What the One Big Beautiful Bill Act Means for You: A Year-by-Year Breakdown

Originally posted July 18, 2025 | Updated November 2025

On July 4, 2025, President Trump signed the One Big Beautiful Bill Act (or OB3 Act) into law. This sweeping legislation includes dozens of tax-related provisions aimed at workers, retirees, small businesses, and families.

But many of these changes are temporary, apply only under specific income levels, and depend on final IRS rules still being written. So instead of jumping into the fine print of legislative text, we’ve put together a year-by-year breakdown of what OB3 means for our clients at Northwest Accounting & Tax Service—and what actions you may want to take before the end of the year.

Let’s dive in.

2025 Tax Year (Taxes filed in 2026)

What’s Staying the Same:

• Standard Deduction stays high: Roughly $15,750 for individuals and $31,500 for married couples filing jointly.
• Lower Tax Brackets: The tax rates from the 2017 Tax Cuts and Jobs Act (TCJA) remain.

New Deductions (Temporary: Only Available for Tax Years 2025 Through 2028)

✅ Tips (Temporary)

Official IRS guidance on how this deduction will be implemented has not yet been issued.
While tips are still considered taxable income, the One Big Beautiful Bill Act allows qualifying workers to deduct up to $25,000 of their tip income.

Who Should Pay Attention to This?

This deduction may significantly benefit workers in:

• Restaurants, bars, and coffee shops
• Personal care (salons, barbers, estheticians)
• Hotels and hospitality
• Rideshare and delivery services
• Event and catering staff

Workers who report tips properly could see meaningful tax savings during 2025–2028 before this deduction expires.

• The deduction is up to $25,000 regardless of Single or Married Filing Joint (Married Filing Separate does not qualify for deduction)
• Income Limit: Must earn under $200,000 (single) or $400,000 (married filing jointly).
• Applies only to voluntarily given tips. Mandatory service charges and auto-gratuities do not qualify.
• The IRS has not yet published the list of qualifying occupations. It is expected by October 2, 2025.

✅ Overtime Pay (Temporary)

Official IRS guidance on how this deduction will be implemented has not yet been issued.
Workers earning less than $150,000 ($300,000 for married filing jointly) annually may deduct up to $12,500 ($25,000 for married filing jointly) of their qualified overtime premium, the extra half-time portion paid above your regular wage.

For example, if your base rate is $20/hour and your overtime pay is $30/hour, the premium is $10 (the amount over your base pay rate)

Who Can Benefit?

This deduction is most relevant for:

• Construction and trade workers
• Healthcare professionals (nurses, aides, EMTs)
• Warehouse, manufacturing, and factory workers
• Utility, logistics, and transportation employees
• Any W-2 employee regularly working overtime

Especially in Oregon and Washington, where cost of living pressures drive longer hours, this deduction could reduce taxable income significantly — up to $12,500 per year.

• The full deduction is available to individuals with MAGI (Modified Adjusted Gross Income) up to $150,000 (or $300,000 for married couples filing jointly).
• Above these thresholds, the deduction is phased out by $100 for every $1,000 of income over the limit.

✅ Auto Loan Interest (Temporary)

Official IRS guidance on how this deduction will be implemented has not yet been issued.
Deduct up to $10,000 in interest on a new auto loan if:

• The vehicle is assembled in the United States
• Vehicle must be for personal use
• Your income is under $250,000 (single) or $500,000 (married filing jointly)

This deduction is in effect for tax years 2025 through 2028 and can be claimed whether or not you itemize deductions. Final reporting instructions are expected from the IRS.

✅ Trump Accounts for Children (Temporary)

If you welcome a new child between 2025 and 2028, a federally seeded investment account will be created.

• $1,000 initial federal deposit
• Families can contribute up to $5,000/year
• Accounts function like education savings or Roth-like accounts (details pending)

Start planning if you’re expecting or recently had a child.

✅ Expanded Child Tax Credit (Temporary)

The credit increases from $2,000 to $2,200 per qualifying child, indexed for inflation.

• Income phase-out begins at $200,000 (single) or $400,000 (married filing jointly)

✅ Standard Deduction Add-On (Temporary)

The OB3 Act permanently raises the standard deduction and temporarily adds an “add-on” amount through 2028. This extra deduction applies automatically — no special paperwork needed — and increases your overall standard deduction even if you don’t qualify for any other OB3 deductions.

