The One Big Beautiful Bill Act (OBBBA) is the most sweeping federal tax package since 2017. Signed on July 4, 2025, this 800-plus page law cements many temporary provisions that were scheduled to expire and layers on a handful of new deductions aimed at wage earners, families, and growing businesses. For Baldwin CPAs’ clients, the Act alters planning assumptions for individual returns, entity choice, capital investment timing, and estate strategies. Importantly, almost every tax change takes effect beginning with the 2025 tax year, that is, returns filed in spring 2026.
From a compliance standpoint, OBBBA is notable for what it does not include: there are no new surtaxes on capital gains, no increase in the 21% corporate rate, and no changes to the long term capital gain brackets. But the legislation does introduce brand new above the line deductions, permanently extends the 20% QBI break, and restores full 100% bonus depreciation. Those features can dramatically lower effective rates for both wage earners and entrepreneurs, provided taxpayers document and claim them correctly.
OBBBA skews heavily toward continuity for individuals and expansion for businesses. Here are the headline takeaways:
OBBBA’s permanence provision means individual marginal brackets will no longer sunset in 2026. The top marginal rate holds at 37%, the 22% and 24% middle income brackets remain intact, and bracket thresholds will continue to climb annually with CPI inflation. That certainty simplifies multi year planning, especially for Roth conversions and harvesting long term capital gains within the 0% or 15% windows.
Meanwhile, the standard deduction bump keeps approximately 90% of filers from itemizing. For households that still claim Schedule A, typically due to mortgage interest or the now bigger SALT deduction, the higher threshold reduces the likelihood that a modest charitable giving strategy alone will push them over the line.
For Baldwin CPAs’ planners, these changes underscore the need to revisit withholding, quarterly estimates, and multi-year cash flow projections for every client household.
The headline rule for businesses is the restoration and permanent extension of 100% bonus depreciation for property placed in service on or after January 19, 2025. Qualifying assets include machinery, equipment, computers, vehicles, and, if specific criteria are met, even certain new manufacturing buildings. Separately, §179 expensing now allows up to $2.5 million per year with a phase-out beginning at $4 million of placed-in-service assets.
The Act makes the 20% Qualified Business Income deduction a permanent fixture of the code, eliminating the 2026 sunset. A new floor guarantees at least a $400 deduction for filers with $1,000 or more of QBI, ensuring micro business owners benefit even when profits are modest. Existing wage and property phase-outs for high-income “specified service” firms remain unchanged.
For capital intensive clients, the interplay among bonus depreciation, §179, interest expense limits, and state conformity will drive entity level tax modelling over the next several quarters.
Raising the SALT cap to $40,000 (joint) rejuvenates Schedule A for many filers in high tax jurisdictions. Mortgage interest limitations ($750 k acquisition debt) and the disallowance of miscellaneous itemized deductions are made permanent, codifying the 2018–2024 landscape. Casualty losses remain limited to federally declared disasters.
Taken together, these tweaks encourage tax advantaged saving and modest charitable giving, but they also complicate recordkeeping, it will be crucial for clients to retain proof of 529 withdrawals, HSA eligibility, and small gift receipts.
For deaths and gifts occurring after December 31, 2025, the lifetime estate and gift exemption jumps from the TCJA-inflated ~$13.99 million (2025) to a new statutory base of $15 million per person, and that base will continue to index for inflation. By 2026, most projections put the effective exemption in the $18 million range, or roughly $36 million per married couple using portability. In practical terms, fewer than 0.1% of estates will owe federal estate tax once the One Big Beautiful Bill Act (OBBBA) is fully phased in. The top estate tax rate remains 40%, and the step-up in basis on appreciated assets at death is preserved.
The generation skipping transfer (GST) exemption automatically rises in lock step with the estate exemption, meaning multigenerational dynasty trusts can now be seeded with far larger amounts. Portability elections on Form 706 remain critical; a surviving spouse must still file an estate return, even if no tax is due, to lock in their deceased partner’s unused exemption. Baldwin CPAs will monitor Treasury guidance for any “claw back” issues if a future Congress lowers exemptions; current statutory language prevents retroactive taxation on gifts made during the high exemption window.
Beginning in tax year 2025, annual Health Savings Account contribution ceilings rise by an additional $4,300 (self-only) and $8,550 (family) above ordinary inflation adjustments. Importantly, workers 65 and older enrolled only in Medicare Part A regain HSA eligibility, allowing late career professionals to capture the triple tax advantages of these accounts for the first time. Income phase-outs start at $75,000 single / $150,000 joint, tapering the new incremental room for very high earners.
