Robert A. Woloshen CPA, PC

One Big Beautiful Bill (OBBB) tax changes" refers to tax changes enacted through the One Big Beautiful Bill. This legislation includes significant tax provisions, affecting both individuals and businesses.
Individual Tax Changes:
• Extension of TCJA Provisions: The bill permanently extends key aspects of the 2017 Tax Cuts and Jobs Act (TCJA), including lower income tax rates and the doubled standard deduction.
• Increased Standard Deduction for Seniors: Taxpayers aged 65 and older receive an additional standard deduction of $6,000 from 2025 to 2028, with an income phaseout.
• SALT Deduction Cap Increase: The State and Local Tax (SALT) deduction cap is temporarily raised to $40,000 for 2025, with an annual inflation increase through 2029. The cap reverts to $10,000 in 2030.
• Child Tax Credit: The Child Tax Credit increases to $2,200 per child in 2025 and is indexed for inflation thereafter.
• Estate and Gift Tax Exemption: The estate and lifetime gift tax exemption is permanently increased to $15 million per individual ($30 million for married couples) in 2026 and indexed for inflation.
• Deductions for Tips and Overtime Pay: Temporary above-the-line deductions are available for certain tip income and overtime pay from 2025 through 2028. These deductions are subject to income limits.
• Auto Loan Interest Deduction: A temporary, above-the-line deduction for qualified auto loan interest is available for vehicles assembled in the U.S. from 2025 to 2028, up to $10,000. This deduction is subject to income phaseouts.
Business Tax Changes:
• Research and Development (R&D) Expensing: Businesses can immediately deduct domestic R&D expenses in the year incurred, reversing the prior law's amortization requirement.
• Bonus Depreciation: The bill permanently reinstates 100% bonus depreciation for qualifying property acquired and placed in service after January 19, 2025.
• Section 179 Expensing: The Section 179 deduction limit is increased to $2.5 million, with a phaseout threshold of $4 million, for property placed in service after 2024.
• Qualified Business Income (QBI) Deduction: The Section 199A QBI deduction is made permanent at 20%. Income thresholds for specified service businesses are raised, and a minimum deduction of $400 is introduced for qualifying taxpayers.

Impact on the Affordable Care Act (ACA):
• Expiration of Enhanced Premium Tax Credits: The OBBB does not extend the enhanced ACA subsidies which are set to expire at the end of 2025. This is expected to increase premiums for many individuals and could lead to coverage losses.
• Eligibility Verification: The OBBB includes new ACA requirements for eligibility verification for premium tax credits.
• Elimination of Recapture Limit: The limit on the recapture of excess advance premium tax credits is removed for tax years beginning after December 31, 2025.
Important Notes:
• The OBBB passed both the House and Senate and awaits the President's signature.
• Some provisions, like the temporary deductions for tips, overtime, and auto loan interest, are scheduled to expire after 2028.
• The OBBB is expected to have a significant impact on health care, including potential coverage losses due to the expiration of enhanced subsidies and changes to Medicaid funding.
• While the OBBB makes some permanent changes, other provisions are temporary, requiring taxpayers to stay informed about future legislation.

New Tax Inflation Adjustments for 2025

The IRS has announced new tax inflation adjustments for the 2025 tax year, reflecting a 2.8% inflation increase. These adjustments will be in effect when you file your federal income tax return in 2026.

Additional Tax Adjustments for 2025
The IRS has also outlined several other inflation-related updates for the 2025 tax year. These include:

Earned Income Tax Credit (EITC)
The Earned Income Tax Credit (EITC) provides financial support to workers with low to moderate incomes and their families. For taxpayers with three or more qualifying children, the maximum credit will increase to $8,046 in 2025, up from $7,830 in 2024. Individuals with fewer than three children—or none at all—may still be eligible for a smaller credit, depending on income.

Health Flexible Spending Accounts (FSAs)
Health FSAs, which allow employees to save pre-tax money for approved medical expenses, will have a new contribution cap of $3,300 for 2025, an increase of $100 from the prior year. For plans permitting fund carryovers, unused balances up to $660 can roll over into the next year, up from the $640 cap in 2024.

Adoption Credit
For families adopting a child, the adoption tax credit offers relief from expenses like legal fees, travel, and other adoption costs. In 2025, the maximum credit will increase to $17,280 for the adoption of a child with special needs, up from $16,810 in 2024.

Estate Tax Exclusion
The estate tax exclusion, determining the portion of an estate not subject to federal tax, will increase to $13.99 million in 2025 from $13.61 million in 2024. This means the first $13.99 million of a taxable estate is exempt from federal tax, while any amount above this threshold may be taxed.

Standard Deduction for 2025
According to the IRS, the standard deductions for 2025 are as follows:
Single filers: $15,000, Heads of household: $22,500, and Married couples filing jointly: $30,000.

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