Understanding the OBBB Act: What It Means for Your Taxes

A Bold Shift in Tax Policy

On July 4, 2025, the U.S. tax landscape changed with the passing of the One Big Beautiful Bill (OBBB) Act. Touted as one of the most comprehensive tax reforms in recent years, the OBBB Act aims to simplify tax compliance, support middle-income households, and make U.S. businesses more globally competitive.

But what does it really mean for taxpayers, especially individuals, small businesses, and international entities?

This blog breaks down the major tax changes under the OBBB Act—so you can understand what’s changed, who benefits, and what to plan for next.

What is the OBBB Act?

The One Big Beautiful Bill (OBBB) Act is a sweeping piece of federal tax legislation designed to:

Simplify the tax code
Introduce new income brackets
Reform international tax rules
Expand deductions for businesses
Modernize IRS enforcement and technology

The bill was signed into law on July 4, 2025, and many of its provisions go into effect for the 2025 tax year (returns filed in 2026), with a few retroactive and staggered rules.

Key Changes for Individuals

1. New Income Tax Brackets

The OBBB Act revamps the federal income tax brackets, aiming to make the structure flatter and more equitable:

Taxable Income	New Rate
$0 – $50,000	10%
$50,001 – $200,000	20%
$200,001+	33%

Impact:
Most middle-income households will see modest savings. High-income earners could see a slightly higher effective tax rate, particularly those losing certain itemized deductions.

2. Standard Deduction Increase

Individuals: Raised from $14,600 to $18,000
Married Filing Jointly: Increased from $29,200 to $36,000

Impact:
More taxpayers will take the standard deduction instead of itemizing. This simplifies filing and reduces record-keeping burdens.

3. Child & Family Credits Enhanced

Child Tax Credit increased from $2,000 to $2,500 per qualifying child
Dependent Care Credit expanded and made fully refundable

Impact:
Working families and single parents will see larger refunds or lower tax bills.

4. Capital Gains & Dividends

Long-term capital gains taxed at 15% for most filers

Top earners (over $1 million) pay 20% + 3.8% Net Investment Income Tax
Qualified Dividends follow the same rate schedule

Impact:
High-net-worth individuals and investors should revisit tax-loss harvesting and asset allocation strategies.

Key Changes for Businesses

1. Corporate Tax Rate Reduced

Flat corporate rate reduced from 21% to 19%

Impact:
C-Corporations benefit immediately, especially capital-intensive businesses and those competing globally.

2. Expanded Section 179 Deduction

Deduction limit raised to $2 million annually
Phase-out starts at $5 million in equipment purchases

Impact:
Small and medium-sized businesses can invest more in equipment, vehicles, and software while deducting the full amount in the same year.

3. Qualified Business Income (QBI) Deduction Modified

QBI deduction for pass-through entities (S-corps, partnerships, sole proprietors) now capped at 15% of qualified income
Phase-outs adjusted for high-income service businesses

➡️ Impact:
Still favorable for small businesses, but service firms may lose part of the deduction unless they restructure.

4. Start-Up Expense Deduction

Start-up businesses can now deduct up to $15,000 (previously $5,000) in start-up costs in year one

Impact:
New ventures have more breathing room in early-stage finances.

5. New R&D Incentives

A new refundable Research and Development Tax Credit available for businesses with fewer than 100 employees
Accelerated refund process through IRS business portal

Impact:
Startups in tech, healthcare, and manufacturing can reinvest more into innovation sooner.

International Taxation: Major Overhaul

1. Global Minimum Tax Adopted

U.S. joins OECD’s 15% global minimum tax standard for multinational corporations
Applies to U.S. companies with over $750 million in global revenue

Impact:
Multinational firms must review international structures, especially those using low-tax jurisdictions.

2. Digital Services Tax Relief

U.S. negotiates phase-out of Digital Services Tax (DST) in partner countries
Foreign tax credits restructured for digital economy firms

Impact:
Reduces double taxation for U.S. tech exporters and online service providers.

IRS Modernization and Enforcement

Key Allocations:

$8 billion for IRS tech upgrades
AI-assisted auditing for large returns and crypto activity
Expanded taxpayer portal with real-time filing status and smart alerts

What This Means for You:
Expect faster processing, better communication, and—possibly—more efficient enforcement. Compliance accuracy matters more than ever.

Planning Considerations for 2025 and Beyond

For Individuals:

Recalculate your withholding or estimated tax payments
Consider Roth IRA conversions under the new brackets
Maximize family-based credits before phase-outs

For Businesses:

Update your entity structure analysis
Time capital purchases to benefit from enhanced deductions
Evaluate R&D strategy and employee classification

For Investors:

Adjust tax harvesting strategy
Revisit estate planning in light of rate changes
Monitor foreign investment structures if applicable

Final Thoughts: Big Change, Bigger Opportunity

The OBBB Act may have a charming name, but its implications are serious—and far-reaching. For many taxpayers, it means lower taxes and simpler filing. For others, it means reevaluating tax strategies, deductions, and even corporate structures.

Whether you’re an individual taxpayer or a business owner, 2025 is the year to be proactive, not reactive. Partner with a CPA who understands how to navigate this new era and tailor your strategy to the realities of the OBBB Act.