Here’s how it breaks down for 2025:

• Single filers receive a $1,000 add-on, increasing the standard deduction from $14,750 to $15,750 total.
• Head of Household filers receive a $1,000 add-on, raising the deduction from $22,625 to $23,625 total.
• Married Filing Jointly filers receive a $1,500 add-on, increasing the standard deduction from $30,000 to $31,500 total.

These increases will adjust for inflation each year, and the add-on is available through the 2028 tax year. If you’re also age 65 or older, the senior deduction (explained below) can be added on top of this amount.

✅ Standard Deduction Add-On (Temporary)

If you are age 65 or older, the OB3 Act provides an additional senior-specific deduction on top of the regular standard deduction, available through 2028. This benefit is separate from the standard deduction add-on and is designed to offer extra relief to retirees and older taxpayers.

Here’s how the senior add-on works in 2025:

• Single filers age 65 or older receive a $6,000 senior add-on, increasing the standard deduction from $15,750 to $21,750 total.
• Married Filing Jointly, one spouse age 65 or older receives a $6,000 senior add-on, raising the standard deduction from $31,500 to $37,500 total.
• Married Filing Jointly, both spouses age 65 or older receive a $10,000 senior add-on, increasing the deduction from $31,500 to $41,500 total.

Keep in mind, this deduction begins to phase out at higher income levels — the IRS has not finalized the exact phase-out thresholds, but we expect them to begin around $150,000 for single filers and $300,000 for married couples.

Planning Tip: If you’re 65 or older (or turning 65 before the end of the tax year), make sure you inform your tax preparer — this deduction is not applied automatically unless your age is correctly entered on your return.

✅ Charitable Deduction for Non-Itemizers (Temporary)

From 2025 through 2028, taxpayers who do not itemize may still deduct qualifying charitable contributions:

• Deduction Amount: Up to $2,000 for Married Filing Jointly (MFJ)
• Up to $1,000 for Single or Head of Household (HOH)
• Single / HOH: Up to $250,000 modified adjusted gross income (MAGI)
• Married Filing Jointly: Up to $500,000 MAGI

✅ State and Local Tax (SALT) Deduction Cap Increase (2025–2028)

The OB3 Act temporarily raises the cap on state and local tax (SALT) deductions — which includes property taxes, state income taxes, and certain local taxes — for the 2025 through 2028 tax years.

Previously, the SALT deduction was limited to $10,000 per return. Starting in 2025, the new law increases the cap to:

• Up to $40,000 for Married Filing Jointly
• Up to $20,000 for Single and Head of Household filers

This is especially significant for taxpayers in Oregon, where state income taxes and property taxes often exceed the old $10,000 cap. Higher-income households and those with larger homes or investment properties will benefit most — assuming they itemize deductions.

For Washington residents, there’s still potential benefit, particularly for those with high property taxes or local levies, but no savings from state income tax since Washington doesn’t have one.

Planning Tip: If you normally itemize, this is a good time to review your 2025 state and local tax payments to see if you can now deduct more than in past years. Bunching property tax payments or estimating state tax payments before year-end might help maximize your deduction.

Keep in mind: this expanded cap is only available through 2028 unless Congress extends it. If you plan to sell property, relocate, or have unusually high local taxes, it’s worth discussing whether to accelerate or defer certain payments based on your itemization strategy.

2026 Tax Year (Taxes filed in 2027)

While 2025 introduces several temporary deductions aimed at individuals, 2026 brings in major long-term changes for small businesses and investors. These provisions are largely permanent under the OB3 Act and offer significant tax-saving opportunities for business owners, contractors, landlords, and entrepreneurs.

✅ The 20% Qualified Business Income (QBI) Deduction is Now Permanent

The 20% QBI deduction — originally part of the 2017 Tax Cuts and Jobs Act — is now permanent under the OB3 Act.

This deduction allows eligible business owners to deduct up to 20% of their qualified business income (QBI) directly from taxable income, reducing their overall tax bill.

Here’s how it works in 2026:

• Deduction Amount: Up to 20% of QBI from a U.S.-based sole proprietorship, partnership, S-corporation, or certain rental activity
• Minimum Deduction: A minimum deduction of $400 applies, but only if you have at least $1,000 in QBI from an active trade or business
• Phase-Out Thresholds for 2026 (indexed annually):
  • $170,050 for Single filers
  • $340,100 for Married Filing Jointly

If your income exceeds these thresholds, certain limitations kick in — especially for “specified service trades or businesses” (SSTBs) like law, consulting, health, and financial services. Above the phase-out range, the deduction may be reduced or eliminated entirely unless you meet wage and asset thresholds.

