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

The One Big Beautiful Bill Act, now commonly referred to as OB3, was signed into law in July 2025 and brings sweeping tax changes for individuals, families, and small businesses. While many of the provisions sound like big wins for working Americans, the IRS has not yet released formal guidance on most of the new rules. That means taxpayers, and even experienced tax professionals like our team at Northwest Accounting & Tax Service, are still waiting on critical details from the IRS. Until official guidance is issued, it remains unclear how many of these new deductions will be claimed, what documentation will be required, or how eligibility will be verified.

This article reflects our best understanding and interpretation as of now, based on the language of the bill and early summaries. However, much of this could still change as formal IRS guidance is released. Many provisions will likely continue to be clarified in the years ahead through administrative updates, legal challenges, or corrections issued by the IRS itself.

Here’s a year-by-year look at what OB3 means for you, especially if you are a blue-collar worker, small business owner, or retiree.

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.

• 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 annually may deduct up to $12,500 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)

• What types of overtime and industries/professions affected are unknown until guidance is issued by the IRS
• This deduction is available to Single filers and Married couples filing jointly. If filing separately, you cannot claim this benefit.
• The full deduction is available to individuals with MAGI 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)

✅ Seniors Age 65+ (Temporary) – Official IRS guidance on how this deduction will be implemented has not yet been issued.

Taxpayers aged 65 or older may claim an additional $6,000 deduction beyond the standard deduction. This deduction is intended to provide added relief to older adults, particularly those living on fixed incomes such as Social Security or retirement distributions.

• Available to individuals filing as Single or Married Filing Jointly (MFJ)
• Not available to those filing as Married Filing Separately (MFS)
• Both spouses must be age 65 or older to claim the full $12,000 on a joint return
• Single filers: Full deduction if income is under $75,000; phases out completely at $175,000
• Married filing jointly: Full deduction under $150,000; fully phased out at $250,000

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)
Available to children born between 2025 and 2028.

• Funded with $1,000 from the federal government at birth
• Up to $5,000 may be contributed annually
• IRS will issue guidance on how these accounts will be established and eventually utilized

✅ 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)
From 2025 through 2028, the One Big Beautiful Bill Act provides an increase to the standard deduction for most filing statuses:

• Single and Head of Household (HOH): Additional $1,000
• Married Filing Jointly (MFJ): Additional $1,500
• This add-on is not available to taxpayers filing as Married Filing Separately (MFS).

The add-on is applied on top of the regular standard deduction and does not require itemizing. Unless extended, it will expire after the 2028 tax year.

✅ 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

✅ SALT Deduction Cap Increase (Temporary)
Raises the cap on State and Local Tax (SALT) deductions from $10,000 to $40,000 for taxpayers with adjusted gross income under $600,000. This applies to itemizers and expires after 2028. MFS filers have a separate cap of $20,000 (while MFJ/S and single have a $40,000 cap). Thus, MFS filers can still claim, but under a lower limit.

Important: The IRS has not yet explained how these deductions will be tracked. It is unclear if:

• Employers will report tip or overtime earnings
• Documentation will be required for vehicle and charitable deductions
• Forms will change or expand for 2025 filings

2026 Tax Year (Taxes filed in 2027)

Business and Investment Updates

✅ Qualified Business Income (QBI) Deduction (Permanent) – Official IRS guidance on how this deduction will be implemented has not yet been issued.
The One Big Beautiful Bill Act makes the 20 percent QBI deduction permanent for eligible pass-through business owners, including sole proprietors, partnerships, S corporations, and some LLCs.

• Includes a minimum deduction of $400 applies only if you have at least $1,000 of qualified business income from an active trade or business
• Phase-out begins at $170,050 (single) and $340,100 (married filing jointly), indexed for inflation
• Deduction Amount: Up to 20% of qualified business income

✅ Qualified Small Business Stock (QSBS) Capital Gains Exclusion (Permanent)
Expanded capital gains exclusion rules encourage long-term investment in startups and small businesses. Final IRS details on holding periods and tiers are still pending.

Real Estate and Depreciation

✅ Section 179 Expensing (Permanent)
Businesses may immediately deduct the full cost of qualifying equipment, software, and property improvements in the year the asset is placed in service. The current deduction limit is $2.5 million, with a phase-out beginning at $3.5 million in total purchases.

This provision is especially useful for small and mid-sized businesses investing in tools, vehicles, machinery, and other eligible assets.

✅ 100% Bonus Depreciation (Permanent)
The One Big Beautiful Bill Act restores 100% bonus depreciation permanently for qualifying property placed in service after January 19, 2025. This allows businesses to fully expense the cost of both new and used tangible assets with a useful life of 20 years or less, such as equipment, furniture, and certain improvements.

How They Work Together

• Section 179 offers flexibility for smaller or lower-cost purchases and is commonly used for items like office equipment and vehicles.
• Bonus depreciation can be used for larger capital investments and is not limited by business income or asset totals.

Together, these deductions offer powerful tax-saving opportunities for businesses making qualified purchases and capital upgrades. Final reporting rules are expected from the IRS.

Other Provisions

✅ Moving Expense Deduction Repeal (Permanent)
Permanently eliminated for most taxpayers. Only active-duty military and intelligence personnel under orders qualify.

2027 and 2028 Tax Years

(Last Chance for Temporary Deductions)

Unless extended by Congress, the following provisions expire after 2028:

• Tip Income Deduction (up to $25,000)
• Overtime Pay Deduction (up to $12,500)
• Auto Loan Interest Deduction (up to $10,000)
• Senior Deduction (extra $6,000)
• Trump Accounts for Children (available only to those born by 2028)
• Expanded Child Tax Credit (drops to $2,000 in 2029)
• Standard Deduction Add-On
• Charitable Deduction for Non-Itemizers
• SALT Deduction Cap Increase (returns to $10,000 limit)

Final Thoughts from Northwest Accounting

The One Big Beautiful Bill Act introduces some generous tax breaks, especially for working families, retirees, and small business owners. However, many of the most valuable deductions are temporary, income-limited, and awaiting final clarification from the IRS.

We strongly recommend waiting for official IRS guidance before making major tax decisions or relying on these provisions in your planning. As of now, many key details remain unknown, including eligibility rules, documentation requirements, and how the deductions will be reported on 2025 tax forms.

That said, this is an important time to start evaluating your situation. Our team is available to help you understand your options and prepare once IRS guidance is issued.

We are accepting tax planning appointments starting in August and through November 2025.
Call us at (360) 694-8206 or visit nwatax.net to reserve your spot and ensure you’re ready when guidance is issued.

We are here to help you make smart, compliant tax decisions under OB3, once the rules are clear.