What income and estate tax provisions are in the One Big Beautiful Bill Act?

The One Big Beautiful Bill Act (OBBA) is a piece of legislation designed to address a range of national priorities through large-scale reforms and investments. Envisioned as a comprehensive, long-term plan, the bill targets infrastructure, public services, and economic development, with the goal of delivering lasting benefits for communities across the country. Supporters see it as a bold step toward modernizing key systems and improving quality of life, whereas critics have raised questions about its scope, cost, and implementation. Regardless of viewpoint, the OBBA has become a central focus of public and legislative discussion, highlighting the ongoing debate over the nation’s future direction.

Existing Provisions With Material Changes

The OBBA includes several expiring provisions that are now permanent (Table). The OBBA also makes some significant changes to other provisions, with some temporary but others permanent. Two of the changes that received significant coverage leading up to passage and enactment include a temporary increase in the limit on allowable state and local tax (SALT) deductions and the rollback of existing energy tax incentives.

SALT Deduction

The new legislation temporarily increases the cap on the SALT deduction from $10,000 to $40,000. This increased cap is retroactively effective for 2025. The $40,000 cap will increase to $40,400 in 2026 and by 1% for each of the following 3 years.

The cap is reduced for those with modified adjusted gross incomes exceeding $500,000 (tax year 2025, adjusted for inflation in subsequent years), but the limit is never reduced below $10,000. In 2030, the cap will return to $10,000.

Repeal and Phaseout of Clean Energy Credits

The new legislation significantly rolls back energy-related tax incentives. Provisions include:

• The Clean Vehicle Credit (Internal Revenue Code [IRC] Section 30D), the Previously Owned Clean Vehicle Credit (IRC Section 25E), and the Qualified Commercial Clean Vehicles Credit (IRC Section 45W) are eliminated effective for vehicles acquired after September 30, 2025.

• The Energy Efficient Home Improvement Credit (IRC Section 25C) and the Residential Clean Energy Credit (IRC Section 25D) are repealed for property placed in service after December 31, 2025.

• The New Energy Efficient Home Credit (IRC Section 45L) will expire on June 30, 2026; the credit cannot be claimed for homes acquired after that date.

• The Alternative Fuel Vehicle Refueling Property Credit (IRC Section 30C) will not be available for property placed in service after June 30, 2026.

Gambling Losses

The new law changes the treatment of gambling losses, effective as of 2026. Before the legislation, individuals could deduct 100% of their gambling losses against winnings (the deduction could never exceed the amount of gambling winnings); now, a new cap limits deductions to 90%.

Bonus Depreciation and Section 179 Expensing

These provisions apply primarily to businesses purchasing qualifying equipment, machinery, or other depreciable property and are designed to accelerate tax deductions for capital investments. Prior to this legislation, the additional first-year bonus depreciation was being phased out, with the maximum deduction dropping to 40% by 2025. The new legislation permanently establishes a 100% additional first-year depreciation deduction for qualifying property, allowing businesses to deduct the full cost of such property immediately. The 100% additional first-year depreciation deduction is available for property acquired after January 19, 2025. Effective for property placed in service in 2025, the legislation also increases the limit for expensing under IRC Section 179 from $1 million (indexed for inflation) to $2.5 million and raises the phaseout threshold from $2.5 million (indexed for inflation) to $4 million.

New Provisions

The OBBA also contains multiple new tax deductions that are intended to represent a step toward fulfilling campaign promises made to end taxes on Social Security, tips, and overtime. These new deductions are temporary, but other changes, such as allowing individuals who do not itemize deductions to deduct some amount of qualifying charitable contributions, are permanent.

Deduction for Seniors

Effective for tax years 2025-2028, the legislation creates a new $6000 deduction for qualifying individuals who reach the age of 65 years during the year. The deduction begins to phase out when modified adjusted gross income exceeds $75,000 ($150,000 for married filing jointly).

Tip Income Deduction (“No Tax on Tips”)

Effective for tax years 2025-2028, for the first time, tip-based workers can deduct a portion of their cash tips for federal income tax purposes. Individuals who receive qualified cash tips in occupations that customarily received tips prior to January 1, 2025, may exclude up to $25,000 in reported tip income from their federal taxable income. A married couple filing a joint return may each deduct up to $25,000. The deduction phases out at a modified adjusted gross income of $150,000 for single filers and $300,000 for joint filers. This provision applies to a broad range of service occupations, including restaurant staff, hairstylists, and hospitality workers.

Overtime Deduction (“No Tax on Overtime”)

The OBBA includes a new temporary deduction of up to $12,500 ($25,000 if married filing jointly) for qualified overtime compensation. The deduction is phased out for individuals with a modified adjusted gross income of more than $150,000 ($300,000 if married filing jointly). The deduction is reduced by $100 for each $1000 of modified adjusted gross income exceeding the threshold. To claim the deduction, a Social Security number must be provided. The deduction is available for tax years 2025-2028.

Investment Accounts for Children (“Trump Accounts”)

A new tax-deferred account for individuals younger than 18 years will be available starting January 1, 2026. With limited exceptions, up to $5000 in total can be contributed annually (indexed for inflation). Parents, relatives, and employers as well as certain taxable, nonprofit, and government organizations may make contributions. Contributions are not tax-deductible.

For children born between 2025 and 2028, the federal government will contribute $1000 per child into eligible accounts that have been opened. A child must be a US citizen with a Social Security number to have an account. Distributions generally cannot be made before the account holder is 18 years old, and there are restrictions, limitations, and potential tax consequences governing how and when the funds may be used.

Charitable Deduction for Nonitemizers

The legislation reinstates a tax provision that was previously effective for the tax year 2021. A deduction for qualifying charitable contributions is now permanently established for individuals who do not itemize deductions. The deduction is capped at $1000 ($2000 for married filing jointly). Contributions must be made in cash to a public charity and meet other specific requirements. This deduction is available starting in tax year 2026.

Car Loan Interest Deduction (“No Tax on Car Loan Interest”)

For tax years 2025-2028, interest paid on car loans is now deductible for certain buyers. Beginning in 2025, taxpayers who purchase qualifying new vehicles assembled in the US for personal use may deduct up to $10,000 in loan interest annually. The deduction is phased out at higher incomes, starting at a modified adjusted gross income of $100,000 (single filers) or $200,000 (joint filers).

There’s More…

The OBBA includes broad and sweeping changes that will have a profound impact. Although income and estate tax provisions are highlighted here, the legislation also makes fundamental changes affecting areas such as health care, immigration, and border security. There are also additional tax changes made by the legislation that are not mentioned in this summary. Additional information and details will be available in the coming weeks and months. As always, if you have questions about how these changes affect your specific situation, consider consulting a tax professional.

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