Who qualifies:

• Sole proprietors filing Schedule C
• S-corp and partnership owners receiving pass-through income
• Rental property owners with active participation or qualified real estate activity

Planning Tip: Business structure, payroll setup, and how you allocate income all affect eligibility. If you’re near the phase-out range, we may recommend strategies like retirement plan contributions or wage adjustments to preserve the deduction.

✅ Qualified Small Business Stock (QSBS) Capital Gains Exclusion (Permanent)

The OB3 Act permanently expands the capital gains exclusion under Section 1202 for sales of Qualified Small Business Stock (QSBS) — offering powerful long-term tax savings for investors, startup founders, and small business owners.

Under the updated rules:

• You may exclude up to 100% of capital gains from federal taxes when selling QSBS
• The stock must be held for at least 5 years
• The issuing corporation must be a qualified C-corporation
• The corporation’s gross assets must not exceed $50 million at the time of stock issuance
• The company must be engaged in an active trade or business, excluding some service-based fields (e.g., law, health, finance)

What changed under OB3?

• The OB3 Act makes the 100% exclusion permanent (previously, it was set to drop to 50% or 75% for stock issued after 2025)
• It expands eligibility to more industries and removes some timing restrictions for founders and early-stage investors
• It clarifies that the exclusion is available even if gains are passed through via partnerships or S-corps, as long as holding and original issuance rules are met

Exclusion limits:

• The exclusion generally applies to the greater of $10 million or 10 times your basis in the stock
• This applies per-issuer, meaning you can repeat this strategy across multiple companies

Example: If you invest $100,000 in QSBS and sell it for $1.2 million after 5 years, you may exclude 100% of the $1.1 million gain from federal income tax.

Planning Tip:
If you’re starting a new business or raising capital, consider forming a C-corporation and issuing QSBS to founders or early investors. It’s also worth reviewing older investments to see if they qualify under the new rules.

Real Estate and Depreciation

✅ Section 179 Expensing (Permanent)

Section 179 allows small businesses to immediately deduct the full cost of qualifying equipment and business assets in the year they’re placed in service — instead of spreading depreciation over several years. The OB3 Act permanently expands the deduction limits, making this a core tool for tax planning.

Here’s what you need to know for tax year 2026:

• Maximum Deduction Limit: Up to $2.5 million per year
• Phase-Out Threshold: Begins when total qualifying purchases exceed $4 million
• These figures are indexed for inflation annually, so they will increase slightly each year going forward

What qualifies for Section 179:

• Machinery, tools, and manufacturing equipment
• Office furniture, computers, and software
• Certain nonresidential building improvements (like HVAC, alarm systems, and roofing)
• Vehicles used more than 50% for business (with some weight and cost limits)

What does not qualify:

• Land or buildings
• Property used outside the U.S.
• Assets acquired from related parties

Example: If you buy $100,000 worth of equipment for your business in 2026, and place it in service before year-end, you can deduct the entire $100,000 on your 2026 tax return — assuming you stay under the annual purchase cap.

How this works with Bonus Depreciation:
Under OB3, you can still use 100% bonus depreciation as a fallback. Most businesses apply Section 179 first, then use bonus depreciation to deduct any remaining cost.

Planning Tip: For businesses planning large upgrades or expansions, timing matters. To qualify, the asset must be both purchased and placed in service during the tax year. If you take delivery after year-end, you may lose the deduction for that year.

✅ 100% Bonus Depreciation (Permanent)

The OB3 Act restores and makes permanent the full 100% bonus depreciation deduction, which had been phasing out under previous tax law. This allows businesses to immediately deduct the entire cost of eligible property the year it’s placed in service — even for used equipment.

Here’s how it works under the updated law:

• Deduction Amount: 100% of the cost of qualified property
• Applies to: New and used assets (as long as it’s the first time used by your business)
• Effective for assets placed in service on or after January 19, 2025
• No annual dollar cap — unlike Section 179

What qualifies for 100% bonus depreciation?

• Machinery and equipment
• Computers and office tech
• Business-use vehicles (with restrictions)
• Furniture and fixtures
• Leasehold improvements
• Certain qualified film, television, or software production assets

What doesn’t qualify:

• Land or buildings
• Property used outside the U.S.
• Property used less than 50% for business

Example: A business purchases a $75,000 production machine and places it in service in July 2026. The full $75,000 can be deducted on the 2026 return using bonus depreciation — no need to depreciate it over 5 or 7 years.