OBBBA creates a new custodial savings vehicle that behaves much like a Roth IRA meets 529: parents may contribute up to $5,000 annually per child, receive no upfront deduction, but enjoy tax-free growth and withdrawals for education, first home costs, or qualified small business investments. A one-time $1,000 federal seed deposit applies to births from 2025–2029, and contributions close after the child’s 8th birthday or December 31, 2028, whichever comes first. Baldwin CPAs suggests opening accounts as soon as Social Security numbers are issued to capture compound growth.
While OBBBA leaves IRA and 401(k) contribution limits to standard cost of living adjustments, it dovetails with SECURE 2.0’s higher 401(k) catch-ups for ages 60–63 and the pending Roth-only rule for high-earner catch-ups (from 2026). Clients should evaluate multi year conversion ladders: locked in individual brackets that top out at 37% lower the tax cost of shifting pretax dollars into Roth space before RMDs begin at age 73 (75 after 2032).
OBBBA reprograms a portion of the Inflation Reduction Act’s enforcement budget, but the Service will continue rolling out Form 1099-K $600 thresholds and crypto broker reporting (delayed to 2026 filings). Audit resources are expected to target high income non filers, large partnerships, and promoter driven credit claims such as the Employee Retention Credit. Baldwin CPAs encourages clients to maintain contemporaneous substantiation for every new deduction or credit, in particular, the $2.5 million §179 election statements and qualified tip records.
With 100% bonus depreciation retroactive to January 19, 2025 and a $2.5 million §179 cap, SMBs can front load expansion without timing anxiety. Decide between bonus and §179 on an asset by asset basis: bonus can drive losses (useful if you anticipate future high profit years), whereas §179 stops at taxable income but carries forward seamlessly. Cash method eligibility now extends to manufacturers up to $80 million in average receipts, simplifying inventory accounting and deferring income.
Locking in §199A removes the previous 2026 sunset and introduces a $400 minimum deduction for micro businesses with at least $1,000 in profit. Specified service traders, medical, legal, consulting, still face wage and property phase outs, so salary design and retirement plan funding remain levers for staying below thresholds. Kentucky owners should remember the deduction does not reduce state taxable income, emphasizing the need for two tier projections.
Manufacturers gain from the rare ability to expense certain new factory buildings outright, slashing the payback period on large capital projects. Combined with the cash method expansion and the pause on five year R&D amortization through 2029, plant upgrades and on shoring initiatives become materially cheaper. Construction contractors similarly benefit: improvements classified as Qualified Improvement Property remain 15 year assets but now enjoy perpetual 100% bonus. State decoupling will, however, slow state level recovery of those costs.
Front line labor incentives are indirect but powerful. The $25,000 tip deduction effectively increases after tax wages for employees, aiding retention. Employers should enhance point of sale systems to capture tip data accurately, both for their FICA tip credit and to furnish year end statements employees need for the deduction. On the balance sheet side, dining room refurbishments, POS hardware, and delivery vehicles all qualify for immediate expensing, improving cash flow for multi location operators.
Real Estate: Opportunity Zone extensions plus enduring §1031 exchanges and REIT level §199A dividends maintain real estate’s favored status. Developers should weigh electing out of §163(j) when leverage is heavy, as ADS depreciation may pale next to the financing benefit.
Agriculture: Equipment intensive farms can expense new combines or grain bins in year one and continue using cash accounting. The higher exemption removes estate tax concerns tied to soaring land valuations.
Healthcare: Clinics and labs gain from immediate write offs on expensive diagnostic gear, while small practices may utilize the new $100 per employee CHOICE HRA credit when replacing group health plans.
Kentucky conforms to the Internal Revenue Code only as of December 31, 2024, so, unless the General Assembly updates that static date, many of the federal benefits in the One Big Beautiful Bill Act (OBBBA) will not automatically carry through to Kentucky returns for tax year 2025. Businesses and individuals therefore need to keep dual books for depreciation, expensing, and new above the line deductions. For example, while 100% bonus depreciation and the $2.5 million §179 limit will apply federally, Kentucky still caps §179 at $100,000 and offers no bonus depreciation, meaning the entire federal deduction must be added back on Kentucky Schedule M and then recovered slowly under pre 2002 MACRS rules.
