher income.
- Track tip income separately—you’ll still report it, but records protect you if the IRS audits how much qualified for the new exclusion.
- Estate freeze now, gifts later: With a $15 m lifetime cushion, wealthy families may hold off on large gifts until the law takes effect, but valuation discounts done in 2025 can lock in lower asset values.
- Update payroll withholding in January 2026 to reflect larger standard deductions and credits so you don’t wait for an over-withholding refund.
3. Major business-owner provisions
| Provision | Current law | OBBB change | Source |
|---|---|---|---|
| §199A QBI 20 % deduction | Expires after 2025 | Permanent; phase-in thresholds widened. bakertilly.com | |
| 100 % bonus depreciation | Phases down 60 % in 2025 → 0 % by 2027 | Revived & made permanent for qualified property placed in service after 1/1/25. bakertilly.com | |
| §179 expensing limit | $1.22 m cap (2025 indexed) | Raised to $2.5 m cap / $4 m phase-out. bakertilly.com | |
| Interest-deduction limit (§163 j) | EBIT DA add-back ended in 2022 | Restores EBITDA test permanently from 2025. bakertilly.com | |
| R&D expensing (§174) | Five-year amortization | Allows immediate deduction or elective 60-mo/10-yr amortization for domestic R&D. bakertilly.com |
Planning pointers for 2025-26
- Cost-segregation studies become valuable again—bonus depreciation at 100 % lets real-estate owners write off QIP immediately.
- Consider S-Corp reasonable-comp adjustments—a permanent QBI deduction means wage vs. pass-through income balance affects long-term savings.
- Model R&D timing—accelerating qualified domestic research into late 2025 could capture immediate deductions in 2026.
- Review interest-expense strategy—shifting from EBIT to EBITDA may lift limitations; revisit debt-vs-equity financing plans.
4. What happens next?
A House-Senate conference committee will reconcile differences—mainly spending offsets and the exact expiration dates for some individual breaks. Lawmakers aim to deliver a unified bill to the White House before the August recess. Until the ink is dry, treat all numbers as proposed, not guaranteed. washingtonpost.com
5. Bottom-line takeaways
- Most households see lower taxable income thanks to bigger deductions, but high earners reap the largest dollar benefits.
- Service-industry workers gain most from the tax-free tips/overtime pilot—but only through 2028.
- Small-business owners get permanent QBI relief plus faster write-offs on equipment and R&D, making 2026 a pivotal reinvestment year.
- Estate planners should revisit lifetime-gift strategies; the higher exemption slashes potential tax but also resets the urgency of 2025 “use-it-or-lose-it” gifting.
- Stay flexible—final text could still tweak thresholds or sunset dates.
Need help mapping these changes to your own tax picture?
Riverbank Tax’s attorney-led team is tracking every revision in real time and can model the bill’s impact on your 2026 liability—whether you’re a W-2 earner, gig worker, or business owner.
Put attorney-level tax insight to work before the new rules kick in.
