The OBBBA Is Now Law: What It Means for Your Taxes and Financial Plan

On July 4, 2025, the 119th Congress passed the “Opportunity for a Better, Balanced Budget Act,” or OBBBA, cementing several provisions from the 2017 Tax Cuts and Jobs Act (TCJA) into permanent law. While some of the headlines focus on tax cuts, the real story lies in the details—especially for individuals, small business owners, and high-income households.

Let’s break down what this new law means for your finances, and what steps you should consider as tax season approaches.

Key TCJA Provisions Made Permanent

Some of the most impactful tax provisions introduced in 2017 were set to expire in 2025. OBBBA extends and locks in several of them for the long haul:

• Standard Deduction & Brackets: The increased standard deduction remains in place, reducing the number of people who need to itemize. Current tax brackets are also preserved, offering rate stability for most filers.

• Qualified Business Income (QBI) Deduction: This important deduction for small business owners, self-employed individuals, and certain investors is not only made permanent but also increased from 20% to 23%.
  

This is particularly relevant if you’re running a small business, consulting practice, or have pass-through income.

New Individual Tax Breaks

The OBBBA goes beyond making TCJA provisions permanent. It introduces new deductions designed to support working households and moderate-income earners.

Deduction for Overtime Pay

If you work in a profession where overtime is common—such as nursing, logistics, or emergency services—there’s a new deduction you should know about.

Between 2025 and 2028, you may deduct up to $12,500 in qualified overtime pay, or $25,000 if filing jointly. This deduction phases out at higher income levels, so if your adjusted gross income exceeds those thresholds, you may receive only a partial benefit or none at all.

Example: A registered nurse earning $110,000 who logs substantial overtime could reduce taxable income by up to $12,500, potentially lowering her tax bill by thousands.

Vehicle Loan Interest Deduction

If you’ve taken out a car loan—especially for a vehicle used partly for work—OBBBA allows for a deduction of up to $10,000 in vehicle loan interest, also subject to income-based phase-outs. This applies from 2025 through 2028.

Child Tax Credit

The Child Tax Credit increases permanently by $200 per child. This is a modest bump, but for households with multiple dependents, it adds up.

Expanded SALT Deduction Cap

The State and Local Tax (SALT) deduction cap has been raised from $10,000 to $40,000 for those earning under $500,000. This provision, which lasts for five years, offers significant relief to taxpayers in high-tax states like California, New York, and New Jersey.

If you itemize and live in one of those states, the expanded cap could reduce your federal tax bill by thousands.

Business and Investment Tax Breaks

OBBBA delivers significant wins for business owners and investors.

Bonus Depreciation

The law makes 100% bonus depreciation permanent for qualifying property placed in service after January 19, 2025. This means you can immediately deduct the full cost of new or used equipment in the year it's placed in service, rather than depreciating it over time.

This is particularly valuable for capital-intensive businesses or entrepreneurs reinvesting profits into expansion.

Enhanced QBI Deduction

The Qualified Business Income deduction, already a cornerstone of the TCJA, rises from 20% to 23%. This benefits sole proprietors, partnerships, S corporations, and certain real estate investors.

Expensing and R&D Rules

OBBBA restores and makes permanent full expensing for capital investments and more generous R&D expense deductibility. This provides stability and incentives for long-term innovation and growth.

What Didn't Make It In?

One notable exclusion from the final law is the “revenge tax”—a global tax targeting foreign-owned firms. Originally part of international negotiations, it was dropped after the U.S. struck a deal with the G7.

International and Estate Planning Changes

The OBBBA also introduces important changes that will affect wealth transfer strategies and international tax obligations.

Global Tax Framework

New international tax rules take effect for tax years starting after December 31, 2025, aligning with multilateral agreements and affecting multinational business owners or investors with overseas holdings.

Estate and Business Succession Planning

While the estate tax exemption levels haven’t changed, the law adjusts certain valuation rules and deductibility of business interest for closely held firms. If you own a business or have significant assets, it’s worth discussing these changes with your estate attorney or financial planner.

Who Stands to Gain—and Who Might Not?

Beneficiaries:

• Middle- and upper-middle-income households benefit from permanent tax bracket reductions, the larger standard deduction, and the new overtime and vehicle interest deductions.

• Small business owners see expanded QBI deductions and generous expensing options.

• High-income earners in high-tax states gain from the SALT cap increase—if their income stays under $500K.

  
  

Potential Losers:

• Those earning above the phase-out thresholds may see limited or no benefit from new deductions.

• Households that don’t itemize may not take advantage of the SALT deduction expansion.

What You Should Do Next

With many provisions becoming effective in 2025, there is time to plan. Here’s what to consider:

• Evaluate your filing strategy: If you typically itemize, the new SALT cap may change your approach.

• Review your business structure: A review of your QBI eligibility and entity type may reveal ways to optimize your tax treatment.

• Assess large purchases or capital investments: Take advantage of 100% bonus depreciation for qualifying business assets.

• Plan for estate or business succession: Wealthy individuals should revisit their long-term planning in light of new valuation rules.

Final Thoughts about OBBBA

The OBBBA introduces meaningful changes for individuals and business owners alike, offering new planning opportunities—and new complexity. While many of the benefits are clear, the phase-outs and timelines mean the best moves will vary by situation.

Now is a good time to revisit your tax plan with a professional. If you’d like help assessing how these changes affect your personal or business finances, we’re here to guide you.