Understanding the “One Big Beautiful Bill” (OBBBA): What Everyday Taxpayers Need to Know

On July 4, 2025, President Trump signed a sweeping new tax law called the One Big Beautiful Bill Act (OBBBA).  It is a wide-ranging package of tax cuts, policy changes, and spending shifts that will affect almost every American household in some way — whether you are a worker earning tips, a homeowner in a high-tax state, a small business owner, or someone who relies on government programs. While the law has received both praise and criticism, what matters most is how this new law will impact you. Below is an article that explains the main points of this Bill so you know what to expect as you begin thinking about your 2025 tax return and beyond.

Impact on Tax Rates and Standard Deductions

This new law makes the 2017 Tax Cuts and Jobs Act (TCJA) permanent. That means the lower tax rates and bigger standard deductions from that earlier law will not expire after 2025 like they were originally scheduled to.  If you have been enjoying lower tax rates over the past few years, that will continue.  For example, middle-income taxpayers who were in the 22% or 24% tax bracket will stay in those brackets rather than moving up to higher rates. The standard deduction — the flat amount you can subtract from your income before paying taxes — remains high as well.  For 2025, it is $15,750 for single filers and $31,500 for married couples filing jointly.  This helps most families who do not itemize deductions save money on taxes.

Increase in SALT Deductions

One of the most talked-about changes is the increase in the State and Local Tax (SALT) deduction cap.  Under the old law, you could only deduct up to $10,000 in state and local taxes from your federal tax return. This was a problem for people living in high-tax states like California, New York, and New Jersey.  The new law raises the SALT cap to $40,000 through 2029 for households making less than $500,000.  That is a big win for middle- and upper-middle-income homeowners in high-cost areas.  If you own a home and pay a lot in property or state income taxes, you might now be able to deduct much more of those costs on your federal return.  Just keep in mind this benefit phases out if you make over $500,000.

New Temporary Tax Deductions

The new law also introduces several targeted temporary tax deductions aimed at working Americans.  For example, if you earn tips, you can now deduct up to $25,000 in tip income from your taxable income — but only if your total income is under $150,000 (or $300,000 for married couples).  Similarly, if you earn overtime, you can deduct up to $12,500 of that extra pay under the same income rules.  These changes are designed to help service workers and hourly employees, but they are only available through 2028. Another notable deduction is for auto loan interest — if you buy a car that was assembled in the U.S., you can deduct up to $10,000 in loan interest, as long as your income is below $100,000 ($200,000 for couples).

Seniors also get a tax lift under the new law.  If you are over 65, you now qualify for an extra $6,000 deduction.  This is on top of the standard deduction and is meant to ease the tax burden for retirees.   Families with children will also benefit from a slightly larger Child Tax Credit — it goes up from $2,000 to $2,200 per child, and it is now adjusted for inflation, meaning it could rise slightly each year.

New "Trump Accounts"

Another new feature is the creation of what the law calls “Trump Accounts.”  These are special accounts created for children born between 2025 and 2028.  While the details are fuzzy,  the government plans to automatically deposit $1,000 at birth, and families can contribute up to $5,000 a year.  The money can be used later for things like education, job training, or buying a first home.  It is a new way to help young families save for their children’s future, though the program’s long-term benefits remains to be seen.

Small Business Tax Benefits

Small business owners also get a handful of benefits.  The law extends and expands Section 179 expensing, which allows businesses to write off large equipment or software purchases right away rather than over several years.  This encourages business investment and helps lower taxable income.  In addition, tax breaks for pass-through businesses (like LLCs and sole proprietorships) are preserved, which means many small business owners will continue to see lower tax bills.

Negative Impacts

However, not everyone will benefit from this Bill.  To finance the reduction in income tax revenue, the law includes major cuts to programs like Medicaid and the Supplemental Nutrition Assistance Program (SNAP), totaling over $1 trillion in reductions.  This could impact millions of low-income families who rely on these services for healthcare and groceries. In fact, analysts warn that for many of these families, any small tax savings could be outweighed by the loss of vital support.  So, while the law puts more money into some peoples pockets, it also takes money and services away from others.

The law also rolls back many clean energy tax credits that were included in the Inflation Reduction Act of 2022.  Subsidies for solar, wind, and electric vehicles have been scaled back, though some support for hydrogen energy remains.  This could make green energy projects more expensive and slow the pace of environmental progress, depending on how the private market reacts.

In terms of the overall economy, the law is expected to add between $3 trillion to $4 trillion to the federal deficit over the next 10 years.  While some economists believe the tax cuts could boost economic growth in the short term, others argue that adding so much to the already massive $36.2 trillion national debt could harm the economy in the long run; especially if the U.S. economy cannot grow at a rate sufficient to sustain this level of debt.  It is also important to note that this law, just like the TCJA in 2017 passed without a single vote from Democrats in Congress, making it one of the most partisan tax laws in modern history.  

What Does This All Mean for You?

If you are a high-income earner living in a high-tax state and itemize your deductions, you could benefit significantly from the higher SALT cap.  If you are a middle-income family earning tips, overtime, or raising children, you might see modest tax savings starting in 2025.  Seniors and small business owners also have opportunities to reduce their tax bills.  But if you are a low-income earner and depend on government aid for healthcare or food, you may incur increased financial hardships because of reduced benefits.

Because this Law will have an immediate impact on your 205 tax return, the best thing you can do now is start planning ahead.  Review your 2025 income, check if you qualify for any of the new deductions, and consider talking to a tax professional.  Some changes, like the Trump Accounts and overtime deductions are temporary, so you’ll want to act before they expire.  If you are concerned about losing benefits, start looking into your state-level programs now to see if they could potentially help make up for lost benefits.

In short, this law is a major tax overhaul that rewards some and penalizes others. While many Americans could see some financial benefit from a tax savings standpoint, the bigger story is how it reshapes social programs, energy policy, and the national debt for years to come — with significant economic consequences that may last long after the immediate personal tax benefit is felt.

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This content is developed from sources believed to be providing accurate information, and provided by Attune Financial Planning. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.