A clear calendar helps prevent missed opportunities and compliance missteps. Below are the milestones Baldwin CPAs recommends flagging now:
| Date | Provision | What Happens | Who’s Affected |
|---|---|---|---|
| July 4 2025 | Bill enactment | OBBBA signed; 60 day clock starts for certain expiring clean energy credits | All taxpayers planning solar/EV projects |
| Jan 19 2025 | 100% bonus restart | Assets placed in service on/after this date qualify for full expensing | Manufacturers, contractors, farms |
| Tax Year 2025 | Core individual & business changes | New standard deduction, tip/OT/auto deductions, §179 $2.5 M, QBI permanence, suspended R&D amortization | Individuals; all entities |
| Jan 15 2026 | Final 2025 estimated tax payment | Adjust for new deductions to avoid penalty or overpayment | Individuals & pass through owners |
| April 15 2026 | First federal returns under OBBBA due | New 1040 lines for above the line deductions; new depreciation schedules | Everyone |
| 2027–2032 | SALT cap indexes 1%/yr | Cap rises from $40,000 to about $44,000 | High tax state itemizers |
| Dec 31 2028 | Temporary deductions expire | Tip, overtime, auto interest, senior bonus deduction, Trump Account contributions end | Wage earners, seniors, parents |
| 2029 | R&D amortization set to return | Absent new law, five year amortization restarts | Tech, pharma, advanced manufacturing |
Planning early around these dates can save real dollars, for example, pulling a planned machine purchase forward into 2025 secures 100% expensing, while deferring a large Roth conversion until 2029 preserves the senior bonus deduction through 2028.
Use the following checklist as a starting point for client conversations and year end reviews:
The One Big Beautiful Bill Act rewrites the tax playbook just as decisively as the 2017 TCJA, yet its opportunities look quite different. For individuals, brand new above the line deductions reward service industry labor, overtime, and middle income retirement savers, while the higher standard deduction and permanent brackets flatten tax liability for the broad middle class. Business owners gain unprecedented flexibility: a once temporary 100% bonus depreciation provision is now perpetual, the §179 expensing ceiling leaps to $2.5 million, and the valuable 20% Qualified Business Income deduction is locked in. Estate planners see the federal exemption soar to a historic high, eliminating transfer tax worries for all but the wealthiest 0.1% of households.
Yet OBBBA’s benefits are not one size fits all. Kentucky’s lingering decoupling demands dual ledgers for depreciation and careful Schedule M add backs. Leveraged enterprises must re model debt strategy in light of an unchanged §163(j) cap that could disallow interest precisely because bonus depreciation slashes EBIT. Seniors and near retirees have a four year window (2025–2028) to coordinate Roth conversions, HSA maximization, and IRA withdrawals around the temporary senior bonus deduction before it sunsets. Families with young children should open Trump Accounts immediately to snag the $1,000 federal seed deposit slated for 2025–2029 births. Manufacturers and real estate developers should fast track qualifying projects to lock in 100% building expensing and extended Opportunity Zone perks, but weigh state conformity and interest deduction trade offs.
The common thread is timing. Nearly every OBBBA provision arrives with a clock, whether it is a hard expiration (tip deduction, overtime deduction, auto loan interest), a scheduled policy snap back (R&D amortization after 2029), or an inflation indexed cap whose value ebbs over time (SALT). Optimal strategy means mapping those timelines against your personal cash flows, capital expenditure horizon, and succession goals. Baldwin CPAs stands ready to model multiple what if scenarios, reconcile federal and Kentucky divergences, and keep your plan nimble as the Treasury and General Assembly release further guidance.
The One Big Beautiful Bill Act introduces meaningful changes for individuals, business owners, and families alike. Baldwin CPAs can help you take full advantage of new deductions, stay compliant across federal and Kentucky rules, and build a proactive plan for the years ahead. Let’s get started.
Yes. W2 wages, including tips and overtime premium pay, qualify for the deductions; your separate 1099 income is unaffected. Be sure to track each income stream distinctly.
Possibly. Older credit shelter or bypass trusts drafted for a $5–$7 million exemption may now trigger capital gain disadvantages. Schedule a trust review meeting to weigh a trust decanting or basis step up strategy.
Treasury has signaled a forthcoming Schedule 1 worksheet that will request lender EIN, loan origination date, and VIN assembly certification. Retain your purchase and annual interest statements now.
No penalties apply if funds are redirected to qualifying first home costs or a bona fide small business launch. Non qualified withdrawals, however, are fully taxable and subject to a 10% surtax.
Federally, you may blend bonus and §179 by asset class. Kentucky still caps §179 at $100,000 and disallows bonus entirely, so you will add back the federal expensing on Schedule M and deduct state depreciation over time. Dual books remain essential.