Sonspored article by 88 Accounting Corp
With the introduction of the “One Big Beautiful Bill” (OBBBA), the U.S. tax system is poised for a comprehensive overhaul. Many temporary provisions originally introduced under the Tax Cuts and Jobs Act (TCJA) will become permanent, while new measures will address family support, personal deductions, business incentives, and public welfare.
This summary outlines the major changes in three key sections: Personal Taxes, Business Taxes, and Other Key Reforms.
I. Personal Tax Reforms
Standard deduction permanently increased
The increased standard deduction under the TCJA will become permanent starting in 2025:
- Single filers: $15,750
- Head of household: $23,625
- Married filing jointly: $31,500
This change raises the tax-free income threshold, providing relief especially for low- and middle-income earners.
SALT deduction cap increased
Beginning in 2025, the State and Local Tax (SALT) deduction cap will rise from $10,000 to $40,000 for taxpayers earning under $500,000. For those above that threshold, the deduction will gradually phase out. This provision offers meaningful relief to residents in high-tax states like New York, New Jersey, and California.
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Child Tax Credit increased
The Child Tax Credit (CTC) will increase to $2,200, with up to $1,700 being refundable. The credit will also be adjusted annually for inflation.
Estate and gift tax exemption
The lifetime exemption for estate and gift taxes will increase from $13.61 million to $15 million and will be indexed annually for inflation. This change benefits high-net-worth families preparing for intergenerational wealth transfers.
Gambling loss deduction limited
Taxpayers will only be able to deduct gambling losses up to 90% of their winnings, effectively making at least 10% of winnings taxable. This cap will be permanent.
Charitable contribution deduction rules adjusted
- Non-itemizers: Starting in 2025, single filers may deduct up to $1,000 in cash charitable donations, and joint filers up to $2,000.
- Itemizers: May deduct only the portion of cash donations that exceeds 0.5% of Adjusted Gross Income (AGI).
Taxpayers should retain documentation such as bank statements, credit card records, and official receipts.
Remittance tax
A 1% remittance tax will apply to personal funds transferred abroad, collected by registered remittance transfer providers (RTPs).
Tip and overtime deduction (Temporary: 2025–2028)
Taxpayers with Modified AGI (MAGI) of:
- $150,000 or less (single)
- $300,000 or less (married filing jointly)
may deduct: - Up to $25,000 in qualified tip income
- Up to $12,500 in qualified overtime pay
Social Security, Medicare, and state taxes will still apply.
Temporary senior deduction
From 2025 to 2028, taxpayers aged 65 or older may claim an additional $6,000 deduction, regardless of whether they itemize. The deduction begins phasing out at $75,000 MAGI ($150,000 for joint filers) and phases out completely at $175,000 ($250,000 for joint filers).
Auto loan interest deduction
Between 2025 and 2028, taxpayers may deduct up to $10,000 in interest paid on loans for newly purchased, U.S.-assembled personal vehicles. The vehicle must serve as security for the loan.
The ‘Trump Account’ for children’s savings
The bill introduces the “Trump Account,” aimed at promoting early financial planning for children. Newborns born between Jan. 1, 2025, and Dec. 31, 2028, will receive a one-time $1,000 federal deposit. Parents may contribute up to $5,000 annually until the child turns 18. Children born outside this window can still open accounts but will not receive the federal contribution.
Funds must be invested in low-cost, non-leveraged mutual funds that track a U.S. stock index and meet Treasury standards. Earnings grow tax-free and may be used after age 18 for:
- Higher education
- Vocational training
- Small business startup
- First-time home purchase
Qualified withdrawals will be taxed as long-term capital gains; non-qualified withdrawals before age 30 incur ordinary income tax and a 10% penalty.
II. Business Tax Reforms
1099 reporting threshold raised
The reporting threshold for payments to independent contractors will rise from $600 to $2,000. Payments under this amount will not require Form 1099. Starting in 2027, the threshold will be adjusted annually for inflation.
Bonus depreciation and research and experimental (R&E) expensing
Businesses will be allowed to fully expense newly acquired, placed-in-service assets in the year of purchase. Domestic R&E expenses may be deducted in the year they are incurred. Foreign R&E expenses must continue to be amortized over 15 years.
FICA tip credit expanded
Beginning in 2025, the FICA tip credit — previously limited to the food service sector — will expand to include beauty service providers such as hair salons, nail salons, and massage businesses. Employers can claim the credit on payroll taxes paid on reported tips.
III. Other Key Reforms
Impact on low-income families
The tax reform stands to have a significant impact on low-income families, particularly in New York State. Federal Medicaid funding will be substantially reduced, and subsidies for legal immigrants (including green card holders) under the Essential Plan will be eliminated. States will need to raise approximately $2.7 billion annually to maintain existing coverage levels.
Starting in 2026, all Medicaid recipients aged 19 to 64 who are not exempt must complete at least 80 hours per month of work, education, or volunteer service. States will also be required to reassess eligibility for Medicaid expansion populations every six months.
In terms of SNAP benefits, the bill raises the age cap for work requirements from 54 to 64. Able-bodied adults without dependents who fail to meet 80 hours per month of work, training, or volunteering will be limited to three months of benefits within a three-year period.
These new requirements and eligibility checks must be implemented by the end of 2026.
This article was written and provided by 88 Accounting Corp. For more information or to request professional consultation services, please contact:
88 Accounting Corp
Phone: (917) 563-1225
Fax: (917) 563-1241
Address: 37-12 Prince St, Ste 10D, Flushing, NY 11354
Email: [email protected]
Website: 88accounting.com
