Part 1 — Individuals·Obbba Summary

One Big Beautiful Budget Act — Tax Provisions Summary

Overview

The One Big Beautiful Budget Act (OBBBA) was signed into law in 2025. Its primary tax purpose was to make most Tax Cuts and Jobs Act (TCJA) provisions permanent, extend others, and introduce several new tax benefits. This is a major law for EA candidates studying for exams administered in 2025 and beyond.

> Exam note: The IRS updates exam content on a rolling basis. EA candidates should confirm which provisions are currently testable based on their exam window. Provisions effective in 2025 and 2026 may appear on exams before full implementation guidance is available.

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TCJA Provisions Made Permanent

The TCJA individual provisions were set to expire after 2025. The OBBBA extended most of them permanently:

| Provision | TCJA/OBBBA Status | |---|---| | Reduced individual income tax rates (10/12/22/24/32/35/37%) | Made permanent | | Increased standard deduction | Made permanent (continues indexed for inflation) | | $10,000 SALT cap | Made permanent (with modifications — see below) | | Doubled child tax credit | Made permanent | | Elimination of personal exemptions | Made permanent | | $750,000 mortgage interest limit | Made permanent | | 20% QBID (Section 199A) | Made permanent and modified | | AMT exemption increases | Made permanent |

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SALT Cap — Modified

The OBBBA retained the $10,000 SALT deduction cap but introduced modifications for certain taxpayers. Proposals debated in Congress included higher caps for married filers or residents of high-tax states. Candidates should be aware that the base cap remains $10,000 but legislative modifications may have changed the precise amounts.

> Exam tip: Know the baseline $10,000 SALT cap ($5,000 MFS) as the testable default unless exam materials specify a different figure.

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Child Tax Credit Increase

The OBBBA increased and made permanent the enhanced Child Tax Credit:

  • Credit amount: $2,000 per qualifying child (TCJA level retained)
  • Refundable portion (ACTC) increased or preserved at elevated levels
  • Phase-out thresholds retained: $200,000 (single) / $400,000 (MFJ)

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    100% Bonus Depreciation Restored

    The TCJA introduced 100% bonus depreciation for qualified property placed in service after September 27, 2017, which was phasing down (80% in 2023, 60% in 2024, etc.). The OBBBA restored 100% bonus depreciation retroactively for property placed in service in 2025 and made it permanent going forward.

  • Applies to qualified property with a recovery period of 20 years or less
  • Includes new and used property (provided not previously used by the taxpayer)
  • Applies to certain film, television, and live theatrical productions

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    Qualified Business Income Deduction — Section 199A

    The 20% deduction for qualified business income from pass-through entities was made permanent and modified:

  • Base deduction: 20% of qualified business income (QBI) from sole proprietorships, partnerships, S corporations, and certain trusts
  • W-2 wage limitation still applies to specified service trades or businesses (SSTBs) above the income threshold
  • The OBBBA may have adjusted the income thresholds or phase-in ranges — confirm current limits in IRS guidance

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    New Deductions and Exclusions

    Tip Income Exclusion

  • Exclusion for qualified tips received by tipped employees in certain industries
  • Applies to tips in industries where tipping is customary (food service, hospitality)
  • Subject to income limits — high earners may not qualify for the full exclusion
  • Reportable tips must still be disclosed; the exclusion reduces taxable income

    • Overtime Pay Exclusion

  • A new exclusion for overtime compensation (pay above regular hourly rate required by FLSA)
  • Subject to income limits
  • Employers must separately identify overtime pay on W-2 forms
  • Regular wage income remains fully taxable

    • New Senior Deduction ($6,000 for Age 65+)

  • An above-the-line deduction of $6,000 for taxpayers age 65 or older
  • Available in addition to the existing additional standard deduction for age
  • Subject to phase-out at higher income levels
  • Both spouses in an MFJ return may qualify if both are 65+

    • Auto Loan Interest Deductibility

  • Interest on personal auto loans is deductible for vehicles assembled in the United States
  • Treated similarly to a limited above-the-line or itemized deduction
  • Subject to caps and income phase-outs
  • Does not apply to leased vehicles or commercial use vehicles already deducted elsewhere

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Provisions Pending Full Implementation

Several OBBBA provisions have staggered effective dates or require Treasury regulatory guidance before full implementation:

| Provision | Status | |---|---| | Roth catch-up requirement (SECURE 2.0) | Delayed to 2026 | | Auto loan interest specific rules | IRS guidance pending | | Overtime exclusion employer reporting | Guidance pending | | Super catch-up contributions (ages 60–63) | Effective 2025 |

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Exam Tips

> TCJA rates are now permanent. Do not treat the pre-TCJA rate structure (28%, 31%, 36%, 39.6%) as currently applicable. The OBBBA locked in the TCJA brackets.

> Tip and overtime exclusions are new and testable. Know that only income from tipped occupations qualifies; all wage income does not.

> The $6,000 senior deduction is separate from the additional standard deduction. A taxpayer age 65+ could claim both — confirm whether it stacks or replaces under the specific exam version.

> 100% bonus depreciation restored. For EA Part 2 (business returns), know that the phase-down schedule that was in effect (80%, 60%, etc.) was reversed.

> QBID (Section 199A) is permanent. Do not assume it expires. Know the W-2 wage and UBIA of property limitations for taxpayers above the income threshold.