How it differs from Section 179:

• No purchase limit
• No income or taxable income requirement
• Can result in a net loss (NOL), whereas Section 179 is limited to taxable income
• Bonus depreciation is applied after Section 179 (if used together)

Planning Tip:
Bonus depreciation is especially helpful for:

• Capital-intensive businesses
• Companies investing in used equipment
• Businesses looking to reduce taxable income in a high-income year
• Startups planning to generate losses and carry them forward

If you’re planning to make large purchases before year-end, placing assets in service before December 31st ensures full deduction in that year.

Other Provisions

✅ Moving Expense Deduction Repeal (Permanent)

Permanently eliminated for most taxpayers. Only active-duty military and intelligence personnel under orders qualify.

Tax Years 2027 and 2028 – The Countdown to Expiration

Many of the individual tax benefits introduced by the OB3 Act are temporary and scheduled to expire after the 2028 tax year. Without new legislation, these deductions and expanded thresholds will disappear — and some will revert to pre-OB3 rules starting in 2029.

Here’s what’s currently set to expire after 2028:

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1. Tip Income Deduction (ends after 2028)
The ability to deduct up to $25,000 in qualified tip income is temporary. If you work in a tipped industry, make sure you’re claiming this deduction each year through 2028 and keeping accurate records.

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2. Overtime Premium Deduction (ends after 2028)
W-2 employees earning overtime premiums can deduct up to $12,500 annually, but only through 2028. If you’re regularly working overtime, now is the time to maximize this benefit.

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3. Auto Loan Interest Deduction (ends after 2028)
Interest on loans for U.S.-assembled personal-use vehicles is only deductible through 2028. If you’re considering financing a vehicle, doing so before the deadline may allow you to deduct interest for multiple years before the benefit sunsets.

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4. Senior Deduction Add-On (ends after 2028)
The additional $6,000–$10,000 deduction for seniors (age 65+) is only in effect through 2028. If you’re nearing retirement, it’s important to plan for income positioning and timing.

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5. Standard Deduction Add-On (ends after 2028)
The extra $1,000–$1,500 added to the base standard deduction phases out after 2028. After that, the standard deduction reverts to the OB3 base amount (still higher than pre-2025 levels, but without the add-on).

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6. SALT Deduction Cap Increase (ends after 2028)
The expanded state and local tax (SALT) deduction cap — raised to $40,000 for married filers — will expire, returning to the $10,000 cap unless extended by Congress. For Oregon taxpayers, this is a big one to watch.

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7. Non-Itemizer Charitable Deduction (ends after 2028)
The ability to deduct cash charitable donations without itemizing is temporary. If you don’t normally itemize, consider planning larger gifts between now and the end of 2028 to take advantage of this option.

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8. Trump Accounts / Child Investment Accounts (ends after 2028)
Children born between 2025 and 2028 are eligible for a $1,000 federal seed investment and up to $5,000 in annual parent contributions. No new accounts will be created after 2028 unless the program is renewed.

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What This Means for You

If you qualify for any of these benefits, your planning window closes at the end of 2028. This gives you four tax years — 2025 through 2028 — to:

• Accelerate income or deductions to maximize benefit while they’re available
• Make qualifying purchases (vehicles, equipment, gifts, contributions)
• Adjust income levels to stay under deduction phase-out thresholds
• Coordinate with retirement timing, especially for seniors approaching age 65

Planning Tip: Don’t wait until 2028 to act — the IRS may tighten documentation or issue new limitations as we approach the sunset year. Take advantage of what’s available now while the rules are clear.

Final Thoughts from Northwest Accounting

Final Thoughts from Northwest Accounting

The One Big Beautiful Bill Act brings some of the most significant tax changes we’ve seen in years — with new opportunities for working families, seniors, and small business owners alike. But while the headlines sound promising, many of the most impactful deductions are temporary, income-limited, and still awaiting final guidance from the IRS.

At this time, we advise clients to avoid making any major tax moves based solely on what the law might allow. Key details — including eligibility rules, income phase-outs, documentation standards, and how deductions will be claimed on 2025 tax forms — are still being finalized.

That said, now is the right time to:

• Understand which OB3 provisions may apply to your situation
• Begin collecting the right documentation (tip logs, overtime records, purchase receipts, etc.)
• Schedule a planning session to stay ahead of IRS developments

We’re currently accepting tax planning appointments from August through November 2025.
Call us at (360) 694-8206 or visit nwatax.net to book your spot.

As soon as final IRS rules are released, our team will be ready to help you make smart, compliant tax decisions — so you can take full advantage of what OB3 allows, without surprises.