One Big Beautiful Bill - What you need to know.
- Jerrod Aud
- Jul 5
- 4 min read
One Big Beautiful Bill has been signed into law and is meant to make America take off like a “Rocket Ship!" There are measures certainly intended to strengthen the United States at home and support our interests worldwide.
Spending cuts of $1.2trillion are paying for the investments. Many are concerned that programs like Medicaid are at risk. With the number of Americans on the program skyrocketing over the last several years to 21% of Americans, as reported by Fox News, maybe some of them should be. Republicans claim those who may soon not qualify are individuals who are able to work but choose not to. The new legislation requires people considered “abled bodied individuals able to work” to meet certain minimum work requirements or prove that they have been looking for work.
Projections by the Congressional Budget Office, a nonpartisan federal agency, projects the bill will add 3.4trillion to the U.S. deficit. But Republican Senators argued that the $3.8trillion in tax cuts would have been extended anyway and should not be counted. House Republicans argue that additional revenue from economic growth will pay for the measures implemented by the passing and signing into law the One Big Beautiful Bill.
What was passed?
To implement President Trump's Peace through Strength agenda, $150billion in mandatory funding will be allocated to Homeland Security, ICE, and missile defense. It allocates $60billion in border security infrastructure, including an additional $46 billion to wall construction.
The final version of the bill will allow workers to deduct up to $25,000 in tips and up to $12,500 ($25,000 in the case of a joint return) in overtime. The tax only applies to the additional “half-time” that is earned during the hour of overtime.
This is a temporary tax law change and ends Dec. 31, 2028. Also, there is a phase-out for people that make over $150,000 on qualified tips & overtime. Tips and Overtime pay are still subject to payroll taxes (FICA).
In 2025, Seniors will enjoy a $6,000 deduction per person for individuals 65+ in age. For parents, the child tax credit has been increased from $2,000 per qualifying child to $2,200. This amount is set to be adjusted each year for inflation. The temporary change will be set to expire at the end of 2028.
Good news for family farms, ranches, and some outfitters: the estate & gift tax amount has been increased from $5million to $15million. Now, passing down that ground that's been in the family doesn't necessarily mean a trip to see the bank for a loan.
To Itemize or Not to Itemize?
The SALT tax deduction is a federal deduction that allows a taxpayer to reduce their federally taxable income for state and local property, personal property & income taxes. This had been limited to $10,000 but now goes up to $40,000 (limited by income of $500,000.) The requirement here is that a taxpayer must take the itemized deduction and not the standard deduction. This will favor taxpayers in heavily taxed states like California, New York, and Illinois.
Deduction on Vehicles
Now, being American made is the important factor. The electric vehicle credits are gone and have been replaced by an auto loan interest deduction. This measure will temporarily allow vehicle buyers 2025 or later to write off up to $10,000 of auto loan interest without needing to take the itemized deduction. It lasts through 2028. The best thing about this deduction is that the vehicle must be new and must be MADE IN AMERICA!
Qualified Business Income Deduction has been made permanent.
Business owners are especially happy as the Qualified Business Income Deduction (QBID- made possible by the Tax Cuts and Jobs Act 2017) becomes permanent. QBID is a tax deduction that allows eligible self-employed and small-business owners to deduct up to 20% of their qualified business income on their taxes.
Income limitations still apply for those businesses considered a Specified Service Trade or Business (SSTB’s) or businesses “where the principal asset is the reputation or skill.”
Bonus depreciation for business assets is now back up to 100%. This is a big deal since it was set to drop to 40% in 2025. Now, small business owners can enjoy the entire deduction in the same year for business assets like vehicles, equipment, and other qualifying business assets if they choose to. This affects S-corps, Partnerships, and even business & rental owners who file on their individual tax return and is a major planning tool each year!
Check out my blog on tax planning, HERE, or schedule an appointment with me below to learn more.
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