President Trump’s One Big Beautiful Act (OBBA)

July 5, 2025

The One Big Beautiful Act (OBBA), signed by President Trump on July 4, 2025, is viewed as legislation that will again substantially reshape U.S. tax and welfare policy. It extends and expands the major tax cuts introduced in 2017 under the TCJA and is expected to directly affect the broader U.S. economy through earned-income tax relief, larger deductions for older taxpayers, and reduced estate and gift taxes.

1. Extension and Expansion of Tax Cuts

Most of the 2017 TCJA tax cuts become permanent, including the 37% top individual income tax rate, increased standard deduction and child tax credit, and the 21% corporate tax rate. The 20% QBI deduction for the self-employed and pass-through entities such as S corporations and LLCs remains, and 100% bonus depreciation returns for January 20, 2025 through December 31, 2027. The SALT deduction cap also increases to $40,000 for households with AGI below $400,000, or $800,000 for married filing jointly, temporarily from 2025 through 2030.

2. New Tax Deductions

Purchasers of vehicles finally assembled in the United States receive a new deduction for up to $10,000 of annual vehicle loan interest. It is available in addition to the standard deduction. Taxpayers age 65 or older may claim an additional deduction of $6,000 individually or $12,000 as a couple, temporarily for 2025 through 2028.

3. Tax Relief for Lower-Income Workers

Workers in traditionally tipped occupations, such as restaurants and beauty services, are exempt from federal income tax on up to $25,000 of annual tip income. Overtime compensation of up to $12,500 annually is also exempt from income tax. Social Security taxes, FICA, still apply. These benefits are temporarily available for four years beginning in 2025 to workers with annual income no greater than $150,000, or $300,000 for married couples.

4. Expanded Estate and Gift Tax Exemption

Beginning in 2026, the lifetime estate and gift tax exemption permanently increases to $15 million, with automatic annual inflation adjustments. This substantially reduces the number of people subject to estate tax and may benefit wealth-transfer strategies for high-net-worth individuals.

5. Higher Child Tax Credit and Newborn Support: Trump Accounts

The child tax credit rises to $2,200 per child from 2025 through 2028, followed by $2,000 plus inflation adjustments. Both parent and child must have Social Security numbers to qualify. When a newborn arrives, the government deposits $1,000 into a dedicated Trump Account, and parents may save up to $5,000 annually. The account provides tax deferral like a Roth IRA when used for education or a home purchase.

6. Remittance Excise Tax

Beginning in 2026, a 1% remittance tax applies to cash transfers sent abroad from the United States. Transfers through bank accounts or credit cards, or through financial institutions regulated under the federal Bank Secrecy Act, are exempt regardless of immigration status.

7. Phaseout of Green Tax Incentives

The $7,500 electric vehicle tax credit ends on September 30, 2025, and the credit for installing EV charging stations ends in June 2026. Credits for residential solar and other energy-efficiency improvements end at the close of 2025.